EdenTree adds ESG government bond fund

EdenTree has launched the Global Select Government Bond Fund, a portfolio of government ESG bonds.

The fund targets at least 80% exposure to government and government-related green, social, sustainable or impact bonds the proceeds of which finance projects that support a reduction in carbon emissions. For global sovereign debt, the responsibility of governments is assessed through EdenTree’s proprietary Oppressive Regime screen. The fund is managed by head of fixed income, David Katimbo-Mugwanya.

EdenTree’s Oppressive Regimes list is based on assessments from Freedom House (Freedom in the World report), Transparency International (Corruption Perceptions Index), and the World Economic Forum (Gender Gap assessment). Each of these assessments considers a range of criteria when determining a country’s score, such as human rights standards, freedom of belief and political expression, use of torture, and civil liberties.

EdenTree uses a weighted average – strongly skewed towards the Freedom House ranking for every country. Countries which fall under a certain threshold – 30% – are considered to be oppressive. Bonds issued by the government of any country identified as having an oppressive regime are excluded from the fund.

Katimbo-Mugwanya, said, “In its latest assessment of development investment around the world, the United Nations (UN) estimates that $4.2 trillion per annum is required to close the development financing gap, up from $2.5 trillion before the COVID-19 pandemic. Urgent steps are needed to address global sustainable development funding requirements, and governments have a unique ability to mobilise capital at scale through vast debt issuance programmes, placing them in a prime position to fund projects that tackle these societal challenges.”

Sovereign ESG-labelled debt issuance is continuing at an unprecedented pace, with government and or related issuance making up just over half of the outstanding global universe of use-of-proceeds green, social and sustainable debt. In a market environment that offers considerably higher bond yields compared to the last decade, the risk-return profile of government debt from an asset allocation perspective has markedly improved. As such, we believe this new fund is ideally placed to leverage these market dynamics in the best interests of clients seeking to credibly enhance sustainable fixed income offerings when allocating to government debt.”

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