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In our research on faith-based asset owner investment policies,...

...we noted that over three-quarters of asset owners apply some type of values screen to their equity holdings, but just under half do the same for fixed income. In practice, we’ve heard and observed that fixed-income is harder – not as many options, still developing metrics. But…

You may see more options for fixed income ESG investing – according to two recent reports (benchmark survey and ESG survey) by the Index Industry Association, who found a 61% YoY increase in the number of fixed income ESG indices launched between 2020 and 2021 alone, and a jump from 42% to 76% of asset managers “incorporating ESG principles” into their fixed income offerings, making fixed income “the fastest growing ESG asset class.” For those asset owners that have parked fixed income ESG / values ambitions for the lack of benchmarks and products, let’s have a fresh look.

Side note: the same ESG survey found that the majority of asset managers (80%) prioritize Environmental criteria over Social or Governance – with nearly the same number agreeing that “environmental criteria should always be given priority over social and governance criteria.” This may be a misalignment with the full aspirations of faith-based asset owners, many of whom have strong and defined social objectives.

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