Over 2021 we have expanded our business, grown our team and continued to hold ourselves to the same – or higher – standards that we expect from the issuers in which we invest. We are pleased to have delivered on financial returns over the medium term with environmental and social impact. Since our inception we are proud of the investment we have made and the genuine imapct we have delivered. We outline our impact in more detail below.
This year we published our first Modern Slavery Statement, addressing our investment and operational processes, to ensure we adhere to the highest standards. We also published our People Policy, outlining our core values driving our culture and investment approach. We recognise that our people drive our success. In what has been a challenging period, we are proud that we have continued to foster an environment of collaboration internally and with our clients and stakeholders.
The impact bond market continued to grow rapidly in 2021. Issuance for the year reached a total of US$1.13tn (1) with US$2.20tn (2) outstanding. The proportion of social bonds and sovereign issuance has grown, with the latter further enhancing liquidity and encouraging other issuers to the market. We take a deeper dive into the impact bond market and our views in our upcoming Impact Bond Market Year in Review.
The growth in the market has been supported by initiatives and regulation. We welcome consistent regulation as it enables investors to have a standard against which to measure their investments and investment managers. This year we saw the introduction of EU Sustainable Finance Disclosure Regulation (“SFDR”), which, alongside the EU taxonomy, will continue to shape investment in Europe, and globally.
Our team expands
Our team has expanded to 23 people which spans the UK, Japan, Australia and India. Over the year we have continued to expand our expertise across teams, with hires in the Investment Committee, sustainability, credit, client engagement teams and in our Japan office. We continue to adhere to government restrictions related to the COVID-19 pandemic and support our colleagues across all regions.
We officially opened our Japanese office in 2021, which is led by Mitsuo Kojima. The registration of Investment Advisory and Agency Business under the Financial Instruments and Exchange Act was successfully completed for Affirmative Investment Management Japan Inc. This was the first registration case for the FSA using the newly created Financial Market Entry Office (FMEO). We continue to work closely with SMBC group and are excited to be expanding our engagement across the Japanese market.
In 2021 Fiona Reynolds joined AIM as a Senior Advisor and first member of our Advisory Committee. As former CEO of the UN Principles for Responsible Investment (PRI), Fiona brings extensive experience as a leader across the responsible investment community.
Iain Lindsay joined our team in May as a member of the Management Committee and co-chair of the Investment Committee, bringing over 30 years’ fixed income experience. Our sustainability team further expanded as we welcomed Giulia Rado from the Carbon Trust, and George Barnard and Sam Harrison transitioned to permanent employees from their internships. Kayoko Nakayama joined us in Japan as Chief Compliance Officer and Erika Lambey joined our client engagement team. We expanded our credit team and welcomed Deepali Pawar, who sits as a full-time employee alongside our colleagues within Acuity Knowledge Partners.
During the year we farewelled Judith Moore, Stuart Kinnersley and Patrizio Trapletti and we thank them for their contribution to AIM.
Andrew Roffey has announced he will be retiring at the beginning of 2022. We thank Andrew for his leadership across the credit team and wish him well. We are currently recruiting additional credit resources.
We continue to grow our business and are proud to manage over US$1.2bn at the end of 2021. We are proud to be managing assets on behalf of clients globally.
We remain dedicated to delivering mainstream returns with environmental and social impact. We continue to manage three core strategies on behalf of our clients: global fixed income, single currency fixed income and short duration fixed income. At the end of 2021 we launched a Dublin-based version of our global fixed income strategy, the ESG Impact Global Bond Fund managed against the Bloomberg Global Aggregate ex-Japan Index.
We continue to strive to meet the highest standards. The new SFDR regulation was introduced in March. SFDR is applicable to European financial market participants, ranging from asset managers to financial advisors, and aims to increase transparency regarding ESG-focused products. It requires asset managers to disclose the differing levels of sustainability integration across each investment strategy.
Under the new classifications, products are labelled as either Article 6, 8 or 9 under SFDR.
- Article 6 funds do not integrate any kind of sustainability considerations into the investment process.
- Article 8 funds promote environmental, social and governance characteristics.
- Article 9 funds have sustainable investment as their objective.
Our flagship fund, the LO Funds – Global Climate Bond, has been classified as an Article 9 Fund, the highest sustainable classification. We expect all our vehicles for EU distribution, including our new Dublin-based fund, to be classified under Article 9.
Annual Impact Report
During the year we were delighted to release our fourth annual Impact Report. We are proud of the impact we achieved across our client’s portfolios. Our reports demonstrate our transparency of process, the importance of active engagement with issuers and data collection at the project level.
Our global portfolios, which are managed to the Bloomberg Global Aggregate, achieved coverage ratios of over 90%, funded over 2,551 projects in 165 countries (equating to ¾ of the globe) and avoided 189,219 tonnes of GHG emissions per year, equating to 64% GHG emissions savings.
We continue to innovate in our reporting. This year, key developments included:
- In-house calculation of the Weighted Average Carbon Intensity (WACI) for both the fund and benchmark and provision of a WACI composition breakdown.
- An updated, dynamic baseline for our calculation of avoided emissions and Carbon Yield.
- Enhancement of our multi-year assessment of physical climate risk to include issuer engagement on the use of scenario analysis, adaptive capacity measures and resilience planning.
We continue to engage with issuers throughout our impact reporting process and on an ongoing basis to promote integrity within the impact bond market. In January we were delighted to have been highlighted by Environmental Finance in their survey on impact reporting best practices. Our Impact Bond Market Year in Review provides more details of specific engagement and examples.
Ongoing global recognition
Throughout the year we continue to be recognised as a leader within responsible and sustainable investing.
We were delighted to be awarded Impact Asset Manager of the Year at the 2021 Australian Impact Investment Awards. The awards are developed by the Social Impact Hub and Impact Investment Summit Asia Pacific. We were recognised for our expertise and commitment in the impact Investment ecosystem.
The Responsible Investment Association Australasia (RIAA) included us a Responsible Investment Leader in its landmark study launched in September, recognising our commitment to responsible investing and attributes as an investment manager.
In May we were awarded an ESG commitment level of “Leader” by Morningstar. We received this accolade both as a firm and for our Affirmative Global Bond Fund. Morningstar defines “Leader” funds as those funds which integrate ESG factors fully into their security analysis and portfolio construction, and deliver desirable ESG outcomes at the portfolio level, such as a high sustainability profile, advancement of the UN Sustainable Development Goals, or similar. Out of all the 140 strategies and 31 asset managers assessed by Morningstar, we are the only strategy and only manager to be awarded this highest classification of “leader”. We have also received the highest possible rating by the UN PRI, scoring an A+ across all reported modules.
We strive for excellence across all aspects of our business and are delighted that our funds and impact reports have also been recognised as leading. The AIM US$ Liquid Impact Fund, our short duration offering, won ‘Best ESG investment fund: specialist fixed income’ at the ESG Investing Awards, while our annual Impact Reports won ‘Impact report of the year (for investors)’ at the Environmental Finance Bond Awards. In their comments the judges highlighted our extensive coverage and addition of reporting in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
In 2021 we also earned the ‘Towards Sustainability’ label for the LO Funds – Global Climate Bond fund. The label is sponsored by Febelfin, the Belgian financial sector federation. The initiative aims to promote socially responsible and sustainable investment and instil trust among investors that labelled products are managed with sustainability at the fore. We are proud that our European vehicle has been recognised by the federation.
Collaboration with industry peers
We continue to collaborate with our peers to support collective action and impact. During 2021, we participated in a number of working groups to facilitate the development of the impact bond market. These included the CBI basic chemicals first impact working group, the ABN AMRO roundtable on aligning ESG ambitions with bond issuance and the ICMA working group on transition finance.
In July we joined the Net Zero Asset Managers Initiative (“NZAM”), a group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5 degrees Celsius. NZAM is fully aligned with our mission to mobilise capital to address the major challenges the world faces.
We participated in a number of events throughout the year promoting sustainable investing and action. Stephen Fitzgerald, Managing Partner, spoke on the Australian Climate Change Authority panel at COP26 and also at the Portfolio Construction Forum, advocating for the power of positive selection. |During 2021 we spoke on panels organised by the University of Bologna on impact investing and sustainable finance, by Swedbank on sustainability-linked bonds, and on impact reporting best practices at webinars organised by Environmental Finance and the Climate Bonds Initiative. We also participated in the International Panel for Climate Finance, convened by Aviva, which included calling on governments to create net-zero incentives to shift capital at scale and speed. We spoke on podcasts, such as the Good Future podcast, hosted by John Treadgold, the Green Dream and Between Meetings with Matt Heine. We believe raising awareness and sharing knowledge is crucial to developing the impact investing market.
We continue to publish insights and thought pieces. During 2021 these included:
- Greenium – fact or fiction?
- Iain Lindsay Interview: Thoughts from our newest team member
- Impact investing to finance the net zero transition
- Screening for impact: Spotlight on Sovereigns
- Stephen Fitzgerald speaks on CCA panel at COP26 These pieces are available on our website here.
The year ahead
We are optimistic about the year ahead. We believe the impact bond market will continue to grow and diversify. As the investment opportunity set for achieving returns and impact expands, and increasingly finances the transition to net zero, the need for authenticity is crucial. We look forward to continuing to engage with issuers, promote industry collaboration and best practice. We are excited to meet our clients in person where we can and continue our remote engagement, partnering to deliver portfolios that generate mainstream financial returns with environmental and social impact.
We thank you for your support and wish you all the best for the year ahead.
The AIM Team
(1) Source: Bloomberg BNEF
(2) Source: Bloomberg