The Anthropocene Fixed Income Institute (AFII) has published their 2022 Market Trends in the Fixed Income Market. This report serves as a non-exhaustive list of themes that AFII finds particularly interesting for fixed income/climate practitioners going into the new year.
The main findings include:
- Asset owners regularly hold both debt and equity in the same company. From a valuation perspective, there are interesting contrasts between how climate risks are priced in these markets, especially in companies such as the oil majors. We still lack a full model to allocate the carbon footprint between bonds and stocks, which will be helpful both in terms of carbon footprints.
- It is clear that the broader philanthropic community is paying greater attention to climate risks and fixed income markets. The impact of this is a new breed of activism, where fixed income investors can also be targeted in campaigns that traditionally used to be deployed directly towards companies or equity backers of controversial activities.
- One of the great events during COP26 happened away from the actual conference. A large bank stepped back from providing a substantial loan to the aforementioned coal mine on what appears to have been considerable pressure from clients, rather than investors.