Mackenzie Investments | Investing for the common good using sustainability bonds

The transition from an economy dependent on fossil fuels to a more equitable and inclusive society is no small feat and will require huge investments. Here’s how smart investors can generate wealth while helping to make things better through green and sustainable bonds.

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The Evolution of Sustainable Fixed Income Investments

Until recently, the limited supply of sustainable bonds made sustainable investment difficult and not necessarily suitable for all investor profiles. These securities are usually concentrated in European countries, where the world’s first green bonds were issued. Given the exponential growth of the industry in recent years, it is now possible for all investors to build a diversified bond portfolio that matches their personal values.


Konstantin Boehmer, Head of ESG Integration, Co-Head of Fixed Income Team, Mackenzie Investments

We expect that the gap between sustainable investments and traditional investments will continue to widen. Large investors are moving away from unsustainable securities, reducing the capital available to finance related activities and potentially increasing the cost of borrowing.

Konstantin Boehmer, Head of ESG Integration, Co-Head of Fixed Income Team, Mackenzie Investments

Fixed income securities and ESG criteria

Sustainable investment takes into account environmental, social and governance (ESG) issues, such as combating climate change, promoting positive values ​​and diverse representation in leadership positions. While some sovereign and corporate bonds may be considered “green” or “sustainable”, others may not. However, beyond validation, there are more elements to consider.

In the interest of investors, every opportunity must first be profitable. Some good bonds issued by companies with good standing do not necessarily go through the certification process, and therefore should not be included.

Konstantin Boehmer, Head of ESG Integration, Co-Head of Fixed Income Team, Mackenzie Investments

A flexible approach to sustainable investment

Mackenzie’s fixed income team reviews all securities for a comprehensive and proprietary ESG risk assessment, whether they are considered sustainable or not, by conducting its own issuer and security research.

When something is important, it is always better to take care of it yourself. We read reports from rating agencies and third parties, but we also do our own research. When we come to different conclusions than the agencies, we know we have seen a good investment opportunity.

Konstantin Boehmer, Head of ESG Integration, Co-Head of Fixed Income Team, Mackenzie Investments

For example, Mackenzie chose unlabeled bonds issued by a fashion company, led by a diverse team. It encourages physical fitness and women’s autonomy in addition to offering product lines. “This is an example of a traditional bond issued by an industry leader that meets many of our goals of delivering strong financial performance and placing progressive values,” said Konstantin Boehmer.

Such extensive research and validation is a challenge for an individual investor.

Sustainable bonds: a market of the future

Experts expect the number of sustainability bonds issued worldwide in 2022 alone to exceed two trillion dollars. This is equivalent to almost double the entire U.S. high yield bond market, and this volume could increase annually.

This illustrates the enormous size of sustainable debt markets.

Our job is more than simply investing our clients ’money in government and corporate securities. We play an active role in guiding issuers to become true agents of change.

Konstantin Boehmer, Head of ESG Integration, Co-Head of Fixed Income Team, Mackenzie Investments

What about the investments associated with the rhino population?

Mackenzie’s fixed income team recently bought labeled bonds to fund a project to increase the population of endangered black rhinos in South Africa’s nature reserves. This is the first wildlife conservation bond in the world. Notably, the performance of the bonds is tied to the success of the program. Therefore, the higher the number of rhinos, the higher the yield!

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