Harrison Hill explains how RBC BlueBay provides specific solutions that give investors access to what we consider to be strong, forward-looking sustainability themes in public fixed income markets. This involves looking beyond investing exclusively in ESG bonds.
Our analysis revealed several secular megatrends that are changing our world in an unsustainable way. These include social developments such as the growing and ageing population, unsustainable lifestyles and increasing disparities in education and healthcare. There are also numerous environmental challenges, from climate change to increasing water scarcity, waste, pollution, and unsustainable land use.
To help address these sustainability challenges, we have developed our own impact-based framework for fixed income investments, which is structured around seven sustainable investment themes. Three of these are social themes (an inclusive society; building knowledge and skills; good health, safety and well-being), the other four are environmental themes (a circular economy; clean and sufficient water; clean and safe energy; sustainable mobility and infrastructure). This multi-theme approach is the cornerstone of our investment philosophy for the impact-conscious strategy and, in our opinion, makes the big difference with some of our colleagues who mainly focus on environmental or social themes. We are aware that the two considerations must go hand in hand, since they are undeniable. For example, in the area of climate change, the transition to a low-carbon economy can only work if the social aspects are also addressed. In other words, there must be synergy between the two dimensions.
For our sustainability themes, we have applied the UN's Sustainable Development Goals, the so-called SDGs, and we also report on the extent to which our portfolios are aligned with these themes. Incidentally, these SDGs are not used purely as an investment filter based on two reasons. First, the SDGs are a framework developed by governments to help governments achieve sustainable development. Secondly, we are aware that the framework has been set up with a 2030 horizon, whereas ultimately our strategy must continue beyond that.
Through our investment process, we consciously strive to make a positive contribution to society and the environment. Our seven themes refer to the impact and results we seek by investing in companies with a core business in that area or in bonds that finance activities to address some of the biggest sustainability challenges in the world. By being at the forefront of these trends, we believe we can contribute to improving living standards worldwide.
In the industrial sector, for example, we are trying to challenge the traditional linear production model of 'take-make-dispose', which generates a lot of waste and pollution. Our circular approach aims to support companies that want to avoid waste by ensuring that their products and materials can be used permanently, by regenerating natural systems and by stimulating innovation. In addition, we also see market opportunities for the future in the field of education and skills development. Businesses that enable people to learn, adapt and evolve will be crucial to shaping a sustainable future.
For every investment opportunity we consider, we take the same rigorous investment and risk management approach: every security is thoroughly analyzed and we scrutinize whether the fundamentals are sound to generate alpha. And of course, we look at everything through the lens of our sustainability themes.
