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The impact of ESG integration in fixed income portfolios’ performance

We seek to quantify the impacts of ESG factors on the quality and performance of corporate and government bond portfolios across developed, emerging and frontier markets.
14 October 2020
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    This publication presents the highlights of our quantitative fixed income research work, initiated in 2018, to determine whether issuers with better ESG scores can enhance portfolio returns. As such, it also demonstrates the ongoing adaptation of our investment approach to fixed income analysis and management.

    Key takeaways

    • Several recent studies highlight how fixed income strategies that integrate Environmental, Social and Governance (ESG) factors in their investment process have outperformed during the ongoing COVID-19 crisis.
    • Our own analysis confirms these results. Nevertheless, we think that the analysis of the observations made during unprecedented circumstances shouldn’t be the sole driver of institutional long term fixed income allocations.
    • We decided to put these findings into perspective by looking at a broader time period, from 2007 to June 2020. We find this period relevant because it coincides with the Global Financial Crisis and strong implementation of unconventional monetary policies, which after an eventual pause, resumed again with the COVID-19 health crisis.
    • Using our quantitative fixed income research capabilities, we aimed to establish the extent to which issuers with better ESG scores can enhance portfolio returns over different market conditions. In this research paper, we wanted to quantify the impacts of ESG factors on the quality and performance of investment grade corporate and government bonds.