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Sustainable equity funds have excelled from a total return point of
view recently, but what are the options for fixed income investors?
Rebecca Jones finds out
Desperately seeking
sustainable income
Income, as most investors
are painfully aware, is hard
to come by these days. This is
particularly true for anyone
interested in sustainable investment:
a sector where most companies
are focused on growth, rather than
income, making equity income a
rarity. The sustainable and green bond
sectors, however, are growing apace,
with the Covid-19 pandemic helping to
spur issuance of these securities to an
all-time high of £75.5bn in the second
quarter of 2020, according to the latest
report from Moody’s.
The sustainable bond sector has
been one of the biggest surprise
beneficiaries of the current crisis,
with corporates, government bodies
and NGOs alike all scrambling to
raise debt to finance social-support
packages.
Simon Bond, manager of the
Threadneedle UK Social Bond fund,
says: “In March, we saw a flurry of
issuance from organisations like the
Nordic Investment Bank, the Austrian
government, the French employment
agency and others supporting areas
like SME lending. The speed of the
Covid response was surprising.”
What’s in a name?
During this period, Bond says yield
spreads widened significantly as issuers
flooded the market, a fact reflected in
his own fund’s average yield, which
spiked 100bps to 2.5 per cent in March.
Aitken Ross, manager of the Liontrust
Sustainable Future Corporate Bond
fund, concurs: “The market has
been quite challenging over the past
TRUSTNET