ABSTRACT
This chapter analyzes existing environmental, social, and governance (ESG) fixed income funds available to investors, globally. Actively managed sustainability strategies typically consider material ESG factors into their investment decisions and engage with companies to improve their ESG practices. The chapter presents a taxonomy that investors can use to navigate fund evaluation in fixed income. While negative screening for corporate bonds is comparatively straightforward to implement, it is challenging to apply to sovereigns, especially developed countries. In broad terms, positive screening aims to invest in or tilt towards securities with strong or improving ESG characteristics. Growing interest in sustainable and impact investing has encouraged fund managers to launch suitable products. Repurposing and rebranding sustainable fixed income funds are increasingly common. ESG fixed income fund assets are located in Europe, comprising nearly 90% of all assets. Impact funds can be found in multiple sector categories including diversified bonds, investment grade corporate bonds, government bonds, or municipals, matching the overall impact bond market.
