Monthly Commentary - Pareto ESG Global Corporate Bond
The debate over greenwashing has accelerated the past few months. We will not be able to provide a quick solution, but our strategy has been to partner with organisations which hold us accountable and give us guidance along the way. All is not lies, and our goal is to finance corporations, the winners of tomorrow, which provide solutions for a better future.
This month, we are proud to announce PEGCB as the first fixed income fund to receive a license approval from the Nordic Swan Ecolabel for the application of the second-generation criteria.
In 2018, the fund received a first approval, and the label has conducted an audit control every year since then. Earlier this year, the Nordic Swan Ecolabel announced they would reinforce the ESG requirements and sent a call to action to all licensees. Tougher ESG integration, engagement and transparency criteria are applied, which has led to strengthening our investment process. Further information on changes is available here:
https://paretoam.com/en/news/renewing-the-ESG-vows/
As for the financial markets, we have seen a continuation of the positive developments since mid-October. Inflows into both investment grade and high yield funds have been strong in both Europe and US. Volatility has remained benign, which provides comfort for the new issue market. Investment grade and financial bond issuance has been very robust. High yield issuance is still slow and likely will remain so through the end of 2022.
It was a strong month performance-wise for the fund and global credit indices.
The fund participated in two new issuances: Faurecia Sustainability Linked bond and Orsted Green Bond. Both bonds had very strong participation and have traded well in the aftermarket.
In secondary trading, we added in Seche Environment and Davita, exited Momox, Hapag-Lloyd and LR Global. There is a slight decline in inflation numbers and there are talks of fewer rate hikes in both the US and Europe for 2023. The US 10-year yield fell from approximately 4% in early November to around 3.75% at the end of November.
The strategy going forward remains having a strong focus on companies that contribute with sustainable solutions here and now.
The fund is classified as an Article 9 fund under the SFDR Disclosure Regulation.
The synthetic CDS credit index narrowed during November. The iTraxx Crossover index went from +556 bp at the end of October to +458 bp at the end of November.
Portfolio management team:
Philip Lindgren
Portfolio manager
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Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager’s skill, the fund’s risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments. This is marketing communication.