Fixed income sustainability takes a positive screening approach to identify bonds that finance or support environmentally sustainable initiatives. It incorporates the “E” and the “S” of ESG, which may not be as common in fixed income as equities but it can be fully integrated into fixed income analysis and helps make more-informed investment decisions. Within the different offerings of traditional fixed income investments, the incorporation of ESG examination can help provide insight into underlying risks and advantages.
Over the last couple of years, fixed income sustainability has increased substantially. More and more investors are conscientiously looking at their investment portfolios to “do well” and not just from a financial perspective. They are looking at how their investment portfolio is positively affecting our world and our environment.
There are many opportunities for sustainable fixed income investments. As with any investment, fixed income securities should be thoroughly evaluated and researched prior to making an investment. Given that the range of sustainable products is expanding, it is important for investors to understand and be comfortable with the portfolio managers’ experience, investment process, risk/reward trade-off and sustainable reporting capabilities.
At Community Capital Management (CCM), we include an added layer of transparency in our investment process by detailing the use of bond proceeds to analyze an investment’s sustainable benefit. Transparency is a key factor in our decision-making process. The majority of our investments have a positive sustainable impact whether it’s an affordable housing property using reclaimed water to a small family run hydroponic indoor farm to a mixed-use development targeting LEED certification that is a walkable community located near public transportation.
For investors who have an interest in sustainable fixed income investing, there are various options available depending on their financial and sustainable goals.