NN IP: Only 26% of investors have a clear fixed income approach to responsible investing

October 31, 2019

Historically, responsible investors have tended to focus more on equities than on fixed income, not least because of the influence shareholders can exert through their voting activities. NN Investment Partners’ recent survey shows that this trend still prevails, with only a quarter of professional investors saying their organisations have a clearly defined responsible investing (RI) approach for fixed income, while nearly half have a process in place for equities. NN IP integrates ESG criteria into the majority of its fixed income strategies. In addition to ESG integrated products, NN IP offers a fixed income Sustainable and Impact product range with an even stronger focus on ESG.

In terms of future plans, the survey shows that more than three in five (61%) professional investors say they will work on their RI approach for equities over the next three years, while 49% are looking to improve their fixed income RI process.

Edith Siermann, Head of Fixed Income and Responsible Investing at NN Investment Partners: “It is striking to see that the number of fixed income investors that currently have an RI strategy in place is still only 26%. In my opinion there is no reason why this percentage should be lower than on the equity side. All approaches that are applied to equities can, apart from voting, be applied to fixed income.

It is, however, encouraging that almost half of the investors in our survey intend to improve in this area. At NN IP, we believe that ESG integration is the best way to achieve attractive returns for our clients while also contributing to society at large. We are committed to extend integration of ESG criteria to all our fixed income strategies where relevant. In our approach, we focus on investment opportunities based on positive ESG momentum.

“Apart from ESG integrated products we offer sustainable fixed income products that incorporate a clear tilt towards sustainability opportunities in addition to impact products, such as our green bond fund, which target industries and companies that make a clear positive contribution to the UN SDGs.”

NN IP’s survey shows that there are concerns that perhaps not every sustainable fund is as ‘green’ as it appears to be on paper. Overall 64% of investors agree that it is difficult to differentiate between the products on offer.

Edith Siermann adds: “The concerns about greenwashing are to a certain extent justified. It is key that asset managers offer transparency on the ESG integration approach and help clients understand the differences in product offering. At NN IP, we therefore developed a stringent definition of ESG integration where each investment analysis is required to integrate all three (E, S and G) factors, and for this to be demonstrable and documented in a consistent way.”

Nearly seven out of 10 (69%) of respondents believe that equity shareholders can drive clear and positive changes in the companies in which they invest, whereas 65% believe that this is harder for bondholders because they do not have voting rights.

Edith Siermann concludes: “There is a lot more to engagement than voting. The fact that bondholders have no vote is no reason to downplay the value of engagement for fixed income investors. Voting is just one of the ways investors can influence corporate behaviour. Irrespective of asset class, engagement is an important tool for driving sustainable change and identifying the most attractive investment opportunities within Fixed Income. I also truly believe that apart from voting, it’s only a matter of time before it is generally accepted that bond and equity holders use similar tools and approaches in their responsible investment strategies.”