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David Katimbo-Mugwanya, manager of our Amity Sterling Bond Fund and Amity Short-Dated Bond Fund, sheds some light on how EdenTree, as a responsible and sustainable investor, is helping to fund the fight against the ongoing coronavirus pandemic in this Q&A on our recent participation in the issuance of the World Bank’s recent Sustainable Development Bond.

Adding the World Bank Sustainable Development Bond to our Fixed Income Portfolios

David Katimbo-Mugwanya David Katimbo-Mugwanya Fund Manager
Opinion

Adding the World Bank Sustainable Development Bond to our Fixed Income Portfolios

David Katimbo-Mugwanya

David Katimbo-Mugwanya
Fund Manager

David Katimbo-Mugwanya, manager of our Amity Sterling Bond Fund and Amity Short-Dated Bond Fund, sheds some light on how EdenTree, as a responsible and sustainable investor, is helping to fund the fight against the ongoing coronavirus pandemic in this Q&A on our recent participation in the issuance of the World Bank’s recent Sustainable Development Bond. 

What exactly have we bought?

EdenTree recently participated in the primary issuance of a World Bank Sustainable Development Bond in our Amity Sterling Bond & Amity Short-Dated Bond Funds. This is a 3-year maturity bond that is denominated in pound sterling...As pioneers in the responsible and sustainable investment space, we are constantly on the lookout for instruments that not only meet our clients’ financial investment objectives but also those that help you achieve ethical or responsible outcomes in-line with our award-winning “profit with principles” investment approach…Social bonds are key tool for us to deliver on this promise.

What do the proceeds of the bond go towards funding?

Whilst the World Bank may not typically ring-fence proceeds of its bond issuance for particular projects, it does provide colour as to how it intends to deploy funds raised from bonds that the organisation issues. Recent sustainable development bond issuance will enable the institution to further support for existing health programmes in countries such as Ecuador and the Dominican Republic, in-line with Sustainable Development Goal 3 = Health & Wellbeing= particularly focussing on efforts to tackle the impact of the COVID19 outbreak from both a health infrastructure perspective, bolstering systems, as well as in helping to tackle adverse impacts on economies around the world resulting from the related disruption to business activity.

The bonds relationship to the SDGs

In fact, the World Bank views all its activities as geared towards Sustainable Development and we think that such bonds are in keeping with the description accorded other social bonds, that is, bonds whose proceeds target specific societal issues or a particular segment of the population

As pioneers in the responsible and sustainable investment space, we are constantly on the lookout for instruments that not only meet our clients’ financial investment objectives but also those that help you achieve ethical or responsible outcomes in-line with our award-winning “profit with principles” investment approach 

How/ why the WB chose to partner with us at issuance despite it being oversubscribed

As providers of long-term capital, we believe there is a crucial role to be played by investors such as ourselves in funding projects that aim to transform society into the sustainable cities of the future and so it brings us great pleasure to successfully participate in such bond fundraisings for Green, Social and Sustainable bonds = in this case, World Bank’s 3-year sustainable development bond. To that end – as responsible and sustainable investors – we view ourselves as perfectly positioned to be partnering with organisations such as the World Bank, in achieving these outcomes for our clients – as there is clear alignment in our objectives.

Why is this a good investment on behalf of our clients, both from an investment perspective and a responsible perspective?

With its true supra-national status and AAA credit rating to boot, few other bond issuing entities, if any, are able to offer a risk profile as low as the International Bank for Reconstruction & Development, also known as the World Bank. Particularly as the economic environment turns to what may be a severe contraction, such securities are invaluable for their safe-haven attributes in times of heightened financial market volatility – such as that witnessed in March

Why are we looking for cash proxies right now and why does this investment suit that?

Considering the prevailing interest rate environment, where central bank rates have been cut to historic lows, AAA-rated debt with shorter maturities such as this 3-year bond, that offer some spread over gilts, could offer a home for cash – if not for the capital preservation properties they possess, to pick up some yield whilst sovereign debt and cash rates are near zero for this tenor. We would therefore view instruments such as suitable cash proxies, for those with an incrementally higher risk appetite or as part of a portfolio’s allocation to higher credit quality debt, such as our Amity Short-Dated and Amity Sterling Bond Funds.