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The Rise of Social and Sustainable Bonds

David Katimbo-Mugwanya David Katimbo-Mugwanya Senior Fund Manager
EdenTree Insight reports

The Rise of Social and Sustainable Bonds

David Katimbo-Mugwanya

Senior Fund Manager
30 Dec 2020



We have written at length in other EdenTree Insights on a range of crucial ESG themes and their impacts on the environment, business and society. However, this insight seeks to explore how that change can be funded as, without capital, many of the necessary shifts needed for a responsible and sustainable future will not be possible.

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  Chapter 1

Our approach to responsible and sustainable investing

As responsible and sustainable investors, it is important to have an understanding of the impact of the products in which you invest. This process does not finish at the point you invest, but is an ongoing monitoring process to ensure that products have a real impact and align with both our Responsibility and Sustainability themes and the UN's Sustainable Development Goals.

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  Chapter 2

Green Bonds: Prioritising environmental concerns

The first responsible financial instrument we are going to look are are Green Bonds. These have come to prominence in recent years as a way of funding sustainable environmental projects and will be a key component of a greener future.

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  Chapter 3

Green Bonds: How do they guide investment?

Due to the rise of Green Bonds, it is important to consider how they fit into any investment portfolio. However, it is also crucial to consider whether the underlying issuer has a true responsible purpose for their use, or whether it is an attempt to "greenwash" an underlying issue. Here we look at 2 investment examples that pass the screening test with flying colours.

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  Chapter 4

Social Bonds: Addressing societal needs

We have already looked at how our investments can have a positive impact on the environment and the places we live in, but equally as important is the societies in which we live. Social Bonds are a rapidly growing market and aim to generate funds for social improvement projects. They can have a huge positive impact on those affected and could be a cornerstone of responsible fixed income in future.

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  Chapter 5

Social Bonds: The investment case

As with any investment product, it is important to look deeper into the underlying issuer to ascertain if the product meets responsible and sustainable investment requirements. Here, we look at some examples of companies issuing social bonds and why we believe they would fit into a responsible portfolio.

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  Chapter 6

Retail Charity Bonds: A tool for the socially-conscious retail investor

While most fixed income instruments are targeted towards institutional investors, an increasing proportion of responsible instruments are being designed for retail investors. Here, we look at how the Retail Charity Bond platform brings fixed income products to a retail audience looking to support charitable organisations and the impact of this funding.

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  Chapter 7

Sustainable bonds: Combining green and social initiatives

While it is important to focus on enabling change and the pivot towards a more responsible future, it is also key to make sure that these changes can be continued for the forseeable future. Here, we examine Sustainable Bonds, combining both green and social initiatives into one responsible and sustainable product.

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  Chapter 8

Sustainability-linked instruments: Setting sustainability targets

Many issuers are beginning to opt for Sustainability-linked bonds, thereby providing an extra incentive for the issuer to meet its stated sustainability targets. These instruments are measurable and have strong ties to the UN's Sustainable Development Goals, meaning that these are possibly one of the more transparent instruments available.

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  Chapter 9

Transition bonds: A new frontier

Many companies have depended on unsustainable practices in past, but are looking to move towards a more responsible future. There will need to be a period of change while companies shift from their old practices to more sustainable ones. As such, Transition Bonds are an instrument created to help fund the transition to a more responsible future.

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ESG Bonds: A noble initiative that still demands scrutiny

As responsible and sustainable investing becomes an increasingly important consideration in the construction of any portfolio, it is key to remember that the work does not finish there. As an ethical investor, it is important to look beyond the top line and delve into the real impact of your funds and ensure you fully understand and support the values of companies you support.

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