After a year of tumult, can the silver lining be green?
A global, public health crisis; social inequality and unrest; record economic retraction and violent swings in financial markets. To say that 2020 was a very challenging year might be the mother of all understatements. The primary driver for the turbulence in fixed-income markets was, to state the obvious, the Covid-19 pandemic and its associated effects on society and the economy. As credit investors, typically we would have some miserable, lugubrious take on such market events. Although there certainly will be a reversion to that base-case disposition sometime in the future, we actually see a silver lining in all of this.
If nothing else, the Covid-19 pandemic exposed the importance of addressing environmental and social challenges. Within investments, “sustainability” came under the spotlight, drawing attention from all corners of the capital markets. Indeed, 2020 was a record fundraising year for sustainable investment funds, with global net assets reaching close to $1.6tn. It was also a record year for green and sustainability-themed bonds and loans with issuance of $700bn for an 80% jump year-on-year, with substantial growth coming out of the US. For these reasons, we decided to take a thematic approach to this edition of 360°, viewing each section through the lens of sustainable investing.
Spotlight on sustainability: issues in focus this quarter
In this issue of 360°, we also take a closer look at three areas:
- Climate-focused solutions: how can we tackle climate goals in credit portfolios?
- Valuations and technical: the rise of green bonds
- Sustainable fixed income: there is no going back on the green transition
See below for a flavour of these sections or read the full report for a more comprehensive picture.
Archive: previous editions of 360°
As fixed income markets have moved through the economic cycle, our thinking has also developed – take a look at some of our previous reports to see how the investment landscape has changed over the past year.