London-headquartered GIB Asset Management’s Sustainable World Corporate Bond Fund team share insights on the fund’s focus on sustainability, their long-term vision and market outlook.

Budget wrangles pitting the US administration versus Congress highlight why sound financial discipline is a better investment yardstick than the hype of market sentiment, portfolio managers for a fund marking its third birthday say.

Samantha Lamb and Pascal Nicoli of GIB Asset Management, who run the Sustainable World Corporate Bond Fund, explained their view of long-term sustainability trends. WealthBriefing joined them for a briefing on the fund's approach, which has a strong focus on sustainability. 

“All our investments have to meet key sustainability criteria and themes which have the potential to create a positive impact on global sustainability,” Nicoli said.

Unlike equities, which revolve around shareholder engagement and short-term market dynamics, the managers said, Lamb and Nicoli think sustainable fixed income investing needs to be disciplined: assessing issuers’ capital allocation choices and long-term fundamentals to gauge resilience beyond climate considerations.

For fixed income investors, the recent US fiscal uncertainty and the temporary government shutdown have underscored the importance of resilience and sound financials over the hype of market sentiment. 

The Irish-domiciled GIB fund, classified under Article 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR), is heavily exposed to financials. The issuers top 10 holdings include New York-headquartered JP Morgan Chase, Dutch financing firm Enel Finance International, Bank of America, and Paris-headquartered bank BNP Paribas. They also include Spain’s Caixabank, UK investment bank Natwest Markets (a subsidiary of NatWest Group), and Frankfurt-headquartered Commerzbank.

“Our core exposure is in the US, but we are still slightly underweight there, and we have been moving away from the US recently,” Nicoli said. “We are overweight in Europe, and have been finding more opportunities in Europe, where valuations are better. We are underweight in emerging markets, which are more volatile, and are exposed to Brazil, Mexico and India in particular.”

“We are looking at key long-term sustainability trends, like water scarcity,” Nicoli said. “We invest in a Brazilian utility firm Aegea, for instance, which provides basic sanitation and delivers water supply and wastewater treatment services across Brazil.”

Trends
“We also look at global trends like electrification, data centres, electric vehicles,” Nicoli said. “Carbon emissions have to be reduced through, for instance, wind and solar power, which also require infrastructure, and we invest in cable firms.”

Copper cables are essential for transmitting electricity from sources such as solar panels and wind turbines to the grid, and specialist firms are manufacturing cables specifically designed for renewables, leading to significant growth of these companies.

The fund allocates across investment grade, high-yield, and emerging markets with a long-term view which Lamb and Nicoli think shows the advantages of active management in a landscape where passive solutions can face challenges. 

The fund is actively managed and seeks to outperform the Bloomberg Global Aggregate Investment Grade Corporate including high yield and EM Custom Index.