Tammie Tang, portfolio manager of the CT Global Social Bond fund, talks about the power of the bond market to target positive social outcomes in a growing global universe
Last year, asset manager Columbia Threadneedle launched the CT Global Social Bond Fund, as a part of its responsible investment offerings. The fund, aiming to deliver social and financial returns by investing in bonds that target positive social outcomes globally, employs a proprietary methodology to rate bonds based on their social impact, focusing on primary social needs and social empowerment.
Managed by Tammie Tang, the fund, referencing the Bloomberg Global Credit Aggregate Index aligns with the UN Sustainable Development Goals (SDG) and classified as Article 9 under the EU’s Sustainable Finance Disclosure Regulation.
The asset manager allocates capital globally to fund socially beneficial activities, using a wide range of bonds from corporations, government agencies, local bodies, mutuals and charities, including social policy leaders financing large-scale social solutions. It identifies bond issuers seeking to make a positive social impact from seven key social development fields to form a broad, global-based social universe of 6,800 bonds. The most beneficial projects in the areas of most need are targeted, with geography being a key driver. These outcomes are then mapped to the underlying 169 targets of the 17 UN SDGs.
As a woman of colour herself, she is passionate about the mission to support social equity and believes the often overlooked ‘S’ in ESG allows investors to spur social change without sacrificing financial returns.
The growth and support for the fund have further contributed to the overall Columbia Threadneedle social bond franchise. According to Tang, industry awareness of the value of impact investments and via listed bonds is improving. “There is a growing awareness and interest by capital owners to direct capital in ways that support solutions to our global social problems whilst not sacrificing financial return.”
“As a woman of colour herself, Tang is passionate about the mission to support social equity and believes the often overlooked ‘S’ in ESG allows investors to spur social change without sacrificing financial returns.”
The fund has been delivering positive social outcomes and impact via bond investments that benefit people and communities globally, investing a significant proportion of the portfolio into opportunities targeted towards the most important social outcome areas and for communities in high need, she adds.
Metrics & measurement
The fund uses proprietary and industry-aligned metrics to construct and monitor the portfolio, enabling the firm to measure and report on its progress from a social impact perspective.
Using the asset manager’s proprietary bottom-up social assessment process, the first step assigns an impact category of either A, B or C and the second step assigns a social intensity score from 0 to 31. Overall, the process generates a discrete social score (A1 to C4), which is used to compare bonds meeting different social needs and monitor the degree of the portfolio’s social intensity over time.
“At a broad level, the proprietary metric assesses social impact strength, so that if faced with two equivalent investment opportunities (from a financial lens), the fund will invest and allocate to the more socially impactful opportunity,” adds Tang.
The proprietary metric has scores for social ‘intentionality’ and ‘intensity’ reflecting the asset manager’s core beliefs of what it deems most socially impactful. According to Tang: “These beliefs lead us to seek bond investments, whereby the use of proceeds most target important social outcome areas. We specifically assess seven outcome areas – housing, healthcare, education and employment, access to services and regeneration and development, and according to a hierarchy of social needs.”
Additionally, the fund aims to target population subsets of greater need such as low-income, unemployed, disabled, aged, etc. It also supports investment in new projects, especially through opportunities in the primary market – as opposed to the secondary market.
Another feature of the fund is that it supports transparent reporting, such as through alignment with International Capital Market Association social, sustainability or green bonds, Tang highlights. “Owing to the depth of research at the underlying bond use-of-proceeds level, we can report additional measures, including alignment with UN SDGs.
While ‘labels’ help, investment does not start with nor end with the label. “In a market dominated by exclusion-based products focused on negative screening, our social bond strategies are based on a different approach to social investment: the principle of positive inclusion.”
Haves vs have-nots
Tang opines that the cost of living challenge has highlighted the problems of unmet needs and inequality. “We’ve been encouraged to observe that issuers are increasingly and intentionally supporting specific socio-economic groups. For example, we’ve observed supranational and corporate institutions targeting more capital to support poorer regions and communities to support improved inclusion and reduced inequalities,” says Tang.
The observation can be corroborated by data from S&P Global Ratings showing that despite global macroeconomic uncertainty in key regions, green, social, sustainability, and sustainability-linked bond ( GSSB) issuance is expected to rise to $0.95 trillion-$1.05 trillion in 2024, up from $0.98 trillion in 2023.
Additionally, issuers in middle- and low-income countries are anticipated to increase their share of GSSSB issuance to address significant unmet funding needs. The social and sustainability impact bond market has expanded significantly, driven by the response to the pandemic, points out Tang.
For Tang, while “labels” help, investment does not start with nor end with the label. “In a market dominated by exclusion-based products focused on negative screening, our social bond strategies are based on a different approach to social investment: the principle of positive inclusion.”
