Incorporating ESG While Maintaining Yield

When creating ESG solutions for our fixed income clients, there is no one-size-fits-all approach. ESG goals vary by end investor. But there is one question we are asked regularly: “Can I incorporate ESG into my portfolio without giving up yield?” We believe the answer is a resounding yes.

ESG considerations have always been implicit in our credit investment process. Given the asymmetric nature of price moves in fixed income, minimising defaults is crucial – and more responsible companies tend to have lower defaults. We believe that ESG factors have the ability to impact the fundamental credit risk of a company and, in turn, a company’s bond price. Controversies and negative ESG-related headlines can hinder investors’ ability to transact in a bond over the short term.

Because available ESG research is not typically designed for fixed income investors, the MSIM Fixed Income team has created an ESG-scoring methodology that explicitly considers the risks that ESG factors pose to bonds.

Read the complete white paper at the link beneath Related Files

Supporting documents

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