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

What drives successful analysis of sustainability risks in fixed-income markets? From bonds to asset-backed securities, we discuss the acumen and processes required.

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 II, Andrew 'Jacko' Jackson, Head of Fixed Income, speaks with Audra Stundziaite, Deputy Head of Credit Research, about the team’s methodology for quantifying the ESG risks faced by bond issuers, and how these scores are integrated into the team’s view of the operating and financial performance of companies. Andrew Lennox, ABS Portfolio Manager, then discusses how ESG analysis can apply to asset-backed securities – an ESG-integration frontier, until now.

“You’re talking about people’s lives – and this is where the social element comes into it,” Lennox says. “This is where you draw the line as to whether you are financing people’s reasonable life or extending credit for purchases they can’t afford. That’s where you need to look at the origination and underwriting and affordability checks.”

Delve into the ESG details. Tune in to Delta.

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