IFR 03.7.2020

International Financing Review March 7 2020 23

People

&Markets

NNIP adds corporate focus in green funds

NN INVESTMENT PARTNERS has launched a

corporate green bond fund, as the Dutch

fund manager responds to the growth of an

asset class that is becoming more liquid and

encompassing more types of issuers.

NNIP said corporate issuers had

dominated the green bond market despite

THEûHIGH

PROlLEûNATUREûOFûSOVEREIGNûISSUESû

from the likes of the Netherlands, France

and Ireland.

The asset manager said companies from

sectors, including industrials,

communications and technology have

TURNEDûTOûTHEûGREENûBONDûMARKETûTOûlNANCEû

green projects, including PepsiCo.

NNIP said car manufacturers could be the

next breed of issuers to embrace the green

BONDûMARKETûASûTHEYûlNDûWAYSûTOûREDUCEû

carbon emissions.

“The green bond market really took

off in 2019 and is now larger than the

European high-yield market, for example,

in terms of volume,” said Bram Bos, NNIP’s

lead portfolio manager for green bonds.

“We are positive this growth is set to

continue.”

Bos said when analysing corporate green

bonds the volatility of the green bond index

had been shown to have moved closer to

that of a traditional bond index.

“This makes corporate green bonds

INCREASINGLYûATTRACTIVEûPURELYûFROMûAûlNANCIALû

and risk-return perspective,” he said.

The corporate fund is NNIP’s third green

bond fund, joining one with a wider

mandate and a short-duration version.

The combined assets in NNIP’s green bond

strategies and mandates amount to €2.4bn.

Robert Hogg

BEA hires Goldman to appease Elliott

BANK OF EAST ASIA has hired Goldman Sachs to

carry out a strategic review of its business,

which could see some of its assets sold off,

following pressure from US hedge fund

ELLIOTT MANAGEMENT.

The activist investor, which is best known

for its long-running dispute with Argentina

over the country’s sovereign debt default,

eventually ending in a large windfall for

Elliott in 2016, has agreed to pause its legal

proceedings against the bank’s

management.

Elliott, which owns a 7.5% stake in BEA,

has long accused the Li family who run the

bank of poor management and has called for

a sale of the bank.

Its case against BEA’s directors was due to

be heard in a Hong Kong court in May and

concerned whether BEA had sold stakes to

Sumitomo Mitsui Financial Group and

Criteria Caixa, a Spanish holding company

that also controls Caixa Bank in Spain, to

protect itself against a hostile takeover.

The review carried out by Goldman Sachs

hWILLûFOCUSûONûTHEûIDENTIlCATIONûOFûPOTENTIALû

strategic transactions, which would enhance

the value of the bank’s existing businesses

and assets, as well as strategic alternatives

for potentially non-core assets”. It said it

will update shareholders on the review by

June 30.

Jonathan Pollock, co-chief executive and

CHIEFûINVESTMENTûOFlCERûOFû%LLIOTTûEXPRESSEDû

support for the review in BEA’s statement.

BEA is Hong Kong’s last large, family-run

bank as most of its previous domestic

competitors have been acquired by global

banks such as Wing Hang Bank, which was

acquired by Oversea-Chinese Banking Corp

in 2014 and Chong Hing Bank, which was

bought by Chinese state-owned Yue Xiu

Group the same year.

The lender has struggled in recent years

ANDûLASTûMONTHûREPORTEDûITSûûPROlTûFELLû

by almost a half to HK$3.26bn (US$420m)

following a spike in provisions for bad loans

in its mainland China business.

Thomas Blott

ESG impact on CDS stronger for developed sovereigns

ESG factors have a stronger effect on

sovereign credit spreads in developed

markets than in emerging markets and

social and governance sub-risks have the

strongest impact on pricing, compared to

environmental factors, a research report

said.

ESG analysis is increasingly important for

investors in sovereign debt, and credit

specialists are seeking to price ESG risks

with greater precision.

A report by Federated Hermes and Beyond

Ratings last year showed that countries with

lower ESG scores have the widest CDS

spreads, while those with the highest ESG

scores have the tightest.

A second leg of the research on the

pricing of ESG risk in sovereign credit

showed there is a strong correlation

between sovereign credit risk and ESG

scores for developed countries.

In the study, average CDS spreads for

developed countries with the lowest ESG

scores were within a 150bp-200bp range,

while average CDS spreads for developed

countries with the highest ESG scores were

below 50bp.

It also highlighted a clear divergence

BETWEENûTHEûRELATIVEûlNANCIALûSTRENGTHûOFû

developed and emerging countries and the

way they assess and price ESG risks.

Average CDS spreads for emerging

countries with the lowest ESG scores stood

within a 150bp-200bp range, while the

average CDS spread for emerging countries

with the highest ESG scores was at 150bp.

4HEûlNDINGSûSUGGESTEDûTHATûALTHOUGHû%3'û

risks have a marked impact, movements on

CDS spreads for emerging market countries

tend to be more related to other country-

SPECIlCûFACTORS

4HEûSTUDYûSAIDûTHEûRELATIVEûlNANCIALû

weakness of some emerging market

countries left them more vulnerable to

deteriorating ESG factors, which translated

directly into credit risk, but those ESG risks

were not accurately priced at present.

Malicka Danna Sielinou

The review carried out by

Goldman Sachs “will focus on

the identification of potential

strategic transactions”

ESG analysis is increasingly

important for investors in

sovereign debt, and credit

specialists are seeking to price

ESG risks with greater precision

5 IFR PM 2323 p 15 - 24 .indd 23 06 / 03 / 2020 19 : 22 : 46