Corporate bondholders have new stewardship guidance from the Institutional Investors Group on Climate Change to get more of them involved in greenhouse gas emissions reduction efforts.
Released Thursday, the Net Zero Bondholder Stewardship Guidance – IIGCC could also correct a perception of poor stewardship practices, said Chandra Gopinathan, chairman of IIGCC's bondholder stewardship working group and senior investment manager for the £35 billion ($44 billion) U.K. pension fund Railpen, in the news release.
"Bondholders fund the majority of a company's capital but suffer from a perception of poor stewardship powers and a fragmented ecosystem," said Mr. Gopinathan who called the guidance a first step toward a structured approach to bondholder stewardship.
The guidance stresses a long-term approach and engagement across the debt ecosystem to get issuers to set emissions reduction targets and objectives. It covers stewardship across different forms of corporate debt, including investment grade, high yield, labeled bonds, private companies issuing public bonds, securitized issuances and emerging markets. It also looks at the role of banks, credit ratings agencies, index providers, industry bodies and regulators.
The guidance builds on the IGCC's existing Net Zero Investment Framework and should help investors deliver on their own climate commitments, IGCC Chairwoman Stephanie Pfeifer said in the release, calling bondholder stewardship "a critical yet largely untapped element of climate and net zero stewardship,"
Officials with the Toxic Bonds Network, a global coalition spotlighting the role of the bond market in the climate crisis, called the IIGCC guidance a good first step, but coordinator Alice Delemare Tangpuori in a separate statement said "it lacks the necessary red lines for when investors must stop engagement and deny debt. For bondholders and issuers to take the transition seriously, investors must use their power to stop funding to companies continuing to expand fossil fuel production."
