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      This two part Investment Conference will bring you the latest updates from economists, asset managers and pension consultants. We will be taking a look at the outlook for the 2021 economy, alternatives, cashflow strategies and global equity markets to name a few, assessing how they fared through the volatility and what we can expect for the year ahead.

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      Webinar: Using passion for ESG to unleash member engagement

      This webinar will look at how pension schemes can harness their members’ interest in ESG to engage them more broadly with their pensions. In particular, it will look at exclusive research showing how members are reacting to ESG; their propensity to act versus their actual behaviour; and the expectations they have of providers in this regard.

      • Date: 26 Jan 2021
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      Webinar: What to put on your GMP Equalisation project roadmap for 2021

      This webinar will bring together views from actuaries, lawyers, administrators, trustees and data experts to look at the pragmatic, collaborative solutions that are open to schemes to solve the GMP equalisation challenges in 2021. It will assess the individual challenges schemes face with equalisations and provide some practical options that are available to resolve these issues.

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      Webinar: Will the world return to normal in 2021?

      In this webinar, PP editor Jonathan Stapleton will be joined by BMO’s chief economist Steven Bell and director of fiduciary management, Christy Jesudasan, alongside PTL trustee director Melanie Cusack and Isio’s head of fiduciary management oversight Paula Champion to discuss the significant impact of these themes on the pensions sector.

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      So far, DC plans have largely been focused on the onset of auto-enrolment and changes to the regulatory framework - be it the ‘charge cap,' ‘pension freedoms' or consultations around ‘value for money', says Annabel Tonry, Executive Director at J.P. Morgan Asset Management (JPMAM).

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      In 2015 George Osborne, then the UK Chancellor of the Exchequer, decided that those age over 55 could take much more of their pension in cash. This has since opened up a range of possibilities for DC scheme members in the world of pensions.

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  • Investment

Industry Voice: How do ESG concerns impact fixed income investors?

Across the globe, fixed income investors are increasingly interested in environmental, social and governance (ESG) issues. MFS Research Analyst Mahesh Jayakumar explains how MFS® incorporates ESG factors into fixed income research and looks at the opportunities and challenges facing investors.

Industry Voice: How do ESG concerns impact fixed income investors?
  • Mahesh Jayakumar, Fixed Income Research Analyst, MFS
  • 10 December 2019
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ESG has been a theme in equities for many years. Why is it now a growing trend in fixed income?

Fixed income has traditionally been used for its ability to manage downside risk while generating income and, in general, it continues to play a diversification role in asset allocation. The fixed income investor base is growing as both institutional investors, such as pension plans, and an increasing number of retail investors, such as retirees and everyday savers, perceive greater volatility within equity markets and allocate more of their capital to fixed income.

At the same time, market participants such as asset managers, asset owners, regulatory agencies and policymakers are increasingly thinking about ESG issues beyond just the implications for equity shareholders. In addition, more investors are seeking to use their capital to have a positive social or environmental impact, which involves a greater degree of ESG integration.

In light of this, and given that fixed income markets are significantly larger than equity markets, it is clear why ESG is becoming an increasingly important part of fixed income investing.

How do you approach incorporating ESG issues into fixed income analysis?

Our investment approach has always focused on identifying companies and issuers with sustainable, long-term competitive advantages. As investors, we need to take into account all factors that can affect the viability of our investments through multi-year business cycles and ever-evolving macro environments. As such, we believe that the integration of ESG factors into our research is essential, as these issues often affect the long-term sustainability of cash flows for corporations and other issuers.

When evaluating corporate bonds, integrating ESG issues into our fundamental analysis of the issuer's credit and leverage profile is critical. ESG analysis involves understanding issues that are typically nonfinancial in nature, such as environmental impacts, employee well-being, supply chain management, product safety and workforce diversity. In the short term, shocks to these factors can affect cash flows and the ability to pay interest to debt holders. In the long term, they can harm corporate culture and impact operating models, which can lead to the erosion of revenue generation and, ultimately, profitability.

While governance is widely considered the most prominent ESG factor affecting various fixed income sectors including corporate, sovereign and municipal bonds; environmental and social factors must also be considered in any analysis. For instance, the deterioration of social or environmental factors can influence the political stability or business climate of a particular country. Therefore, we evaluate social factors, such as inequality, and environmental considerations, such as air quality and water stress, along with a country's governance practices, such as the independence of institutions, rule of law and enforcement of contracts.

 

Continue Reading the Q&A

 

Bond: Investments in debt instruments may decline in value as the result of, or perception of, declines in the credit quality of the issuer, borrower, counterparty, or other entity responsible for payment, underlying collateral, or changes in economic, political, issuer-specific, or other conditions. Certain types of debt instruments can be more sensitive to these factors and therefore more volatile. In addition, debt instruments entail interest rate risk (as interest rates rise, prices usually fall). Therefore, the portfolio's value may decline during rising rates. Portfolios that consist of debt instruments with longer durations are generally more sensitive to a rise in interest rates than those with shorter durations. At times, and particularly during periods of market turmoil, all or a large portion of segments of the market may not have an active trading market. As a result, it may be difficult to value these investments and it may not be possible to sell a particular investment or type of investment at any particular time or at an acceptable price. The price of an instrument trading at a negative interest rate responds to interest rate changes like other debt instruments; however, an instrument purchased at a negative interest rate is expected to produce a negative return if held to maturity.

Please keep in mind that a sustainable investing approach does not guarantee positive results.

The views expressed are those of the author(s) and are subject to change at any time. These views are for informational purposes only and should not be relied upon as a recommendation to purchase any security or as a solicitation or investment advice from the Advisor.

Unless otherwise indicated, logos and product and service names are trademarks of MFS® and its affiliates and may be registered in certain countries.

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