March 2021 - A Covid-19 Sustainable investment update. What is happening? What will happen next? How are we performing?
Sustainable investing is traditionally an equity concept. Its history is largely devoid of fixed income. Yet that appears to be changing. The growing desire from clients for products that embed ethical values, alongside growing evidence that sustainable approaches do not compromise financial performance, has led to a surge in enthusiasm for sustainable approaches to investing across all asset classes. But is this all hype? Does it truly belong in the world of credit?
It is often said that market participants dislike uncertainty, but I think that the opposite is true. Investors thrive on weighing up options for outcomes and then backing their views. Making choices in a world of imperfect knowledge is what we all do.
Government bond yields continued to rise sharply over last week, although appeared to have stabilised towards the end, and equities moved back from their recent highs. All of this was met with some relief throughout global markets.
Government bonds were under pressure last week as inflation, vaccine news and supply fears weighed on markets. A key issue for me over the next few weeks will be whether this rise in the risk free rate impacts on risk assets such as credit and equities.
The separate articulation of Environmental, Social and Governance (ESG) investing started as an equity construct and much of the data and analysis used today is still centred in equities.
The magic money tree is alive.