High yield – going green

High yield – going green

High Yield is often unfairly considered the ‘dirty’ part of credit investing. While they are certainly more indebted companies, this tells you nothing about the sectors they operate in, the governance of companies or indeed the environmental and social impacts the corporates may be having.


Pressure is increasing from all angles for companies to conduct their business as sustainably as possible. It’s not been a surprise to see an increase in bonds linked to green projects, or where the terms of the bond contracts are linked to sustainability targets. One chart that caught our eye last week was the percentage of supply within both high yield and investment grade that is being used for such purposes.

 

You may be surprised to know that far more high yield rated companies are issuing such instruments compared to their investment grade counterparts. It’s a nice development to have; as bond investors we are concerned about capital preservation and ultimately getting our money back (with interest!). To do this effectively, we always seek to avoid tail-risks and one way to do this is to assess the ESG risks within a credit. As these issues become more and more prevalent to company management, it’s the high yield investors themselves who are most set to benefit.

 

imagexa6bh.png

Mark Benbow

Investment Manager, Fixed Income

Mark Benbow is an investment manager in the Fixed Income team. 

More about the author


Read next