Schroder ISF* Sustainable EURO CreditDynamic management of sustainable corporate bonds
More and more investors are convinced that the long-term performance of an investment, including corporate bonds, is closely linked to the sustainability performance of the issuer. Dynamically aligned investment strategies make it possible to sensibly combine return and sustainability. Schroder ISF Sustainable EURO Credit aims to outperform the ICE BofA Merrill Lynch Euro Corporate Index over a three to five year period by investing in bonds issued by companies that have either a strong sustainability profile or a credible transition.
*Schroder International Selection Fund is referred to as Schroder ISF.
Why sustainable corporate bonds?
The bond markets have re-set and are now offering extremely attractive yields. Strong corporate fundamentals with solid interest coverage ratios and low refinancing risks also point to a flat default cycle.
2. Our strategy
The long-term performance of an investment is increasingly determined by the sustainability of the issuer - this also applies to corporate bonds. Our strategy combines a unique approach to sustainability with over 20 years of experience across the fund management team. Schroders acts as an active investor, maintaining regular dialogue with companies to encourage their sustainability transformation.
Sustainability as a selection principle
A multi-stage selection process ensures that sustainability is implemented in the fund. Companies whose business models are incompatible with key ESG criteria are excluded. This is followed by a comprehensive ESG assessment of the portfolio candidates based on in-house research and external analysis.
Dynamic investment approach
The fund mainly invests in euro-denominated corporate bonds; in addition, non-euro-denominated or high-yield bonds, green bonds and derivatives can be included. All of these options enable the management to act flexibly and exploit various sources of return.
To support the transition towards sustainability, the fund also invests in companies that are on a credible path towards greater sustainability. We actively engage with companies about steps they need to take to improve their sustainability profiles
Find out more about Schroder ISF Sustainable EURO Credit
For more information including literature and performance data, visit our fund centre.
"Sustainable credit primarily includes 'green bonds' and social bonds, which fund a range of projects from access to education to affordable transportation to protecting the food supply. In addition, there are sustainability bonds where the issuer has made an explicit commitment to future improvements in sustainability outcomes within a set time frame.”
Head of Sustainable Credit
Investing in credit with Schroders
In global corporate bond markets, there’s a constant race for information. The winners are those who spot the key trends early and uncover opportunities that are overlooked by their competitors.
What are the risks?
ABS and MBS risk: The fund may invest in mortgage or asset-backed securities. The underlying borrowers of these securities may not be able to pay back the full amount that they owe, which may result in losses to the fund.
Contingent convertible bonds: The fund may invest in contingent convertible bonds. If the financial strength of the issuer of a contingent convertible bond falls in a prescribed way, the value of the bond may fall significantly and, in the worst case, may result in losses to the fund.
Counterparty risk: The fund may have contractual agreements with counterparties. If a counterparty is unable to fulfil their obligations, the sum that they owe to the fund may be lost in part or in whole.
Credit risk: A decline in the financial health of an issuer could cause the value of its bonds to fall or become worthless.
Currency risk: The fund may lose value as a result of movements in foreign exchange rates.
Derivatives risk: Derivatives may be used to manage the fund efficiently. The fund may also materially invest in derivatives including using short selling and leverage techniques with the aim of making a return. A derivative may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the fund.
High yield bond risk: High yield bonds (normally lower rated or unrated) generally carry greater market, credit and liquidity risk.
IBOR risk: The transition of the financial markets away from the use of interbank offered rates (IBORs) to alternative reference rates may impact the valuation of certain holdings and disrupt liquidity in certain instruments. This may impact the investment performance of the fund.
Interest rate risk: The fund may lose value as a direct result of interest rate changes.
Liquidity risk: In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares.
Market risk: The value of investments can go up and down and an investor may not get back the amount initially invested.
Operational risk: Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the fund.
Performance risk: Investment objectives express an intended result but there is no guarantee that such a result will be achieved. Depending on market conditions and the macro economic environment, investment objectives may become more difficult to achieve.
Sustainability risk: The fund has environmental and/or social characteristics. This means it may have limited exposure to some companies, industries or sectors and may forego certain investment opportunities, or dispose of certain holdings, that do not align with its sustainability criteria chosen by the investment manager. The fund may invest in companies that do not reflect the beliefs and values of any particular investor.
This webpage does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the “Company”). Nothing on this webpage should be construed as advice and is therefore not a recommendation to buy or sell shares. An investment in the Company entails risks, which are fully described in the prospectus.
Subscriptions for shares of the Company can only be made on the basis of its latest Key Information Document and prospectus, together with the latest audited annual report (and subsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from Schroder Investment Management (Europe) S.A. For Luxembourg, these documents may be obtained in English, free of charge, from the following link: www.eifs.lu/schroders.
Schroders may decide to cease the distribution of any fund(s) in any EEA country at any time but we will publish our intention to do so on our website, in line with applicable regulatory requirements.
The fund has the objective of sustainable investment within the meaning of Article 8 of Regulation (EU) 2019/2088 on Sustainability-related Disclosures in the Financial Services Sector (the “SFDR”).
Any reference to sectors/countries/stocks/securities are for illustrative purposes only and not a recommendation to buy or sell any financial instrument/securities or adopt any investment strategy.
Past Performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of investments to fall as well as rise.
Schroders has expressed its own views and opinions in this document and these may change.
A summary of investor rights may be obtained from https://www.schroders.com/en/lu/private-investor/footer/complaints-handling/
For your security, communications may be recorded or monitored.
Issued by Schroder Investment Management (Europe) S.A., 5, rue Höhenhof, L-1736 Senningerberg, Luxembourg. Registration No B 37.799.