26 February, 2020


Incorporating ESG into your portfolio

 

Companies and asset owners are facing increasing societal pressures to consider and invest in strategies with higher environmental, social and corporate governance (ESG) ratings.

 

Mercer has spent a number of years helping clients invest more responsibly, and nearly a decade providing clients with environmental, social and corporate governance (ESG) ratings1 for investment strategies, including equities and fixed income. 

Fixed income strategies are playing catch-up on ESG integration relative to other asset classes, however fixed income managers are actively taking steps to incorporate ESG into their decision making and we are seeing an upward trend in Mercer ESG ratings for fixed income strategies.

 

There are four main ways in which investors might look to incorporate their responsible investment beliefs in their fixed income portfolios.

 

  1. The integration of ESG factors into fixed income investment processes
  2. Investment in sustainability themes or impact investments
  3. Stewardship or engagement
  4. Screening2

Fixed income strategies are playing catch-up on ESG integration and we believe the upward trend of fixed income managers incorporating ESG will continue its momentum based on a number of factors, including increased regulatory focus and asset-owner demand.
 

There are four main ways in which investors might look to incorporate their responsible investment beliefs in their fixed income portfolios.
 

  1. The integration of ESG factors into fixed income investment processes
  2. Investment in sustainability themes or impact investments
  3. Stewardship or engagement
  4. Screening2

1 An ESG rating is assigned to each strategy by a researcher and forms part of our standard reports.

2 This framework is consistent with our approach to other asset classes, as outlined in “The ABC of ESG,” available here.


Download the Responsible investment in Fixed Income report to find out our thoughts on best practices about the four approaches. In addition, read how Mercer’s ESG ratings allow investors to have a better understanding of how asset managers are taking ESG factors into consideration when making investment decisions.

 

Disclaimers

1 An ESG rating is assigned to each strategy by a researcher and forms part of our standard reports.

2 This framework is consistent with our approach to other asset classes, as outlined in “The ABC of ESG,” available here.

Download the Responsible investment in Fixed Income report.

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