FIXED INCOME ESG INTEGRATION

THE CHALLENGE

How can I integrate ESG into my fixed income allocation?

Investors are increasingly demanding that that their investments align with their own values and have a positive contribution to society. This is bringing sustainable investments to the forefront of portfolio construction and establishing sustainability as the new normal in many client portfolios.

Sustainable investing has moved from the peripheral to the core of wealth management investment propositions. This ‘new normal’ is not only about the ability to prove that you can generate excess returns above benchmark, but also about demonstrating a valid sustainable proposition if managers are to compete effectively for further future investments.

THE ACTION

An investor seeking to transition to a sustainable fixed income allocation may seek to implement via a fixed income ESG ETF. For example, an investor seeking exposure to the euro corporate bond market whilst taking into account sustainable considerations could utilise a EUR-denominated corporate bond ESG ETF.

THE OUTCOME

This EUR Corp Bond ESG ETF would offer an investor diversified exposure to euro corporate bonds with a rules-based transparent approach to implementing sustainable considerations. This aims to provide sustainable profile improvement…

Carbon emissions and ESG ratings

Source: Bloomberg Barclays MSCI index, as at 31 August 2020.

“€ Corp” is represented by the Bloomberg Barclays Euro Corporate Index. “€ Corp ESG” is represented by the Bloomberg Barclays MSCI Euro Corporate Sustainable SRI Index.

Reference to individual investments for illustrative purposes only and should not be construed as investment advice or investment recommendation.

With comparable returns

EUR corporate index performance comparison

EUR Corporate index performance comparison

Index performance Currency 1 Sep 2019 to 31 Aug 2020 1 Sep 2018 to 31 Aug 2019 1 Sep 2017 to 31 Aug 2018 1 Sep 2016 to 31 Aug 2017 1 Sep 2015 to 31 Aug 2016
Bloomberg Barclays MSCI Euro Corporate Sustainable SRI Index EUR -0.75% 6.53% 0.05% 0.86% 6.20%
Bloomberg Barclays Euro Corporate Index EUR -0.81% 6.64% 0.08% 0.67% 6.70%

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. All index returns are expressed as gross of fees. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index. Sources: Bloomberg, BlackRock as of 31 August 2020.

The environmental, social and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

Case studies are for illustrative purposes only; they are not meant as a guarantee of any future results or experience and should not be interpreted as advice or a recommendation.

WHY INDEXING?

Sapling

Improved sustainable profile1

Chart bar

Historically similar performance characteristics

Currency sign of Euro

Comparable costs to standard market cap exposures2

WAYS WE CAN HELP YOU

From case studies to full outsourcing, explore how our portfolio solutions can help you rethink your portfolio.

EXPLORE PORTFOLIO SOLUTIONS

Source: BlackRock, June 2020. All case studies included are for illustrative purposes only.

1 Improved sustainable profile compared to equivalent non-ESG index.
2 Average costs for iShares fixed income ESG ETF range is in line with our non-ETF equivalent product range as at 30 June 2020.