Green Shoots: Exploring Climate-Focused Fixed Income | Lord Abbett
Image alt tag

Error!

There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.

Error!

We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Error!

We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Tracked Funds

You have 0 funds on your mutual fund watch list.

Begin by selecting funds to create a personalized watch list.

(as of 12/05/2015)

Pending Orders

You have 0 items in your cart.

Subscribe and order forms, fact sheets, presentations, and other documents that can help advisers grow their business.

Reset Your Password

Financial Professionals*

Your password must be a minimum of characters.

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.

OK

 

Fixed-Income Insights

As Lord Abbett’s Climate-Focused Bond Fund completes its first year since inception, Portfolio Manager Annika Lombardi talks to Steve Raimer, a Partner and leader in the Product Strategy group.

Transcript

Annika (new VO)

Hi. I’m Annika Lombardi. A little over a year ago, my team and I launched Lord Abbett’s first environmental, social and governance, or ESG, -centric fund, the Climate-Focused Bond Fund, in the United States and abroad. As sustainable investing has been a passion of mine since early in my career, this was a huge milestone. And, as Lord Abbett continues to focus its broader investment philosophy on ESG and sustainability, I’m proud to say the Climate-Focused Bond Fund is only the beginning. I spoke with Lord Abbett Partner and Product Strategy Leader Steve Raimer for his take on the past year – and the years ahead. You’re listening to Green Shoots.

Annika

00:01:34;07

… Thanks so much for joining me, Steve.

Steve

00:01:40;24

Pleasure

Annika

00:01:43;15

So in your position, you've been able to see the ESG related questions that come from both current and potential clients. Could you talk a little bit about how those questions have changed over time?

Steve

00:01:55;13

Yeah, absolutely. So-- the inquiries from our clients and perspective clients have evolved a lot over the last few years. A few years ago, they would be very basic high level questions, and now they're getting much more into detail. So thematically, the discussion has really shifted from our approach (MEDIA SKIPS) to ESG, to the impact that we're having-- in-- in the market.

00:02:20;08

And today, it's less about what we believe and why we're doing what we do, and it's more about how we're doing it. So the focus on a lot of the conversations today will be on the specific actions and the specific outcomes associated with our ESG efforts in our portfolios.

00:02:36;17

When clients speak to us today about ESG, they don't just wanna know how we think about it, or-- or how we integrate it, they wanna know how that actually manifests in portfolios. So rather than just ask about what we're buying or selling, they want to know why we're doing it, and how we're impacting behavior of those issuers in-- in the portfolios.

00:02:55;20

And when you think about the way that we, as an asset management firm, can impact behavior, there's really two tools-- two tools in the toolbox, and Annika, you know this, is they're both at your disposal in your fund-- we can allocate capital, and we can engage with those issuers. And today, we're getting-- a lot more interest from clients, they're holding our feet to the fire, to make sure that we demonstrate how we're using those tools to really make a difference.

Annika (new VO)

Steve says there are essentially five key categories that encapsulate the types of research questions he receives from clients: Philosophy and Process; Resources and Personnel; Active Ownership; Policy and Framework; and Climate-Related questions. Steve described each one, starting with Philosophy and Process.

Steve

00:03:59;00

… We're fortunate in that the

(MEDIA SKIPS) infrastructure that we've built here allows us to respond from a position of strength, because we've got a firm level approach to global corporate citizenship that really does go hand-in-hand with the whole ESG initiatives.

00:04:15;12

And it allows us to speak about things like our mission and our values, and how we're looking to make a difference in world. The questions-- you know, the simple questions early on were, "Do you incorporate ESG into your portfolio management practices?" And today, the questions are more like, "How does consideration of ESG factors impact valuation analysis?"

Annika (new VO)

The second category – Resources and Personnel – includes questions about research tools and team structure.

Steve

00:05:15;17

…We do have significant external research coming into the firm, but I think one of the places we've excelled in the last couple of years is the internal analytics that we've developed to supplement, and to fill the gaps, where there's not outside research available.

00:05:47;07

…Our culture and our governance structure really allows us to answer those questions from a position of strength. Because we've built a structure at the firm where we've got various committees, the executive committee, the investments committee, the Global Corporate Citizenship committee, who all have a hand in shaping our approach and overseeing our approach to ESG

00:06:08;20

And then-- we've got-- bodies like the Investment Stewardship Council, who are directly involved in the tactical kind of day-to-day execution.

Annika (new VO)

Steve says answering clients’ questions about the third category – Active Ownership – is something that enables the team to demonstrate the advancements made in the past few years.

Steve

00:06:36;09

Clients wanna know how we're engaging on the ESG issues, and-- those questions, again, are starting to become very specific. Not just, "Do you engage," or "How do you engage?" They'll ask us for specific scenarios. "Give us an example where you've engaged with an issue, or-- and it led to a good outcome, and it impacted performance in a positive way."

Annika (new VO)

The next category, Policy and Framework, is something Steve says puts the commitment to paper.

Steve

00:07:32;21

It's not enough to just say our practitioners are focused on integrating ESG. Clients wanna know that there's a formal policy behind it, that ensures that it's happening, and it's happening in a certain way. So written communications, like our Responsible Investment Policy, which clients can all see on our website.

Annika (new VO)

The fifth category is something that’s very near and dear to my heart: Climate-Related questions. I should note that Steve references the TCFD here, which stands for The Task Force on Climate-Related Financial Disclosures, which focuses on market transparency when it comes to climate-related risks and opportunities.

Steve

00:08:42;15

…Climate change emerging as a premier topic, it shouldn't surprise anybody, but the degree to science clients are focusing on it now, it's almost like there's ESG, and then there's climate change inquiries. And what they're asking for are more than just, "Do you think about climate change in your investment management processes?"

00:09:02;19

They wanna know if you're aligned with established frameworks, like the TCFD. They're using those types of frameworks as a roadmap. So the questions that they'll ask will actually trace some of the TCFD requirements. And I think what it does for us-- it-- you know, it allows us to get better, because it allows us to focus in areas where we could formalize policies and procedures, and it kind of gives us a roadmap for how we can-- we can get better around climate change.

Annika (new VO)

Steve fields questions from clients around the world. I asked him how the questions he gets from U.S.-based investors differ from those outside the U.S.

Steve

00:10:23;14

I should preface this by saying you've actually managed money on both continents, so you may be in a better position to-- (LAUGH) to speak about this. But certainly, we're seeing a lot of activity from our European clients, and South American clients as well.

00:10:39;13

So think historically, interest in ESG has lagged in the U.S. versus-- certainly in Europe, but non U.S. clients, in general. In the last year or two, we're starting to see the U.S. interest really spike, and maybe in the last six months, we've seen kind of an acute-- acceleration.

00:10:59;16

And at the same time, we're seeing not the interest, but the level of specificity and intensity around those inquires from non-U.S. clients is rising in a similar (MEDIA SKIPS) way. So-- we're definitely seeing that take off in-- in parallels.

00:11:59;16

…Outside of just our actual portfolio management processes-- we're starting to field-- a lot more questions around firm diversity.

00:12:27;24

What's the composition of the organization? How do we think about diversity and inclusion? And-- everything from spreadsheets to breakdown the composition of the organization, the workforce, at the management level, at the partner level, at the executive level, at the investment team level-- we're seeing all kinds of breakdowns.

00:12:46;08

And I would say again, that's something that probably in the last six months or so, we've seen an acute acceleration in those questions.

Annika (new VO)

Steve also pointed out that, while Europe may be a bit further ahead of the U.S. when it comes to ESG investing, there is one area in particular where the gap isn’t so wide.

Steve

00:14:01;16

The last survey that we saw just a couple of days ago suggested that only 5% of European domiciled (MEDIA SKIPS) funds were categorized in what we would call the greenest category, Category Nine. Which again, Annika, you're familiar with, because the climate focused bond fund is our Category Nine.

00:14:19;16

And more than 80% of European domiciled funds in this survey were in Article Six, which suggests that they are-- integrating ESG, but don't have a specific, sustainable mandate. That tells me that the gap between the U.S. and the E.U. may not be quite as significant as we thought it was. Right?

00:14:40;24

And more than 80% of European domiciled funds in this survey were in Article Six, which suggests that they are-- integrating ESG, but don't have a specific, sustainable mandate. That tells me that the gap between the U.S. and the E.U. may not be quite as significant as we thought it was. Right?

Annika

00:15:11;17

Yeah, it's funny, when I moved to London in 2010, as an analyst, I'd been an analyst here, in the U.S. for a few years, I hadn't even heard of ESG. And then when I start working London, it was, like, well, we incorporate ESG here, and I had to kind of relearn all that, it was just a common language over there already.

00:15:28;23

But I would say I have been very surprised at the pace-- of ESG integration both here, in the U.S., as well as you know, even more and more so now in emerging markets. And it really feels like it's picking up steam, and as you said, the gap probably isn't as large as we thought it was anymore, given how quickly it's grown here, in the U.S.

Steve

00:15:55;03

… I would look at that comparison the way we look at active versus passive, right, where we say we don't need to take a stand on active management, as a whole. We need to take a stand on what we do as an organization, and feel good about what we put out in the marketplace.

Annika (new VO)

Steve is also a key contributor to Lord Abbett’s relationship with UN PRI, or the United Nations’ Principles for Responsible Investment, an organization we’ve been affiliated with since 2016. I asked him to talk a little bit about what that signatory commitment entails, and how our performance as a firm is measured.

Steve

00:17:09;22

The last time I looked, PRI was over 1,200 signatories, and represented over $70 trillion in assets. So we think of it as kind of the premiere global organization for responsible investment. And the principles are really you know, in short, they're around incorporating ESG into our analysis and decision making.

00:17:30;14

It's about being active owners. It's about seeking disclosure, and promoting implementation across the industry. And working together to enhance the effectiveness of implementing these principles. And then working to report on our own activities and progress. So when you think about those principles, there's a lot around transparency and reporting.

00:20:45;09

…And then there's other offshoots, like Climate Action 100-Plus, which I know you're very familiar with. CA-100-Plus is an investor led initiative to focus on engaging with the world's largest corporate greenhouse gas emitters.

00:21:02;17

And we joined CA-100-Plus, I'd say about a year and a half ago. And we're actively engaged in two specific engagements with focus companies now. And it's just a great opportunity for us to see another side of how we can incorporate ESG into our practices.

Annika

00:21:23;24

Sounds like you're a very busy man.

Steve

00:21:27;06

Well, I didn't say I was doing it, I just— (LAUGHTER) very close to it, but there's an army of people in this building (LAUGHTER) focused on things like CA-100-Plus.

Annika (new VO)

As we wrapped our conversation, Steve shared a few ESG-related anecdotes on a personal level.

Steve

00:21:50;04

I've got two sons, and one just graduated college last week, and is very dialed into the environment, and I'll tell you what, man, it makes you the cool dad when you could come home from work and say, "I'm involved in my company's sustainability efforts."

00:22:10;24

Don't even underestimate how ESG and sustainability can allow you to connect with your children, because that generation just… it's so important.

… When I think about how I got involved in ESG to the extent that I am-- I didn't really gravitate towards ESG because it was a passion.

00:22:33;12

That's not to say I didn't care, but it wasn't something that was pulling me on a personal level. ESG first caught my attention, really, as a business trend, you know, six-ish years ago.

00:22:51;14

And so I started to just, you know, get curious and read a little bit more, and understand what it was, and why it mattered. And the more I read, and the more I learned, the more I started to realize that this is not going away, it's gonna become bigger and bigger and bigger.

00:23:07;24

And at a certain point in 2016, when we became a signatory to PRI, I think we recognized that ESG was gonna be table stakes in pretty short order. And I think now, five years later, we could say it's table stakes, right? Like, if you're not integrating ESG in an authentic way, you will be left behind in this industry.

00:25:58;03

You know, the fact that we're (MEDIA SKIPS) able to authentically integrate ESG and do good things with the tools that we have as an asset management firm, puts us on the right side of good. So it's exciting to watch, and I'm happy to be a part of it.

Annika (new VO)

That’s all for this episode of Green Shoots. Learn more about Lord Abbett’s commitment to sustainability by visiting our website, Lord-Abbett-dot-com, and be sure to like and subscribe to Green Shoots for more insights. See you next time.

Investing involves risk, including the loss of principal. The value of investments in fixed-income securities will change as interest rates fluctuate and in response to market movements. Generally, when interest rates rise, the prices of debt securities fall, and when interest rates fall, prices generally rise. The municipal market can be affected by adverse tax, legislative, or political changes, and by the financial condition of the issuers of municipal securities. Investments in foreign or emerging market securities, which may be adversely affected by economic, political, or regulatory factors and subject to currency volatility and greater liquidity risk. The value of investments in equity securities will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy.

No investing strategy can overcome all market volatility or guarantee future results.

Market forecasts and projections are based on current market conditions and are subject to change without notice. Projections should not be considered a guarantee.

The views and opinions expressed by the Lord Abbett speaker are those of the speaker as of the date of the broadcast, and do not necessarily represent the views of the firm as a whole. Any such views are subject to change at any time based upon market or other conditions and Lord Abbett disclaims any responsibility to update such views. This material is not intended to be relied upon as a forecast, research or investment advice. It is not a recommendation, offer or solicitation to buy or sell any securities, or to adopt any investment strategy. Neither Lord Abbett nor the Lord Abbett speaker can be responsible for any direct or incidental loss incurred by applying any of the information offered

The credit quality of the securities in a portfolio is assigned by a nationally recognized statistical rating organization (NRSRO), such as Standard & Poor’s, Moody’s, or Fitch, as an indication of an issuer’s creditworthiness. Ratings range from ‘AAA’ (highest) to ‘D’ (lowest). Bonds rated ‘BBB’ or above are considered investment grade. Credit ratings ‘BB’ and below are lower-rated securities (junk bonds). High-yielding, non-investment-grade bonds (junk bonds) involve higher risks than investment grade bonds. Adverse conditions may affect the issuer’s ability to pay interest and principal on these securities.

Important Climate Focused Bond Fund Information:

The Lord Abbett Climate Focused Bond strategy is available in a U.S.-registered mutual fund ("U.S. fund") for U.S. investors and an Ireland-domiciled UCITS fund ("UCITS Fund") for non-U.S. investors, subject to local restrictions. Although the strategy is available in two different commingled vehicle structures the underlying investment strategy and investment team are the same. However, there may be differences between the investments in the U.S. Fund vs. the UCITS Fund due to certain restrictions applicable to each fund structure.

A Note About Risk: The Fund is subject to the general risks associated with investing in debt securities, including market, credit, liquidity, and interest rate risk. The value of your investment will change as interest rates fluctuate and in response to market movements. When interest rates fall, the prices of debt securities tend to rise, and when interest rates rise, the prices of debt securities are likely to decline. The Fund is subject to the risk that its climate-focused investment strategy may select or exclude securities of certain issuers for reasons other than investment performance considerations which may negatively affect its performance relative to unconstrained peers. Certain climate-focused investments may be dependent on government policies and subsidies, which are subject to change or elimination. The Fund may invest in high yield, lower-rated debt securities, sometimes called junk bonds and may involve greater risks than higher rated debt securities. These securities carry increased risks of price volatility, illiquidity, and the possibility of default in the timely payment of interest and principal. The Fund may invest in non-U.S. or emerging market securities, which may be adversely affected by economic, political, or regulatory factors and subject to currency volatility and greater liquidity risk. The Fund may invest in derivatives, which are subject to greater liquidity, leverage, and counterparty risk. The fund performance history at this time is very limited; therefore, performance achieved during its initial period of investment operation may not be replicated over longer periods and may not be indicative of how the Fund will perform in the future. These factors can affect Fund performance.

New Fund Risk: The Fund is newly organized. There can be no assurance that the Fund will reach or maintain a sufficient asset size to effectively implement its investing strategy.

Important Information for U.S. Investors:

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Lord Abbett Funds. This and other important information is contained in the Fund's summary prospectus and/or prospectus. To obtain a prospectus or summary prospectus on any Lord Abbett mutual fund, contact your investment professional, Lord Abbett Distributor LLC at 888-522-2388 or visit us at lordabbett.com. Read the prospectus carefully before you invest.

Lord Abbett mutual funds are distributed by Lord Abbett Distributor LLC, member FINRA.

The information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett's products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service may be appropriate for your circumstances.

Important Information for Non-U.S. Investors:

The Lord Abbett Climate Focused Bond Fund is a sub-fund of Lord Abbett Passport Portfolios plc, an open-ended investment company with variable capital constituted as an umbrella fund with segregated liability between its sub-funds under the laws of Ireland (registered number 534227), and is authorized and regulated by the Central Bank of Ireland as an Undertaking for Collective Investments in Transferable Securities ("UCITS"). Authorization of the Lord Abbett Passport Portfolios plc by the Central Bank of Ireland is not an endorsement or guarantee nor is the Central Bank of Ireland responsible for the contents of any marketing material or the Fund's prospectus. Authorization by the Central Bank of Ireland shall not constitute a warranty as to the performance of the Lord Abbett Passport Portfolios plc and the Central Bank of Ireland shall not be liable for the performance of the Lord Abbett Passport Portfolios plc.

Shares of the Fund are only available for certain non-U.S. persons in select transactions outside the United States, or, in limited circumstances, otherwise in transactions which are exempt in reliance on Regulation S from the registration requirements of the United States Securities Act of 1933, as amended and such other laws as may be applicable. This material does not constitute an offer to subscribe for shares in the Fund. The offering or sale of Fund shares may be restricted in certain jurisdictions. For information regarding jurisdictions in which the Funds are registered or passported, please visit lordabbett.com. Fund shares may be sold on a private placement basis depending on the jurisdiction. This material should not be used or distributed in any jurisdiction, other than those in which the Funds are authorized, where authorization for distribution is required. Lord Abbett Distributor LLC ("LAD") is authorized by the Fund to facilitate the distribution of shares in certain jurisdictions through dealers, referral agents, sub-distributors and other financial intermediaries. Any entity forwarding this material, which is produced by LAD in the United States, to other parties takes full responsibility for ensuring compliance with applicable securities laws in connection with its distribution.

Note to European Investors: This communication is issued in the United Kingdom and distributed throughout Europe by Lord Abbett UK Ltd., a Private Limited Company registered in England and Wales under company number 10804287 with its registered office at Tallis House, 2 Tallis Street, Temple, London, United Kingdom, EC4Y 0AB. Lord Abbett UK Ltd (FRN 783356) is an Appointed Representative of Duff & Phelps Securities Ltd. (FRN 466588) which is authorised and regulated by the Financial Conduct Authority.

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund. This and other important information is contained in the Fund's prospectus, fund supplements, and KIIDs. Read these documents carefully before you invest. To obtain a prospectus, fund supplement, and KIIDs for any Lord Abbett fund, contact your investment professional, Lord Abbett Distributor LLC at (888) 522-2388, or visit us at www.lordabbett.com.

This broadcast is the copyright © 2021 of Lord, Abbett & Co. LLC. All Rights Reserved. This recording may not be reproduced in whole or in part or any form without the permission of Lord Abbett.

FEATURED SPEAKERS:

image

Please confirm your literature shipping address

Please review the address information below and make any necessary changes.

All literature orders will be shipped to the address that you enter below. This information can be edited at any time.

Current Literature Shipping Address

* Required field