Impact Investing in Credit: Debunking Four Common Misconceptions

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Fixed Income Impact portfolios can be flexibly managed to client objectives

Increasingly, companies are being measured not only by their earnings and cash flow, but according to the effect their activities have on the environment and society. As a result, credit investors no longer judge those companies solely on their risk and return characteristics, but increasingly by their external impact as well. 

So-called impact investing is not a new asset class: it is a natural extension of environmental-, social-and governancefocused (‘ESG’) investment approaches in credit. The idea is to identify debt issuers on the right side of change— those that are seeking to deliver a beneficial environmental and social impact, as well as positive financial returns.

Impact investing has grown considerably in the past few years. But a lack of knowledge and several commonly shared misconceptions may discourage investors from considering this way of investing in credit.