SDG Engagement High Yield Credit

Reasons to invest

Positive outcomes for investors and society

We aim to generate attractive returns for investors while benefitting society over the long term.

SDG investing

We seek positive changes for society and the environment through engagement with companies on the United Nations’ Sustainable Development Goals (SDGs).

Future leaders

To create change, we invest in the companies we believe will make an impact tomorrow – rather than those making an impact today.

Investment strength

Since 2004, we have delivered attractive high yield credit returns through relative-value investing across the capital structures of companies worldwide.

Engagement depth

Our dedicated engagers are supported by EOS at Federated Hermes, a leading global stewardship team, and the pioneering Responsibility Office.

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Strategy overview

Combining global, high-conviction credit investing with SDG-aligned engagement, we seek long-term outperformance and positive impact.

Mitch Reznick, CFA

Head of Research and Sustainable Fixed Income

Why SDG Engagement High Yield Credit?

Dual objective: returns to investors & society

SDG impact

Aiming for attractive risk-adjusted returns

In a world facing transitions in climate, technology, demographics, and geopolitics, it is imperative companies take action on sustainability. Investors have an important role to play. Our dual objective is attractive investment returns and a positive impact on society and the environment. These goals are not in opposition but are interlinked.

The strategy aims to generate a positive societal and environmental impact through engagement with companies focused on the United Nations’ Sustainable Development Goals (SDGs). We aim to deliver returns to society by identifying global high yield companies with impact potential. We engage with these companies to help them make positive changes to society and the environment.

We aim to deliver superior risk-adjusted returns versus the global high yield market via an investment process that is more than 15 years in the making. Our flexible, proven investment thesis aims to exploit valuation anomalies across geographies, along credit curves, and within capital structures, based on its acute focus on security selection. By seeking the impact leaders of tomorrow and engaging with companies on sustainability, we aim to invest in companies with improving fundamentals and long-term profitability, while mitigating downside risk.

How we invest

Style

We are bottom-up investors with an acute focus on relative value at the security level. We employ a rigorous and repeatable relative-value investment process, which places as much emphasis on security selection as company selection. Our assessment of the general credit market and sector conditions determines our overall appetite for credit risk. Fundamental, valuation, ESG and technical analysis govern investment decisions in companies and individual securities.

Our approach

The investment approach is based on our long-term, fundamental, high yield investment process. Our global approach to issuer selection improves the opportunities available for high yield investing and engagement outcomes. Portfolio companies must meet specific investment and engagement criteria. Each should have supportive fundamentals, cash-generative operations, be trading at attractive valuations – and must be willing to enter the long-term, transformative process of engagement. To identify potential for change, we have developed a proprietary scoring system (SDG scores).

Engagement overview

Our engagement programmes focus on those areas where the greatest and most tangible positive outcomes can be generated in support of the SDGs, including emerging markets where the need is often greatest. We have dedicated engagers and draw upon the resources of Federated Hermes’ leading stewardship team, EOS. We recognise that any successful engagement strategy requires buy-in from a company’s management and board. Our approach is therefore to treat companies as partners.

Investment philosophy

Seeking positive outcomes for investors and society.

We believe our dual objectives are interwoven and self-reinforcing. By identifying tomorrow’s impact leaders and engaging with companies on the SDGs, we aim to generate positive societal and environmental impact – which will, in the long term, reward the companies and their investors.