The Intelligence Report – 27 March 2019
The science is unequivocal and the evidence is growing ever stronger, supporting the rationale of adopting a long-term investment focus on sustainability. We present our Global Sustainability Strategy. Also in this issue: do not apply a one-size-fits-all approach to BBB rated debt, but assess the idiosyncrasies; and the outlook for European equities.
|Our Sustainability Strategy – become a future maker|
|In a fast changing world, we focus on long-term, sustainable investment returns for our clients. That is why we are putting sustainability at the heart of our strategy.|
|Late-cycle leverage – the risk of US BBB downgrades|
|BBB rated corporate debt accounts for over half the IG index; the volume of BBB rated debt is twice that of the HY index. What are the factors that could sway 2019 performance?|
|Europe – the horizon becomes clear|
|With Brexit a muddle right up to the finish, how does that uncertainty – and other factors in Europe, the US and beyond – affect reflections on investing in European equities?|
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Hopes and concerns are wrestling for investor attention; while wait-and-see might be the sensible approach, our asset allocation team argues portfolios can still be robust despite all the volatility. Also in the “let’s keep it in perspective” department, don’t expect renminbi policy to swing to competitive devaluation; US company debt: less of a burden than it seems. Finally, and perhaps most worryingly, we highlight the need to tackle deforestation for the sake of world sustainability.
Investors play an important part in ensuring that the world is not only economically efficient, but also sustainable. Fortunately, as PRI CEO Fiona Reynolds explains, there is progress; this matters for long-term value creation, the environment and society at large. Next, we argue that a factor investing approach including ESG criteria can work in fixed income and raise the curtain on the upcoming European Parliament elections and subsequent changes in Europe’s top jobs.
The new EU taxonomy defining what is truly 'sustainable' will offer essential clarity and help counteract greenwashing. We also review the implications for investors of Chinese bonds becoming more prominent in global benchmarks. Elsewhere in Asia Pacific, we assess the state of investment stewardship. Finally, we note that Goldilocks may currently prevail on the economic scene, but her grip on the throne is tenuous at best.