We are an independent, employee-owned investment firm, managing fixed income portfolios that generate environmental and social impact, without compromising returns.  As a responsible impact investor, our vision is to mobilise capital to address the major challenges the world faces. Our mission is to move large scale capital into investments promoting environmentally and socially resilient communities, to support the 2015 UN Sustainable Development Goals (SDGs) and to support the global COP 21 Climate Change Accord to limit global temperature increases to 2 degrees Celsius.  By establishing and growing an organisation that is concentrated on broadening and deepening the impact bond market, we believe impact investing can become a significant focus of the $100tn global debt market[1]. We promote robust verification, reporting and active engagement to ensure repeatable performance and sustainable impact.

Responsible Investment through ESG Integration and Impact

We are committed to responsible investment as our selection of investments is based on positive environmental and social values that support global agreements and protocols, such as the Paris climate accord, the Montreal Protocol and the Stockholm Agreement, as well as the UN Sustainable Development Goals. Our goal is to invest in fixed income and cash instruments that deliver both competitive returns and effect positive environmental and social consequences. We believe that environmental, social and governance (ESG) issues are critical and can influence investment risk and return.  Therefore, we integrate ESG considerations into our investment analysis through a robust and disciplined approach involving in-depth credit research and sustainability verification of both issuers of bonds and issues.  We, however, extend our due diligence beyond conventional ESG factors, to include the examination of the potential impacts of the investments around the world. We are solely dedicated to impact fixed income investing, along with impact measurement and reporting.

We analyse all green, social, sustainable, and aligned bonds for their adherence to our ESG criteriaIssuers and issuances must meet the SPECTRUM Bond® criteria to be eligible for the investment universe that is used to build our portfolios.  The SPECTRUM Bond® eligibility criteria are:

SUSTAINABLE +

Aligned with our purpose to support the UN SDGs and Paris Climate Change agreement.

POSITIVE +

Positive Environmental and/or Social Externalities are associated with their issuance.

EXTERNATILITY +

Positive Environmental and/or Social Externalities are associated with their issuance.

CREDIT +

Issuers must be Credit worthy from a financial and broader environmental, social and governance (ESG) perspective.

TRANSPARENCY +

Clear and Transparent investment policies and processes on reporting and disclosure.

RESPONSIBLE +

Responsible issuers with strong integrity and standards, as well as a clear commitment to a sustainable business model.

USE OF PROCEEDS +

Ability to determine Use of Proceeds to assure funded activities meet the AIM criteria.

MATERIAL IMPACT +

All securities must offer mainstream market yields and provide reporting on the Material & Measurable environmental and social impacts

We believe that it is equally important to apply ESG analysis to issuers of bonds as it is to bond projects.  ESG factors include, among others, labour standards and relations, board diversity, equality of opportunity, human rights, global supply chain management, diversity, marketing practices (including demand-side management to shape responsible consumption), corporate governance, business ethics and integrity. 

Our ESG analysis is framed under defined sustainability-focused environmental and social sector criteria for our eligible investment universe on a positive selection basis.  The environmental sectors include energy, resource efficiency, physical infrastructure, land management, water resource management, and marine environment and fisheries.  The social sectors include global health, financial inclusion and sustainable enterprises, education, training & employment, food security, empowerment of women and girls, and social housing.  We may reassess these criteria, particularly when there is new information or emerging global challenges come forward.

Our SPECTRUM Bond® process is aligned with the 17 UN Sustainable Development Goals, which aim to eradicate poverty, fight inequality and tackle climate change.  Goal 17:  Partnership for the Goals, includes private sector engagement in sustainable development, particularly in developing countries, which is core to our mission. We also conduct norms-based screening to evaluate an issuer’s policies regarding environmental and social issues according to their compliance with international standards and norms, such as the UN Global Compact.

Engagement

Engagement with issuers, including corporates, governmental agencies, non-governmental agencies, sovereigns, and supra-nationals, is core to our process throughout every stage of our SPECTRUM analysis. It is the bedrock of our business and underpins our investment process.  We work with key stakeholders to support asset class growth and to ensure quality impact measurement.  We actively engage with the market to promote the development and maintenance of standards that will ensure a high level of transparency and a clear ongoing commitment. Further details may be found in our Engagement Policy.

Exclusion Criteria

We seek to avoid investing in bonds with major recent or ongoing material ESG controversies related to activities funded with proceeds. We also avoid corporate issuers significantly involved in tobacco, weapons and gambling. 

Impact Reporting

We deliver an Impact Report for each portfolio, which includes portfolio alignment with UN SDGs and an assessment of portfolio Greenhouse Gas Emissions avoided.  Our impact reports are based on on-going engagement, including in ESG issues, and impact data collection from issuers and expert sources. For example, we developed the Carbon Yield metric with ISS Ethix and Lions Head Global Partners, funded by The Rockefeller Foundation (more detail available at http://carbonyield.org)

Industry Leadership

We are a signatory to the Principles for Responsible Investment (UN PRI).  We have in place a formal governance structure that aligns our investment processes with the goals of the responsible investment movement.  In addition to the PRI, our commitment to responsible investment is evident through our participation in prominent market and industry investor groups, ICMA Green Bond Principles, US SIF:  The Forum for Sustainable and Responsible Investment, and Climate Bonds Initiative.  Our partners and team members are widely required to present on the subject and participate in industry workshops. 

Commitment to Sustainability, including Diversity and Inclusion

We are committed to applying to ourselves the same high standards that we use in our selection of investments. We invest in alignment with our values.  We strive for social and environmental best practice in our daily operations and hold our governance practices to strong principles of integrity and transparency whilst offering a high quality, fair value service to our clients. Our company operations have a carbon neutral footprint.  We seek to facilitate an environment that embraces diversity and inclusion.  As of March 2018, more than 50 percent of the partners are women.  Additionally, we foster international cultures and languages.

 

For more information about our Responsible Investment policy, contact Judith Moore at Judith.moore@affirmativeim.com

 

[1] Source: BIS