Investors should prioritise GSS bonds or GSS bond fund managers that not only assert their SDG alignment but also provide transparent reporting on how underlying investments contribute to these global goals.
The tools: leveraging AI to gather and analyse data
Artificial intelligence has become a game-changer in terms of efficiently gathering and analysing available data.
Advanced algorithms can sift through vast reams of data to identify patterns, risks, and opportunities that would elude human analysts.
For GSS bonds, AI can be particularly valuable in providing a deeper and broader analysis of environmental impact data, social metrics and more.
Moreover, as the demand for sustainable investments grows, alongside the demand for meaningful data, so does the risk of greenwashing, where issuers exaggerate or make misleading or false claims on sustainable metrics and practices.
In our experience, AI can provide an additional layer of scrutiny, helping to validate claims and ensure that investors are backing truly sustainable projects.
The due diligence: engagement and active stewardship
Active engagement means not just passively investing but working collaboratively with companies or projects to improve their sustainability performance, thereby creating a more significant impact.
In recognition of this, investors and respective management teams should maintain a clear channel of open communication and engagement, either through one-on-one meetings where they can engage directly with management and investor relationship teams or through group meetings.
It is important to be close to management teams to better understand efforts to improve sustainable ratings.
Engagement can also be helpful to fill gaps in our dashboard database by actively asking companies for enhanced information disclosure.
Andre Severino is the global head of fixed income at Nikko Asset Management
