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ESG

Perspective published on October 17, 2019

The Importance and Influence of Bond Issuer Engagement

The Wall Street Journal’s October 9 report on the expanding role of money managers in the municipal bond market highlighted a distinguishing characteristic of our approach at Breckinridge Capital Advisors. The article, entitled “Money Managers Gain Sway Over Muni Market,” highlights the value of our engagement model with muni bond issuers.

“Last month, Ben Watkins, director of Florida’s Division of Bond Finance, held a phone conference with Breckinridge Capital Advisors to learn how he could market the state’s bonds to investors. He now plans to increase disclosure about how Florida is addressing climate-change risk,” The Journal reported.

During engagement discussions, we explore the nature, purpose, and repayment details of forthcoming bond deals. We also review material, non-financial topics including environmental, social and governance (ESG) matters that could impact the long-term economic viability of bond issuers. Our engagement meetings also provide bond issuers interested in sustainability the opportunity to broaden the conversation as well as their understanding.

In addition to the state’s Division of Bond Finance, we have held engagement meetings with representatives of large cities in Florida, including Hollywood, Miami Beach, and Sarasota. These municipalities and others around the country are working to align capital spending programs with resiliency initiatives to address climate change-related risks such as sea level rise.

By having direct conversations with municipal leadership, we can ask questions that have emerged from our research efforts and gain a below-the-surface understanding of borrowers. Engagement is one of our most valuable tools for getting an authentic view of a borrower’s ESG performance and long-term investment quality.

At Breckinridge, engagement is an integral part of our security analysis process, as it allows us to better evaluate issuers’ material financial and non-financial qualities. We believe that prudent credit analysis requires an evaluation of both traditional credit measures and ESG factors, rather than relying solely on public ratings.

We have written more about our issuer engagement and the role that ESG analysis plays within it in the related insights below. 

 

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.Past performance is not indicative of future results.

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.

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