Partner Insight: The advantages and challenges of ESG in fixed income

In the latest video insights from Federated Hermes, Mitch Reznick, Head of Sustainable Fixed Income, discusses some of the key dynamics that underpin the fast-growing sustainable debt market.

clock • 3 min read
Partner Insight: The advantages and challenges of ESG in fixed income
  • 1. What are the dynamics of the greenium?

In terms of pricing green bonds, the so-called greenium - the difference in yield between green bonds and ordinary bonds of a similar maturity - is often referred to. In this video, Mitch Reznick, Head of Sustainable Fixed Income, outlines the factors that underpin the greenium and how the yields on green bonds and conventional bonds compare.

 

2.  How should investors approach sustainability-linked bonds

Sustainability-linked bonds seek to hold companies to green pledges and punish them with higher charges if they fail to meet ESG targets. While the asset class has grown, concerns have been raised that it may be vulnerable to greenwashing as issuers can choose their own objectives. Another concern is that the penalties imposed on companies for missing targets are sometimes not stringent enough. In this video, Mitch Reznick, Head of Sustainable Fixed Income, outlines how investors should approach the asset class.

 

  • 3. Are we heading towards a time when all fixed income will be sustainable?

ESG integration is now part of mainstream investing. In this video, Mitch Reznick, Head of Sustainable Fixed Income, discusses whether as the asset class develops, and companies everywhere improve their ESG credentials, we may reach a point when there is no separate asset class - and everything will be viewed as sustainable fixed income.

 

  • 4. Can ESG factors be self-reinforcing from a financial perspective in terms of influencing a company's behaviour?

In this video, Mitch Reznick, Head of Sustainable Fixed Income, outlines why he believes introduction of sustainability into the investment process is truly self-reinforcing from a financial performance point of view. A structural shift is underway in the economy, driven top-down regulation, bottom-up consumer pressure, and shifting value chains. The companies that buy into this change will be more resilient in the future, he explains.

 

  • 5. What makes Federated Hermes' approach to sustainable fixed income unique?

Federated Hermes has long taken an ESG approach to investing. In this video, Mitch Reznick, Head of Sustainable Fixed Income, outlines what makes the group's approach to sustainable fixed income unique when compared to the wider market.

 

  • 6. What role does engagement play in achieving outcomes in sustainable fixed income?

In this video, Mitch Reznick, Head of Sustainable Fixed Income, discusses how engagement - a constructive dialogue between investors and companies on ESG factors - can most effectively be used to achieve sustainable outcomes and improve financial performance.

 

  • 7. How does ESG analysis in the fixed income investment process help drive alpha and performance?

In this video, Mitch Reznick, Head of Sustainable Fixed Income, outlines how ESG analysis can generate alpha not just for companies at the vanguard of sustainability practices, but also for companies in transition.


 

Unlock a world of sustainable fixed income, find out how.

 

This is a marketing communication for professional investors only. The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. The views and opinions contained herein are those of the author and may not necessarily represent views expressed or reflected in other communications. This does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.

 

 

 

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