Implementation of RI in Credit Strategies
Credit is a broad asset class. Issuers may be corporate, private, or sovereign; and debt may be traded publicly, directly, or accessed via syndicated or structured products. Each of these instruments have unique characteristics that influence whether there is available data and how straightforward it is to integrate RI related risks or run dedicated RI products within this strategy.
Discussion on RI within alternative investment strategies has historically been centred on traditional long only equity portfolios. However, credit portfolios are now also in focus. There are many nuances in terms of the instruments traded, jurisdictions issuing the instruments, and access to underlying data. These nuances may be encountered either when determining “good” or “bad” RI investments or when using engagement to try to drive RI related change.
This memo acknowledges that there is no single way to view RI within a portfolio and contains many items that asset managers and allocators should discuss.
This memo looks at the following for the different instruments traded within this strategy:
- Data availability and reliability,
- Responsible Integration: Including financially material RI related risks in the investment process but not pre-defining an investment universe using RI criteria,
- Responsible Asset Selection: Dedicated RI approaches including exclusions, inclusions, and impact strategies, and
- Responsible Asset Ownership: Voting, engagement, and activism.