Insights

The September Sustainable Investment Update covers broad trends within the ESG landscape that require investor attention. 

Summer should be a time for rest and relaxation, and perhaps a little quiet reflection. Not so with the markets this season. There were plenty of things to debate and concerns to keep investors’ anxiety levels up.

August was a busy month on the regulatory front as global policymakers continue to grapple with the "unequivocal human influence" on climate change and extreme climate events. 

Treasury yields reversed their downward trend modestly in August with the 10-year Treasury note rising 4 basis points (bps) to end the month at 1.29%. Overall, yields experienced big swings intra-month as market participants responded to mixed economic data, Fed commentary around tapering of bond purchases, Treasury bond supply, and the prospects of the Delta variant stalling the economic recovery. 

This month, we introduce our inaugural LIM Sustainable Investment Update. The goal of this publication is to provide timely ESG-relevant information as it pertains to the evolving regulatory landscape, market trends, and the widespread impacts that policy changes can have across industries and companies. In July, we discuss global ESG policy changes, GSS-labelled bonds, and potential implications of recent headlines as they relate to various ESG factors.

Treasury yields continued their downward trend in July with the 10-year maturity experiencing the largest drop of -25 basis points (bps). The Delta variant remains a near-term headwind as the daily pace of new Covid cases in the U.S. continues to march higher. 

Inflation has become the cause celebre in today's bond market. With additional federal stimulus enacted, a very ambitious infrastructure program on the table, and the Federal Reserve still providing highly accommodative monetary policy, 2021 began with investors becoming increasingly concerned about the risk of a prolonged inflationary environment. With an assist from widespread vaccinations and with the "re-opening trade" in full gear, rates rose early in the year as a result. 

In the current environment of low interest rates and bond yields, investors seeking income might consider looking to dividend-paying stocks as an investment option. History has shown that investing in dividend-paying stocks not only provides shareholders with income, but also has been an attractive investment strategy in terms of total return and as a complement to fixed income investments. 

Volatility in interest markets was modest throughout May. The U.S. Treasury benchmark 10-year note traded within a 15-basis point (bp) range, ending the month just 4 bps lower. Paper up and down the curve traded likewise, but short Treasuries barely moved. 

April was characterized by very good economic news, major fiscal policy proposals, and a somewhat surprising mini-bond market rally. The benchmark 10-year U.S. Treasury yield ended the month 12 basis points (bps) lower, and the 2- to 30-year curve slope ended the month 10 bps flatter.