Environmental, social and governance themes will become increasingly important for investors throughout 2018, predicts Insight Investment in a new report.
According to Insight Investment’s Thoughts for 2018 report, the issuance of green bonds would continue to rise in years to come, with environmental, social and governance (ESG) issues remaining a central theme.
“Investment managers need to incorporate ESG into their investment processes,” the report said.
It also pointed to a poll commissioned by a UK association that found 57 per cent of adults with a pension felt investment management firms should invest in companies that were “managed in a way that is positive for the society and the environment”.
The report also underscored the significant demand for the first gender equality bond, issued in 2017, at 20 times the issuance amount, and European and American green bonds that experienced orders double the issue size in 2016 and the first half of 2017.
According to data from HSBC’s S&P Green Bond Index, the social bonds market rose by 231.8 per cent over the 2016 and 2017 calendar years, while sustainable bonds jumped 35.5 per cent.
“We expect further innovations in the impact bond market in 2018 as awareness grows and investors increasingly look to align both financial and non-financial goals,” the report said.
Other themes that investors looked to face in 2018 were an expanding global economy; continued policy normalisation; greater opportunities in emerging markets; improved credit dynamics; and “compelling opportunit[ies] for investors to source attractive risk-adjusted returns in a low yield and narrow credit spread environment without having to take additional credit risks”.