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Lessons from COP26

Net-zero pathway a boon to fixed income

25 November 2021 |
Active ESGImpactSustainable
Having more data to discuss with corporates is helping to rewrite the framework for investment, says Andrew Jackson, Head of Fixed Income
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This content was created in partnership with Citywire and written by Amy Maxwell.

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There’s more data out there which means making the right decisions versus our competitors and our peers is becoming harder, but, potentially more rewarding.

Andrew Jackson

Andrew Jackson

Head of Fixed Income & Lead Portfolio Manager

At COP26 the UK announced it would become the first major economy to commit in law to net zero by 2050, underlining the urgency with which the climate crisis needs to be tackled.

For Andrew Jackson, Federated Hermes’ head of fixed income, the fact that all companies in the UK will now need to describe how they’re going to achieve carbon neutrality, presents an opportunity for his asset class.

‘Net zero gives us another method by which we can analyse the corporates that we invest in and lend to, and it gives us another route through which we can engage with those corporates.’

He says the move will have a significant impact on how he runs money across the group’s bond offerings.

‘There’s more data out there which means making the right decisions versus our competitors and our peers is becoming harder, but, potentially more rewarding.’

In the UK, prime minister Boris Johnson is bringing forward a target to phase out diesel and petrol vehicles by 2035, instead of 2040 which will include hybrid vehicles for the first time.

While other countries around the world may not be forced into action by their respective government’s policy, the direction of travel is clear.

Globally, over 5,200 companies of all sizes have now joined the UN Race to Zero, representing sectors like transport, technology, manufacturing, retail, and finance.

Jackson concedes that many countries around the world would have liked to have seen more action than has been made in the COP26 announcements, particularly with regards to India, but he argues a willingness to compromise is a major achievement in itself.

‘Incremental change is better than no change and I don’t think we need to shoot for the stars. I think we just need to constantly keep moving this thing forward.’

The pandemic he adds, has served as the perfect case study of what can be done when we work together.

‘We learnt that there are resources that can be drawn upon when needed. That money can be found to invest in a problem.  That we can catalyse groups of individuals to get together and solve what on the face of it, appear intractable problems, rapidly.’

Turning his focus back to asset management and as an allocator of capital, he concludes:

‘My great hope is that the population of the world is now looking at us more critically and saying, you need to get on with it, otherwise, a revolution is coming.’

The International business of Federated Hermes was present at COP26 in Glasgow in two significant capacities.

The group’s CEO Saker Nusseibeh CBE spoke during the World Leaders Summit, underlining Federated Hermes’ commitment to halt and reverse deforestation and land degradation by 2030 and to announce its joining of the Natural Capital Investment Alliance which was created by HRH The Prince of Wales under his Sustainable Markets Initiative. The initiative aims to accelerate the development of Natural Capital as a mainstream investment theme. Both commitments are important steps to meeting the goals of the Paris Agreement.

Federated Hermes also hosted its own ‘Further, Faster Conference’ at their ‘Fringe Festival’ site in Glasgow on land owned within its sustainable property portfolio. The two-day event welcomed investors, fund managers and experts from all areas of sustainability to exchange ideas on how to address the three interlinked emergencies of Climate, Nature and Social Injustice. Click here to see more details on the event.

COP26: Amplifying the voice of investors.

The vital role of stewardship in the last stand against climate change.

The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. The views and opinions contained herein are those of the author and may not necessarily represent views expressed or reflected in other communications. This does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.

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