1.Institutional investors in Canada and around the globe are increasingly aligning their investments with ESG mandates to generate impacts. How have the public fixed income markets developed to meet this demand?

On-going growth and diversification of issuers, structures, currencies, UoPs (Use of Proceeds) for impact investors (like Nuveen) to find opportunities. The sector specialist model enables a firm to invest beyond corporates and sovereigns, including ABS (Asset-Backed Securities), CMBS (Commercial Mortgage Backed Securities), munis (municipal bonds), preferred shares, etc. The recent development of SLBs (Sustainability Linked Bonds) is meeting client demand, but we believe these issues are misguided.

2.What approaches do investors need to take in order to align their fixed income investments with impact investment goals?

Defining the outcomes you want to target; establishing disciplined criteria for eligible impact investments, based on industry guidance like GBP (Green Bond Principles) or more rigorous standards constructed in-house. While we are a non-concessionary investor unwilling to sacrifice market returns, some investors may decide that concessionary investing aligns with their goals.

3.How do institutional investors quantify impacts from making investments in fixed income sector?

An Impact report needs to be at the cutting edge of aggregated reporting, and each year organizations should strive for greater complexity and granularity. The impact investment process should have a significant focus on reporting frameworks and transparency, which we believe is essential for issuer accountability (as well as asset manager accountability) and also to provide science-based evidence of the efficacy or projects and programs, which helps support further investment toward these goals.

4.How can investments in sustainable fixed income sector be aligned with investment return objectives?

As noted above, investors can take a concessionary or non-concessionary approach depending on the mission of the asset owner and the specific objectives of the allocation. Yet for non-concessionary investors seeking market returns or better, the breadth and diversification of the impact fixed income market allows for a variety of risk profiles – from high grade, high liquidity, SSA (Sovereigns, supranationals, and agencies) style portfolios to broad market proxies to deeper credit, multi-sector opportunistic portfolios. Similar investment guidelines/portfolio constraints can be arranged for impact portfolios as they are for traditional fixed income portfolios, based on risk tolerance, statutory constraints, and other client preferences about concentration risk, credit quality, DM vs EM and currency exposure.