The JANA ESG in Fixed Interest Survey, which recorded the responses of 63 of the largest fixed income managers, found 88 per cent of respondents believe ESG factors influence the financial outcomes of fixed income investments.
JANA consultant and author of the survey Kristen Temple said there were a greater number of credit managers considering ESG factors in the investment process compared with sovereign debt managers.
Out of the 62 credit managers surveyed, 85 per cent indicated they consider ESG factors within their investment process while only 68 per cent of the 47 sovereign debt managers surveyed indicated they take ESG factors into account.
“This may be because credit managers are exposed to similar risks as equity managers with the same manager potentially holding both debt and equity in the same companies,” said Ms Temple.
“Therefore some credit managers may be able to leverage broader research, and potentially ESG research, conducted by their in-house equity counterparts,” she said.
The survey also found that fixed income managers rated governance as the most influential factor on income returns, with 93 per cent of respondents agreeing or strongly agreeing.
This was followed by environmental factors at 82 per cent and social at 73 per cent.
In terms of the major challenges to incorporating ESG into the investment process, the survey indicated access to research and limited capacity to engage with issuers were the most common responses.
JANA head of investment research and outcomes Steven Carew said contrary to popular belief, the survey shows fixed income managers are as “well versed and developed in their thinking around ESG issues, as their listed equity counterparts”.
“The proportion of managers that not only consider ESG factors important, but who integrate the considerations into their investment process is high, particularly for credit and emerging market debt investments,” said Mr Carew.
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