Are government bonds compatible with an ESG approach?

15/05/2019

We believe governments frequently bring meaningful benefits to societies, which should be acknowledged alongside any activity in less desirable sectors.

Some investors may prefer to exclude holdings of government bonds and derivatives in ESG-screened portfolios. However, in most cases governments seek to deliver positive impacts overall through their policies and spending. Government bonds can also play an important role in the multi-asset investment processes, as managers seek to deliver return objectives.

  • Any government’s revenue raising and spending is likely to cover a complex range of activities.
  • The benefits of government spending and policies should be viewed alongside investors’ concerns about participation in other activities.
  • Government bonds and derivatives can play important roles in applying asset allocation views, using easily traded, liquid securities.

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The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.