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Delta: the rationale and rigour of ESG analysis and engagement (part 1)

Why should fixed-income investors factor sustainability into their investment decisions, and what are the approaches available to them? What drives an impactful engagement with a credit issuer?

This two-part episode of Delta explores home territory for Hermes that is of keen interest for many investors that we speak with: the purpose and practice of environmental, social and governance (ESG) analysis and corporate engagement in fixed-income markets.

In part I, Andrew ‘Jacko’ Jackson, Head of Fixed Income, and Mitch Reznick, Head of Research and Sustainable Fixed Income, discuss how ESG-investment strategies ranging from integration to impact apply to fixed-income markets. Aaron Hay, an engager in the fixed-income team, then explains what is required for an engagement with a company to be successful.

For Reznick, ESG investing enables credit investors to enhance performance while benefitting society and the environment. “When you invest, you are a financial stakeholder. And when you’re a financial stakeholder, you have a voice,” he says. “You can encourage a company to create positive change.” 

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