Abstract
The fixed income market has lagged the equities market in adopting environmental, social and governance (ESG) analysis. According to Eurosif, a trade body, more fixed income assets are managed against ESG principles than equities in Europe. ESG information is at the centre of efforts to develop suitable products and research processes across fixed income asset classes. This chapter explores how ESG information is used by fixed income investors. It outlines the MSCI methodology for corporate and sovereign ESG ratings, and analyses these ESG ratings, focusing on investment grade, high yield, and emerging market debt asset classes. MSCI aims to measure a company’s resilience to long-term, financially relevant ESG risks. ESG risks and opportunities are posed by large-scale trends and by the nature of a company’s operations.
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