Engagement

What We Do

Why We Engage

As a specialist in fixed income impact investing, we view engagement as an integral part of a Responsible Investment, and it forms the foundation of our SPECTRUM bond® analysis. We actively engage with potential and current impact bond issuers to promote the development and maintenance of

standards that will ensure a high level of transparency and a clear ongoing commitment to positive environmental and/or social impact. Our goal is to work with issuers to enhance impact reporting in the market and to harmonise post issuance disclosure.

As a specialist in fixed income impact investing, we view engagement as an integral part of a Responsible Investment, and it forms the foundation of our SPECTRUM® analysis. We actively engage with potential and current impact bond issuers to promote the development and maintenance of standards that will ensure a high level of transparency and a clear ongoing commitment to positive environmental or social impact. Our goal is to work with issuers to enhance impact reporting in the market and to harmonise post issuance disclosure.

Engaging as a Bondholder

We believe that establishing dialogue with companies or other issuers is part of being an active owner of bonds. While active ownership and engagement are typically associated with equity investors, bondholders, as providers of capital to companies or other issuers, are also able to influence practices. In this context, we use our position to advocate for fair, responsible and sustainable business practices.

As bondholders, our avenues for engagement differ from those of equity holders. While shareholders have the opportunity to express their views by voting at company general meetings,

bondholders typically have no formal avenue for feedback to an issuer. Therefore, we take the opportunity to enter into dialogue with issuers on key topics, such as environment, social and governance risk management, during roadshow meetings. In addition to the roadshow meeting cycle, we proactively engage through calls, letters and in-person meetings with issuers to influence where practices have fallen short of our expectations, concerns have been raised because of controversies or impact reporting is not sufficiently transparent for our in-house portfolio calculations.

As bondholders, our avenues for engagement differ from equity holders. While shareholders may vote proxies at company general meeting to express views, bondholders typically have no formal avenues for feeding back to an issuer. Therefore, we take the opportunity to enter into dialogue with issuers on key topics, such as environment, social and governance risk management, during roadshow meetings. In addition to the roadshow meeting cycle, we proactively engage through calls, letters and in-person meetings with issuers to influence where practices have fallen short of our expectations, concerns have been raised because of controversies or impact reporting is not sufficient transparent for our in-house portfolio calculations.

Holistic Approach

SPECTRUM Bond® criteria evaluates all aspects of the bond including the credit worthiness and environmental or social positive externalities. We approach engagement from this unified starting point. The credit and sustainability teams work together through engagement to gain sufficient insight into the issuer and its impact bond framework so that we can

effectively apply SPECTRUM. The outcome is a universe of SPECTRUM Bonds® that deliver both economic value and sustainable impact.

SPECTRUM Bond criteria evaluates all aspects of the bond including the credit worthiness and environmental or social positive externalities. We approach engagement from this unified starting point. The credit and sustainability teams work together through engagement to gain sufficient insight into the issuer and its impact bond framework so that we can effectively apply SPECTRUM®. The outcome is a universe of SPECTRUM® Bonds that deliver both economic value and sustainable impact.

Objectives of Engagement

The green and related impact bond market is just a decade old. The market needs to grow quickly to help meet the $1 trillion per year financing needs of climate change mitigation. Our goal is to help the market to grow quickly while avoiding greenwashing or the weakening of standards. During our dialogue with issuers, we advocate high benchmarks in environmental and social criteria.

Examples of key topics from our engagements:

Business ethics and tax transparency
Human rights and community relations
Climate risk management aligned with TCFD

Governance factors such as board independence and diversity
Issuer strategy in relation to global climate and SDGs
Transparency of green and impact bond frameworks
Process of use of proceeds management
Eligible project criteria
Impact reporting practices and methodologies
Reporting

Examples of key topics from our engagements:

Business ethics and tax transparency
Human rights and community relations
Climate risk management aligned with TCFD
Governance factors such as board independence and diversity
Issuer strategy in relation to global climate and SDGs
Transparency of green and impact bond frameworks
Process of use of proceeds management
Eligible project criteria
Impact reporting practices and methodologies
Reporting

Reporting on Engagement

We actively engage with issuers of bonds held in the funds during the reporting cycle. The interactions range from in-person meetings to calls and email exchanges. We cover topics such as credit updates, impact bond framework, ESG strategy and impact reporting. As new issuers present new impact

bonds, we are proactive in engagement for issuers with low transparency, ESG controversies, or when we use reverse inquiry to investigate new custom issuance for the fund.

We actively engaged with issuers held in the funds during the reporting cycle. The interactions range from in-person meetings to calls and email exchanges. We cover topics such as credit updates, impact bond framework, ESG strategy and impact reporting. As new issuers present new impact bonds, we are proactive in engagement for issuers with low transparency, ESG controversies, or when we use reverse inquiry to investigate new custom issuance for the fund. We typically engage with over 95% of issuers held in the reporting period.

Responsible Investment Policy

If you would like to download our Responsible Investment Policy click here.

Our Responsible Investment Policy sets out our philosophy, impact and investment beliefs and covers our approach to:

ESG
Engagement
Exclusionary criteria
Divestment

Partner Engagement

Positive change is only truly meaningful when it is shared. We actively collaborate with global sustainability experts to support collective action. Here are some examples of how we engage with partners to make this change happen.

Since 2015, we have been a partner of the Climate Bonds Initiative (CBI). CBI is an international organisation working solely to mobilise the largest capital market of all, the $100 trillion bond market, for climate change solution. The strategy is to develop a large and liquid green and climate bonds market that will help drive down the cost of capital for climate projects in developed and emerging markets; to grow aggregation mechanisms for fragmented sectors; and to support governments seeking to tap debt capital markets.

Since 2015, we have been a member of the ICMA principles, starting with the Green Bond Principles, which were the first to emerge. The principles are voluntary process guidelines that recommend transparency and disclosure, and promote integrity in the development of the impact bond market.

Since 2016, we have been a signatory of the Principles for Responsible Investment (PRI). The PRI is an independent organisation and is the world’s leading proponent of responsible investment. It works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.

Since 2016, we have partnered with ISS ESG on multiple fronts, such as portfolio climate analysis and accessing their ESG data and controversy screenings. In 2022, building upon a history of developing climate methodologies and impact bond climate data analysis, we embarked upon a funded projects temperature alignment pilot.

Since its inception in 2016, we have been an active member of the Green Finance Initiative (GFI). GFI was launched by the City of London in partnership with the UK government. The initiative brings together international expertise from across the financial and professional service sectors. It aims to:

Provide public and market leadership on green finance.
Advocate for specific regulatory and policy proposals that might enhance the green finance sector worldwide.
Promote London and the UK as a leading global centre for the provision of green financial and professional services.

In 2016, we co-developed the Carbon Yield metric and methodology with ISS-Ethix Climate Solutions and Lion’s Head Global Partners, with funding from Rockefeller Foundation. The Carbon Yield quantifies the climate change mitigation impact of green bonds in terms of GHG emissions avoided per annum through financed activities. We apply the Carbon Yield methodology to our strategies as part of our annual impact reporting commitment.

Since 2017, we have been a signatory of the Stockholm Declaration. Co-led by GRI and UN Global Compact, and supported by the PRI, this reaffirms our commitment to investing for sustainable development and sustainable impact towards 2030 in supporting the 2015 Sustainable Development Goals.

Since 2017, we have been a member of the Practitioner Community of the Impact Management Project, an initiative to build consensus on how we talk about, measure and manage impact, bridging the perspectives of investment, grantmaking, business, non–profits, social science, evaluation, wealth management, policy, standards bodies and accounting. In 2021, the IMP facilitation concluded but the principles continue to be a standard in the market and have been integrated into several reporting frameworks.

Since 2017, we have partnered with Lombard Odier Investment Managers. The LO Funds – Global Climate Bond is a result of this partnership. The Fund is a diversified investment grade portfolio seeking to simultaneously deliver a low carbon and climate-resilient economy and mitigate some of the effects of climate change, while targeting a higher yield than a typical investment grade portfolio with lower turnover. It is designed to enable investors to benefit from the transition to a greener economy and aims to deliver measurable environmental and social impact in addition to financial performance.

Since 2018, we have partnered with Colonial First State (CFS). CFS is one of Australia’s leading wealth managers, which has helped over 1 million Australians with their superannuation, investment and retirement needs since 1988. The product of this partnership is the Affirmative Global Impact Bond Fund – a vehicle that seeks to engage investors to deliver funding for real solutions to global environmental and social problems. As part of this partnership, we publish an Impact Report, which presents a summary of the positive change investors have made by their investment in the Fund.

Since 2019, we have been members of the FAIRR network. FAIRR’s mission is to build a global network of investors who are focused and engaged on the risks linked to intensive animal production within the broader food system. FAIRR helps investors to exercise their influence as responsible stewards of capital to engage and safeguard the long-term value of their investment portfolios.

Since 2020, we have used S&P ESG data for calculating climate metrics and to assist with our responsible issuer screening against our exclusionary policies. AIM conducts our own ESG analysis on issuers, however we consider ESG data inputs from providers such as S&P.

In 2021 we commenced our partnership with the Impact Investing Institute (“Institute”).The Institute’s mission is to accelerate the growth and improve the effectiveness of the impact investing market in the UK and internationally. The Institute is at the forefront of the emerging consensus that capital can and should deliver for people and planet. It exists to encourage more investment made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Its work encompasses four main pillars: awareness, education, research and impact measurement/reporting.

We have been members of RIAA since 2020. With over 450 members, RIAA is the largest and most active network of people and organisations engaged in responsible, ethical and impact investing across Australia and New Zealand. Our Australian Affirmative Global Impact Bond Fund which we manage on behalf of Colonial First State, is certified by RIAA.

In 2021 RIAA recognised AIM as a Responsible Investment Leader in a landmark study of the responsible investment landscape in Australia.

Since 2021, we have been a signatory of NZAM. The initiative is an international group of asset managers committing to supporting the goal of net zero GHG emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5 degrees Celsius and to supporting investing aligned with net zero emissions by 2050 or sooner.