ESG protects against bond defaults, says Oddo BHF

Franco-German fund manager Oddo BHF Asset Management said it had extended responsible investment criteria to a convertible bond fund and suggested this would lessen default risk.

The firm is applying environmental, social, governance (ESG) principles to its Oddo BHF European Convertibles Moderate fund, limiting exposures to companies with low ESG scores.

Olivier Becker, head of convertible bonds at Oddo BHF Asset Management, said: “The inclusion of ESG aspects in our strategy aims to improve portfolio quality in the long term. It is no coincidence that the latest defaults seen in the convertible bonds market – Folli-Follie or Nyrstar, for example – concerned companies with significant governance issues.” The firm was not invested in these businesses.

He added that integrating “demanding” ESG factors into the investment process should improve the fund’s risk-return profile and “could lead to even more robust investment results in the future”.

As of June 30, 2019, approximately €6.9 billion of the €54.4 billion assets managed by Oddo BHF Asset Management, representing 12% of total assets under management, have incorporated ESG criteria into their investment process.

The firm’s ESG methodology is centered on two elements: the adoption of an absolute – or “best-in-universe” – analysis; and an active dialogue with companies, focusing specifically on human capital, corporate governance and engagement for a low-carbon economy.

France’s Tobam, a quantitative asset manager, recently said it was reducing the carbon footprint of its fixed income portfolios by 20% versus the portfolio’s benchmark.

©2019 funds europe

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