In this week’s blog, Elliot Gilfarb, CCM’s head of fixed income, shares his thoughts on impact and ESG investing in the bond market, specifically as it relates to corporate bonds.
“Over the past few years, we have seen a transformation of corporate bonds in their types of offerings. More and more companies are issuing bonds with an impact and ESG use of proceeds analysis. In 2020, we saw market leaders in two different market segments issue Green Bond offerings – Toyota and Sysco1. In the past few years, household names such as Apple, Starbucks, Verizon, and Pepsi have also issued debt financing green initiatives.
As the impact and ESG investing space continues to evolve, we’ve seen new bond issuers enter the market. Community Development Financial Institutions (CDFIs), for example, are private financial institutions dedicated to delivering responsible and affordable lending to help underserved people and communities join the economic mainstream.2 Since the first public CDFI bond issued in 2017, there have been at least ten different offerings in the market on the corporate debt side.
So, what does the advancement of impact fixed income mean for us here at CCM?
We continue to expand our opportunity set and our use of proceeds analysis to ensure new debt offerings that mention positive impacts or that are labeled “green” are actually providing impact metrics, data, and reports on the bonds’ outcomes. Five years ago, we had a limited allocation to corporate bonds in our flagship core fixed income impact investing strategy. Today, we have almost 4.0%. We are excited to see the continued growth of impact and ESG fixed income offerings as investing with purpose becomes the norm.”
1 Any of the securities identified and described herein are for illustrative purposes only. Their selection was based upon nonperformance-based objective criteria, including, but not limited to, the security’s social and/or environmental attributes. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities identified.