Even after more than three years of Republican-led attacks against environmental, social and governance investing, the strategy is still “extremely important,” according to RBC BlueBay Asset Management.
“Focusing on ESG as part of your investment framework can genuinely help you deliver better investment results,” said Tom Moulds, senior portfolio manager for investment-grade fixed income at RBC BlueBay, which oversees almost $535 billion.
ESG funds have had “fairly decent” performance, compared with traditional funds, said London-based Moulds, adding that sustainable assets are less volatile. While the BlueBay Impact-Aligned Bond Fund has underperformed this year, it’s done better than global investment-grade debt since being launched in 2021, data compiled by Bloomberg show.
On average, ESG strategies have done well for fixed-income investors this year, with the Bloomberg Global Aggregate Green Social Sustainability Bond Index jumping more than 10%. That compares with a 7% gain for the benchmark global aggregate index.
“Striking that balance between returns and outcomes-oriented impact investing is really key,” Moulds said on the latest Bloomberg Intelligence Credit Edge podcast.
On Wall Street, ESG has effectively become taboo, as the Trump administration mounts a full-throated assault on net zero policies and vilifies diversity, equity and inclusion. As a result, companies — especially those with a sizable US business — are reluctant to talk openly about sustainability.
The offshore wind industry has been a specific target in recent days, with a flurry of actions taken by the US government to stymie development. In the latest move, the Trump administration intends to block the development of a large wind farm off the coast of Massachusetts.
“There’s been some pretty radical moves by Trump and US policy,” Moulds said. “It’s had a big impact on European issuers that focus on renewable energy. I would like to think that this is a relatively temporary phenomenon.”
Longer term, Moulds expects the need for cheap fuel to revive interest in renewable energy. In that context, investors should focus on companies that can deliver consistent and reasonably-priced green power.
“It’s never been more important than now when you see the magnitude of energy that’s required to power all these AI chips and cloud computing,” Moulds said.
Photo: A Royal Bank of Canada branch in Toronto. Photographer: Cole Burston/Bloomberg
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