In 2019, we published our Morgan Stanley Investment Management (MSIM) Fixed Income “ESG and Sovereign Fixed Income Investing: A Better Way” approach. We highlighted our thesis that countries’ sustainability performance should be evaluated in the context of their stage of development.
16.04.2021 | 06:18 Uhr
Here you can find the complete article.
Our methodology allowed us to avoid the systematic bias against developing countries that typically have lower absolute sustainability performance compared to more developed countries, but may well be outperforming relative to what might be expected given their GDP per capita. In our updated methodology, we introduce further enhancements to our approach, incorporating a broader range of independent Environmental, Social and Governance (ESG) data, a comprehensive assessment of sustainability momentum, flexibility to adapt the approach depending on timeframe, and an impact framework based on the UN Sustainable Development Goals (SDGs).
We introduce our newly enhanced Sovereign Sustainability Model (Display 1), a significantly updated and comprehensive approach to evaluating ESG performance for Sovereign issuers, which is designed to enhance and inform our investment process. Our model integrates the following key elements:
Risk Considerations
Diversification does not
eliminate risk of loss. There is no assurance that a portfolio will
achieve its investment objective. Portfolios are subject to market risk,
which is the possibility that the market values of securities owned by
the portfolio will decline and that the value of portfolio shares may
therefore be less than what you paid for them. Market values can change
daily due to economic and other events (e.g. natural disasters, health
crises, terrorism, conflicts and social unrest) that affect markets,
countries, companies or governments. It is difficult to predict the
timing, duration, and potential adverse effects (e.g. portfolio
liquidity) of events. Accordingly, you can lose money investing in this
portfolio. Please be aware that this portfolio may be subject to certain
additional risks. Fixed income securities are subject to the ability of
an issuer to make timely principal and interest payments (credit risk),
changes in interest rates (interest-rate risk), the creditworthiness of
the issuer and general market liquidity (market risk). In a rising
interest-rate environment, bond prices may fall and may result in
periods of volatility and increased portfolio redemptions. In a
declining interest-rate environment, the portfolio may generate less
income.Longer-term securities may be more sensitive to interest rate
changes. Mortgage- and asset-backed securities are sensitive to early
prepayment risk and a higher risk of default, and may be hard to value
and difficult to sell (liquidity risk). They are also subject to credit,
market and interest rate risks. Certain U.S. government securities
purchased by the Strategy, such as those issued by Fannie Mae and
Freddie Mac, are not backed by the full faith and credit of the U.S. It
is possible that these issuers will not have the funds to meet their
payment obligations in the future. High-yield securities (“junk bonds”)
are lower-rated securities that may have a higher degree of credit and
liquidity risk. Public bank loans are subject to liquidity risk and the
credit risks of lower-rated securities. Foreign securities are subject
to currency, political, economic and market risks. The risks of
investing emerging market countries are greater than risks associated
with investments in foreign developed countries.Sovereign debt
securities are subject to default risk. Derivative instruments may
disproportionately increase losses and have a significant impact on
performance. They also may be subject to counterparty, liquidity,
valuation, correlation and market risks. Restricted and illiquid
securities may be more difficult to sell and value than publicly traded
securities (liquidity risk).
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