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ESG Newsletter published on July 6, 2017

From Paris to … Portfolios

In recent weeks and months there has been much debate about the 2015 Paris Agreement, which is a global effort to devise coordinated action toward mitigating climate change over the coming decades.

At Breckinridge, our mission is to provide the highest caliber of investment-grade fixed income management, thereby facilitating a sustainable flow of capital from long-term investors to responsible corporate and municipal borrowers. As such, we believe that our investment decisions on behalf of our clients require us to remain not only inquisitive about important global challenges but also fact-based and impartial in our analysis of these challenges.

This lens points to a uniquely independent perspective pertaining to climate change. Our investment philosophy combines top-down, macro analysis with bottom-up, issuer-level synthesis. As such, we divide our approach to climate change in the same way. On the top-down side, we look at the way climate change relates to our investment philosophy as a whole. On the bottom-up side, we look at the way climate change relates to individual credits.

Our top-down perspective is informed by our asset class. As a fixed income manager, we are keenly interested in any risks associated with our investments. These include a range of risk categories that we believe to be relevant based on our understanding of sectors and issuers. Additionally, we have a long-term view and pay close attention to any issue that we believe will be significant over the coming decades.

Indeed, our research suggests that climate change could present a range of risks that have the potential to affect our investments. These include rising sea levels, coastal flooding, droughts, wildfires and severe storms, among other risks. Additionally, while some of these risks have already become more evident in recent years, we believe they are especially relevant over the long term. As investors, these are just the types of future issues that we seek to uncover.

Our bottom-up perspective is informed by our assessment of every issuer in which we invest. On the municipal research side, we look at a range of important trends that uniquely affect issuers across sectors, with a point of view that is primarily local. On the corporate research side, we focus on leading multinational companies that serve global customers and aim to reach international standards of business excellence.

Within this context, we see several important challenges as well as opportunities related to climate change. In particular, much of the commitment to addressing climate change in the United States is at the state and city level. This means that many municipal issuers are continuing to develop increasingly sophisticated solutions that require funding. At the same time, multinational businesses are making decisions in line with global climate standards.

At bottom, we believe that the most meaningful way we can take part in the ongoing dialogue about climate change is through our work in developing client portfolios.

By pursuing in-depth investment research that considers a range of important issues with a long-term time horizon in mind and by engaging directly with issuers on material environmental, social and governance (ESG) factors, we hope we will continue to demonstrate that sustainable investing is simply intelligent investing.

Simply put, when it comes to pursuing investment excellence, “we are resolutely in!”


DISCLAIMER: The opinions and views expressed are those of Breckinridge Capital Advisors, Inc. They are current as of the date(s) indicated but are subject to change without notice. Any estimates, targets, and projections are based on Breckinridge research, analysis and assumptions. No assurances can be made that any such estimate, target or projection will be accurate; actual results may differ substantially.

Nothing contained herein should be construed or relied upon as financial, legal or tax advice. All investments involve risks, including the loss of principal. An investor should consult with their financial professional before making any investment decisions.

Some information has been taken directly from unaffiliated third party sources. Breckinridge believes such information is reliable, but does not guarantee its accuracy or completeness.

Any specific securities mentioned are for illustrative and example only. They do not necessarily represent actual investments in any client portfolio.