Credit bonds with a sustainability focus
We invest in corporate bonds issued by companies with a strong sustainable agenda and that have a high rating compared with other companies measured in terms of various ESG parameters. ESG stands for Environmental, Social & Governance.
We focus on lending funds to companies that have adapted, or are trying to adapt, their business model in a sustainable direction.
Examples of environmental issues are how a company handles its climate impact, such as greenhouse gas emissions, its resource consumption, such as water consumption and waste handling and pollution in general.
In terms of management, we assess whether a company’s management respects the interests of all stakeholders (suppliers, customers, employees, creditors, shareholders, society, etc.) and acts with a high level of integrity, including whether it has a fair tax policy.
Our ESG approach is balanced, meaning that all three ESG aspects are evaluated for each company. It is not enough for a company to perform well on just one ESG aspect. We expect that corporate bonds issued by companies with a strong or increasing focus on sustainability will over time produce better risk-adjusted returns than corporate bonds issued by companies with little or no focus on sustainability, as the business models of such companies are expected to be challenged.
In the corporate bond category, we also invest in green bonds. Corporate green bonds are bonds where the issuing company will use the proceeds to finance specific green projects with clear environmental benefits.
We invest in corporate bonds issued by companies with a strong financial profile as well as companies with a less strong financial profile, expressed as a high or low credit rating, respectively, with credit rating agencies such as S&P, Fitch and Moody’s. Corporate bonds with high credit ratings are known as investment grade bonds, while corporate bonds with low credit ratings are known as non-investment grade or high-yield bonds.