Investment stewardship from a fixed income perspective

By Savannah Irving, Senior Fixed Income Engagement Analyst, Neuberger Berman 

Stewardship and engagement have traditionally been considered a shareholder tool, largely because of a general focus on proxy voting and ownership. However, fixed income investors have a larger seat at the table than ever before, due to the capital that companies need to draw upon to address pressing global challenges. The debt financing lifecycle provides bondholders with multiple opportunities for engagement, including pre-issuance, during the holding period, and through to refinancing. Additionally, fixed income investors have the unique opportunity to influence private companies issuing public bonds. Approximately 40% of issuers in the global high yield market are privately owned.[1] Access to these issuers gives the ability to drive influence with companies that are not typically reached by equity investors.

The sheer size of the global fixed income market further emphasizes the importance of bondholder engagement: in 2023, global long-term fixed income issuance was $ 25.2 trillion compared to $ 422 billion in global equity issuance.[2] While some investors utilize the labelled bond markets as a tool to allocate capital towards intended sustainability outcomes, the size of the market remains limited, with labelled bonds accounting for approximately 5% of total debt market issuance.[3] Thus, bondholders must employ other tools to drive change, such as engagement, which we believe is an essential part of long-term active ownership.

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