ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

ABN Amro offers SDG sovereign bond fund for emerging markets

The sustainable goals help to identify ‘true’ sovereign risk, selected manager Candriam says


Elena Johansson

ABN Amro Investment Solutions has picked Candriam to manage an active, emerging markets sovereign bond fund, which seeks to exploit market inefficiencies through relative value strategies and by applying the UN Sustainable Development Goals (SDGs).

The ABN Amro Candriam Emerging Markets Sustainable Bonds fund aims to primarily invest in a diversified portfolio of hard currency sovereign bonds and achieve medium-term capital growth.

This best-in-universe strategy includes environmental, social and governance (ESG) research and analysis of country-specific ESG indicators.

Selection process

Bonds are selected by applying first an SRI screening, to rank countries in terms of their sustainable development.

The worst-rated countries are excluded to create the investable universe.

The fund managers then decide about the level of exposure to issuers and relative risk by using both financial and non-financial variables.

They implement the most compelling relative value opportunities based on level of conviction and liquidity.

The selection is readjusted according to ABN Amro Investment Solutions’ sustainable criteria and countries’ exclusion list.

SDG philosophy

The portfolio managers said that credit analysis alone is not sufficient to evaluate the long-term performance of sovereign debt.

By assessing the pathway of a country towards the SDGs, they believe that they can evaluate a nation’s sustainable development and ‘true’ risk profile.

Sustainable nations reduce sovereign risk because they pursue economic development without compromising the needs of future generations, they added.

The fund managers at Candriam are Diliana Deltcheva, head of emerging market debt, Magda Branet, Karim Hamdoun and Nicholas Sauer.