INSIGHT by the IIGCC
〉The guidance ‘marks a major step’ towards progressing and framing bondholder stewardship – and seizing of the opportunity for corporate bondholders to progress real-world emissions reductions.
〉New guidance provides the foundational tools, best practice recommendations and case studies to support and enhance their climate stewardship activities.
〉Chaired by Chandra Gopinathan, Railpen, the guidance is the first published output of IIGCC’s Bondholder Stewardship Working Group since launching in 2022.
IIGCC has published new guidance – Net Zero Bondholder Stewardship Guidance – to support corporate bondholders with their climate stewardship and engagement activities.
Developed by IIGCC’s Bondholder Stewardship Working Group the guidance emphasises the importance of a long-term approach across the financing lifecycle and engagement across the debt ecosystem. This approach supports bondholders to build long-term relationships with issuers, establish a link to the issuer’s emissions targets, set objectives on time horizons beyond their initial holdings, and improve the quality and impact of bondholder engagement, thereby protecting the value of current and future investments.
Specifically, the guidance provides:
〉Six practical steps for bondholders via a Toolkit that covers debt-specific approaches to effective stewardship across the life of the bond and beyond.
〉Guidance on stewardship across different forms of corporate debt, including investment grade, high yield, labelled bonds, private companies (issuing public bonds), securitised issuances and emerging markets.
〉Guidance on stewardship across the debt ecosystem, including banks, credit ratings agencies, index providers, industry bodies and regulators.
The guidance builds on the Net Zero Stewardship Toolkit and aligns with the Net Zero Investment Framework.
“The guidance marks a major step towards progressing and framing bondholder stewardship – a critical yet largely untapped element of climate and net zero stewardship. Ultimately, by enhancing bondholder stewardship, investors are better able to steward their debt capital investments, protect long-term value for clients and help finance the path to net zero. In this regard, the guidance should further support investors to deliver on their own climate commitments.”
-Stephanie Pfeifer, CEO, IIGCC
“Bondholders fund the majority of a company’s capital but suffer from a perception of poor stewardship powers and a fragmented ecosystem. The guidance is a very practical resource and a first step to provide a structured stepwise approach to bondholder stewardship with case studies and aggregated insights and perspectives from leading investors. Following this guidance, I look forward to progressing the next workstream where we consider financing structures and frameworks for new issuances.”
-Chandra Gopinathan, Senior Investment Manager, Railpen, and Chair of the Bondholder Stewardship Working Group
“Effective bondholder stewardship is a very powerful tool for investors but has traditionally received less attention. We hope this framework provides clarity about investors’ expectations of their investment managers, encouraging better communication, consistency and appreciation of high-quality bondholder stewardship.”
-Emma Douglas, Senior Stewardship Analyst, Brightwell
“This guidance document could be the catalyst to shift bondholder engagement from the exception to the norm.”
-Mitch Reznick, Head of Sustainable Fixed Income, Federated Hermes Limited
Chaired by Railpen, IIGCC’s Bondholder Stewardship Working Group is comprised of 19 core member investors representing a mixture of asset owners and asset managers1.
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IIGCC brings the investment community together to work towards a net zero and climate resilient future. We create change the world needs by unlocking investor action on climate change.
Our work supports investors in generating returns for clients and beneficiaries, which in turn provides financial wellbeing for future generations. We work with our members to address climate risk and ensure they are well positioned to make the most of investment opportunities offered by climate mitigation and adaptation efforts, ensuring that their investments contribute towards a better world for us all to live in.
Our team supports investors to create practical solutions that can make a real difference in tackling climate change – providing guidance and support on investment practices, policies and corporate behaviours that have real impact and deliver change that the world needs. For more information visit www.iigcc.org and @iigccnews
1 See p3 acknowledgments for full list of investors who are members of the IIGCC Bondholder Stewardship Working Group and those who provided investor input into the Guidance
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