Fixed Income Investors Struggle to Report Carbon Metrics

Carbon-related metrics are being reported by the majority of investors in listed securities, but less than 30% of firms allocating to other asset classes like fixed income are currently doing the same, according to a survey by Russell Investments. The survey of 236 asset managers found that 86% of investors in listed equity are reporting on carbon intensity. In comparison, 41% of fixed income investors said they are reporting ESG-related data for developed market sovereign bonds, but just 27% said the same of carbon data for the same segment, the report said. Further, only 8% of fixed income investors are reporting on carbon-related metrics in the securitised bond market, with respondents citing poor data availability and a lack of standardised reporting frameworks. However, 62% of investors in investment grade corporate bonds and 57% of investors in high yield corporate bonds are reporting on carbon intensity. “The results highlight further improvements are still needed around ESG data,” said Yoshie Phillips, Head of Fixed Income ESG Investing at Russell Investments. “In the corporate bonds space, there are still several challenges such as disclosure practices in privately held companies or applying carbon measures in green bonds. Outside corporate issuers, ESG-related reporting continues to evolve in an unstructured fashion due to the absence of clear industry standards.” The survey further identified a growing trend toward evaluating the energy transition with forward-looking views, with an increasing number of asset managers collaborating with transition-focused industry organisations and initiatives, such as the Transition Pathway Initiative, Science Based Targets initiative and Net Zero Asset Managers initiatives. Phillips said: “During our conversations with asset managers, we often hear about the challenges of third-party ESG data providers’ outputs and how they try to augment it with their in-house forward-looking ESG analysis. We are seeing more support for standardised disclosures in key ESG metrics.” 

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