Zero Trade-off ESG Fixed Income? Really?

There has been a flutter of buzz around a fixed income strategy that we co-incubated – a core bond portfolio with an integrated HIP Score. Aside from the predictable constellation of blog posts flowing from the Impact Investing community, a handful of more thoughtful articles have been written. Financial Advisor Magazine’s respected journalist, Jeri Bier, even took the time to interview the key players for her article to ensure accuracy. How… responsible. If you read the article, you’ll hear SNW’s CEO Eddie Bernhardt, HIP’s founder Paul Hermann and your humble scrivener at TCG. Booyah.

I am usually damn reluctant to be interviewed for any article like this. Having been misquoted, mis-contexted and generally mishandled by journalists more times than I can count, hesitation is the byword. As one of my good friend’s mother always says: “foolish names and foolish faces find themselves in public places.” Words to live by, but in this case thankfully ignored. In short, Jeri did a bang-on-target job, capturing the essence of the strategy, why we think it is important, the context in which it has been so well received and some colorful details along the way. A big shout to Jeri. I hope she continues to explore impact investing, as she clearly knows what she is doing.

And for those who don’t want to read the article, it provides an excellent overview of how we were able to work with SNW and HIP to create a portfolio that replicates the credit quality, duration, and yield of our conventional FI portfolios, but with a high-IQ ESG screens applied. In the early days of this conversation, let’s just say that Eddie was collegially skeptical. Fast forward over a year and he is a true believer. Why? Because the HIP scoring process actually revealed some risks – legislative, environmental and financial – that their conventional diligence did not uncover. This is not to say that the risks will manifest in the form of losses. Only to say that the HIP process catalyzed a different kind of conversation at the diligence table… one more focused on long-term risks than a conventional debt analysis would customarily embrace. All good, particularly for those investors who seek to activate their entire portfolio towards impact, but who don’t want to sacrifice financial performance in the pursuit.