The Berenberg EM Bonds ESG fund invests in emerging markets government and corporate bonds, using a systematic and active investment process. It aims to achieve an appropriate and steady increase in value while applying ESG investment criteria. In addition, it adheres to strict guidelines for the exclusion of non-ESG-compliant investments. Wide-ranging sustainability aspects are also analysed and taken into account when selecting individual bonds for the portfolio. The final portfolio is also subject to ongoing risk management at country and company level.
Active investment approach in EM government and corporate bonds with continuous consideration of ESG exclusion and inclusion criteria.
Active positioning against a market benchmark
Average duration is between 5 and 7 years
Investment segments are primarily government and corporate bonds in hard currencies
Further details on the opportunities and risks of this fund can be found in the sales prospectus.
Indexed performance
Performance in 12-month periods
Currencies
Sectors
Countries
Asset classes
Top Holdings
Monthly market comment
With Donald Trump's election victory as the next U.S. President, the USD strengthened, and U.S. yields initially rose by 17 basis points before easing due to the nomination of a "market-friendly" Treasury Secretary. On a monthly basis, the USD appreciated by nearly 4% against the EUR, and U.S. yields declined by 12 basis points. The sovereign bond segment of emerging markets (excluding CCC-rated bonds) gained by 0.53%, while corporate bonds performed at 0.49%. Risk premiums for sovereign bonds changed only marginally. The Berenberg EM Bonds ESG fund achieved a positive performance of 0.6% due to active duration management.
Portfolio Management
Wei Lon Sung
Head of Fixed Income Emerging Markets
Consideration of ESG Elements
Identifying companies and business models that will be successful in the long term is the basis for good investment decisions. Environmental, Social and Governance (ESG) factors are key factors in decision making and are therefore integral components of the investment process.
The CO₂ Intensity (Scope 1 & 2emissions) per company is multiplied by is portfolio weight (current value of the investment by current portfolio value) and summedup. This weighted average CO₂ Intensity provides an indication ofthe portfolio’s exposure to CO₂ emission intensive companies. The unit is in tons of CO₂ per USD 1 million revenues.
The fund does not actively manage its carbon footprint, however, emissions data such as CO2 intensity are relevant parameters which can be used to assess the efficient management of a company and the extent of transition risks.
ESG Score
Using a score between 0 (lowest) and 10 (highest), MSCI ESG assesses the ability of portfolio holdings to identify and manage environmental, social and governance-related risks compared to peers. The ESG scores are assigned at the holding level and are aggregated at the portfolio level as the weighted average ESG Score.
The data provider MSCI ESG uses an ESG score of 0 to 10 to assess the management of material ESG risks of portfolio holdings compared to competitors.
ESG Controversies Screen
MSCI ESG analyses controversial business practices from the five areas environment, human rights, labour rights & supply management, customers and governance. The controversies are rated according to their reputational risk as well as the operational handling by a flagging system. Green indicates no or weak controversies, yellow indicates moderate controversies, orange indicates severe controversies and red indicates very severe controversies.
Investments in the fund are monitored for ESG controversies and, with the help of MSCI ESG data, flagged according their severity. Thereby, potential ESG risks of investments are identified. In the case of an orange flag (severe controversy), we enter into an active exchange with the company. In the case of a red flag (very severe controversy), the company is excluded.
