CONTRIBUTORS
David Zahn, CFA, FRM
Head of European Fixed Income,
Franklin Templeton Fixed Income
Preview
In last year’s report, we highlighted our view that transparency is the foundation for sustainable finance, and we hope to build on that view this year by continuing to share engagement insights on some of the same topics, as well as new areas of regulation and market interest.
The level of engagement that we have received from our investee companies has been very positive, and our view around this is that there is growing recognition of the value of being an ‘engaged’ market participant, and the insights that these engagements have given us.
This year, we continued with our four-year-long focus on the energy transition—this time through the lens of the important ‘Science Based Targets’ tool—and we gained important insights into how these target setting tools are being viewed and used by the markets. The engagement was a cornerstone of our biodiversity strategy, and we had an opportunity to discuss financing ecosystems protection with both sovereign and corporate issuers. We also spent a fair amount of time trying to understand how our investee companies were responding or planning to respond to the EU Pay Transparency Directive that comes into effect in 2024. I invite you to explore those and other topics in the report.
In the 2023 calendar year, we made use of far more efficient engagement tools than ever before, allowing us to reach well over half thousands of our portfolio companies and sovereigns on a variety of topics.
In our latest engagement report, we look at the following themes:
- Energy transition
- Biodiversity
- Social cohesion
- Transparent reporting
Our engagements throughout 2023 were led by our aim to better understand the interests, ambitions and risks of all market participants, as well as the belief that transparent communication is key in the face of the growing complexity of this sector. It is through these engagements that we are committing to the development of a sustainable finance ecosystem that delivers strong results for everyone involved.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls.
Green bonds may not result in direct environmental benefits, and the issuer may not use proceeds as intended or to appropriate new or additional projects.
The managers’ environmental, social and governance (ESG) strategies may limit the types and number of investments available and, as a result, may forgo favorable market opportunities or underperform strategies that are not subject to such criteria. There is no guarantee that the strategy's ESG directives will be successful or will result in better performance.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.