Amundi has launched a social bond strategy, claiming it will be among the few solutions on the market offering a high allocation to the thematic bonds and a global investment scope.
Issuance of social bonds – bonds whose proceeds are earmarked for use for social projects – surged in 2020, with a large part of the new volumes coming from pandemic-related bond sales. The EU, for example, issued its €17bn SURE bonds as social bonds.
“Amundi believes this is the beginning of the market’s trajectory, following in the footsteps of the green bond market,” the asset manager said.
It said social bonds were not only an effective mechanism for financing social projects, but that it believed they also provided investors with the best platform to engage with issuers to increase their activities in “socially impactful products and services”.
The strategy will be mostly invested in social bonds – at least 75% of the assets – aligned with the best practice principles published by the International Capital Markets Association, although Amundi said it would look to expand the investment universe by including conventional sovereign and corporate bonds “selected for their strong social practices”.
The portfolio may also include sustainability-linked bonds (SLB) with social targets. The SLB market is at an early stage of development, with few of the bonds having been issued. In September, Novartis, a pharmaceutical company, issued an SLB incorporating patient access targets.
Amundi said its strategy would invest in a variety of social bond issuers in different sectors, to foster the development and diversification of the market away from mostly sovereign, supranational and agency issuers.
“The solution, with its global investment universe, aims to benefit from the trend of the social bond market diversifying away from the current European concentration,” it said.
Amundi has committed to assessing the impact of the social bonds held at year-end and to publish an annual impact report.
In a recent paper, Amundi’s Elodie Laugel, chief responsible investment officer, and Isabelle Vic-Philippe, head of euro aggregate, said: “Long-term investors should consider investing in this nascent market to support its development and to take advantage of its future expansion.”
”Although social bonds are not the only instruments with the potential to tackle social challenges, they do represent an optimal starting point for investors to actively engage with corporates and for the latter to start considering how their business models can contribute to the alleviation of social issues,” they added.
FCLTGlobal traces global capital flows
FCLTGlobal, a non-profit organisation working to encourage long-term investing, has produced an interactive dashboard and associated report tracking long-term investments on a global scale, “painting a clearer picture of the status quo and framing the conversation around sustainable finance in a more actionable light for the first time”.
FCLTCompass, as the benchmarking tool is called, measures 10 years of global investment data, tracing savings through various investment options to the companies that deploy it.
Key findings, according to FCLT, include that the widespread shift to indexed equity is contributing to an overall increase in average equity holding periods, while timeframes for fixed income have shortened and the low rate environment has inspired yield-chasing behaviour.
The organisation also said that the accumulation of wealth in China could significantly impact global household investment horizons.
The “critical conclusion” of the capital flow mapping, however, was a “a significant intention-allocation gap of upward of eight years between the expected investment horizon of the saver and the actual time frame that capital remains committed to a particular investment opportunity”, said FCLTGlobal in its report.
“On the other end of the capital markets, the companies that savers’ funds are invested in have the inverse problem: companies have short-term funding sources that are misaligned with the companies’ own longer-term investment horizons,” it added.
“These long-term aspirations, therefore, are lost in translation due to a barbell effect whereby the goals of both savers and companies are weighed down by the path capital takes between them.”
Robeco declares 2050 net-zero ambition
Robeco has declared an ambition to be carbon-neutral across all its assets under management by 2050, with interim targets to include a reduction of portfolio emissions, investment in solutions such as green bonds, and engagement with investee companies to drive emission reductions in the real economy and “create real world impact”.
The €158bn asset manager said it would work with and advise its clients on decarbonisation goals that were in line with the ambition it had set itself.
The declaration of Robeco’s net-zero ambition comes after the asset manager in September announced an expansion of its fossil fuel exclusion policy to all funds. Earlier this year it hired a climate strategist and a climate data scientist. It takes active ownership seriously.
“We can set a clear example for the broader industry, work together and encourage other financial institutions such as asset managers to follow suit.”
Gilbert Van Hassel, CEO of Robeco
Gilbert Van Hassel, CEO of Robeco, said: “We cannot solve big problems such as climate change and the rapid decline of biodiversity on our own. But what we can do is set a clear example for the broader industry, work together and encourage other financial institutions such as asset managers to follow suit.
“We have set this ambition with the conviction that investing is not only about creating wealth but also about contributing to well-being.”
Net-zero commitments have been catching on rapidly among larger asset owners, with independent asset managers in recent months beginning to follow suit. Kempen Capital Management, Robeco’s compatriot, announced a 2050 net-zero climate change policy in September.
Last month Christiana Figueres, former UN climate chief, said net-zero 2050 commitments needed to become “normalised” among asset managers and across the financial sector more broadly.
AllianceBernstein launches global low carbon strategy
AllianceBernstein has launched a global low carbon strategy aiming to deliver a carbon footprint 90% lower than that of the MSCI World Index.
Over time and in simulations that target has been exceeded, with the average carbon footprint for the strategy having been 5% of that of the index, the asset manager said.
Unveiled last week and part of AB’s “Portfolios with Purpose” platform, the strategy is an actively managed, high-conviction portfolio designed to outperform global markets over a full market cycle.
It factors a carbon price into the valuation of companies.
“Through engagement with company management and using proprietary analysis of the physical and transition risks presented by climate change, the investment team is able to more effectively price stocks for the long term,” AB said.