Fund of the year - Fixed income: Wellington's Global Impact Bond fund

Channels: IMPACT

Companies: Wellington Management

Wellington Management launched its first global, multi-sector fixed income impact fund in May 2019.

The $116 million fund seeks to have a positive, measurable impact by investing exclusively in debt issued by companies and other organizations whose products, services, and projects are addressing major social and environmental challenges.

It invests across 11 'impact themes', which it says are broadly aligned with the UN Sustainable Development Goals (SDGs), and fall under the below categories:

  • Life Essentials: Basic life essentials like access to clean water & sanitation, and health;
  • Human Empowerment: tools enabling financial inclusion and bridging the digital divide; and
  • Environment: Issuers that help protect the environment.

Wellington says the fund managers set a high bar for selecting the issuers and securities for its portfolio, partly by requiring that every opportunity "advance" one of its 11 impact themes.

An issuer or project must also be addressing an unmet social or environmental need. For example – non-profit hospitals located in rural, lower income areas providing affordable healthcare services to a population that otherwise would not have access to healthcare.

In addition, the impact must be quantifiable so it can be tracked over time and reported to Wellington's investors. The fund manager says its impact reporting is enhanced by engaging directly with issuers to get deeper access to data and information.

In 2019, it claimed issuers in its portfolio contributed to supplying more than 219,000 affordable housing units around the world; generating more than 415TWh of renewable energy, enough to power 34 million homes and avoid more than 293 million metric tons of carbon dioxide emissions; cleaning and redistributing more than 1 billion cubic metres of polluted water; and providing digital access to nearly 320 million people in South-Asia and Sub-Saharan Africa.

Wellington says it designed the strategy, which uses the Bloomberg Barclays Global Aggregate Index as a benchmark, to have a risk and return profile of a traditional global core fixed income allocation.

"This is because we believe you can achieve a market rate return while only investing in impact issuers and so we compare the performance of our fund to a traditional core global benchmark," Wellington says.

"In order to achieve this risk return profile, we have identified impact issuers and invest across all the major fixed income asset classes – including governments, securitized, corporate, municipals and agencies. We think this structure is beneficial to our investors because they can allocate to our approach as part of their core fixed income allocation. This can be easier from an asset allocation standpoint than trying to allocate to a more niche strategy like a green bond portfolio."