Ethical investment screens applied to credit default swap issuers have helped reduce default rates, according to Paolo Sardi, director at E. Capital Partners, Milan.
This may be welcome news for plan sponsors concerned about importing credit default risk when using credit swaps to gain exposure to longer-dated bonds. The screening process has enabled the firm to reduce credit default rates by 71% among the names it monitors, and based on the last three years of investment-grade defaults published by Moody's Investors Service, said Mr. Sardi.
The firm is advising a London investment bank, which he would not identify, on launching a collateralized debt obligation based on its ECPI-CREDIX euro index.
E. Capital provides ethical investment indexes that allow institutions to benchmark socially responsible investment portfolios. It has €5.2 billion ($10.02 billion) in assets under advisement, mainly from European institutions and faith-based foundations. Clients include Pioneer Investment Management, which launched a European corporate bond fund based on an E. Capital index.
