Navigating the Sustainability Shift: A Challenge for Fixed-Income Investors
Research Paper
June 12, 2024
Preview
Fixed-income investors face challenges balancing fiduciary responsibilities with sustainability commitments, requiring strategies to manage liquidity, tracking error and high trading costs. MSCI's glidepath-index methodology helps investors transition bond portfolios towards sustainability goals by reinvesting cash flows into issuers aligned with specific objectives, such as higher ESG ratings or lower emissions. Historical simulations of the glidepath methodology demonstrate significant improvements in ESG scores and emissions reductions across various fixed-income segments, including high-yield and investment-grade bonds.
Glidepath mechanics
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