January 26, 2020 – Patrick Drum, portfolio manager and senior investment analyst, joins Paul Ellis as a featured guest on The Sustainable Finance Podcast, episode 68: “Fixed Income Investing Accelerates Among UNPRI Signatories.” Drum provides insights from his extensive travels to Asia and the Middle East, identifies sustainable fixed income opportunities in emerging markets, and analyzes the overlap between Islamic and sustainable investing principles, including green sukuk. Their conversation focuses on rising adoption of ESG fixed income investing among the organizations that have signed on to the UN Principles for Responsible Investment (UNPRI).
Excerpts from Drum’s conversation with Ellis:
On opportunities presented by sovereign wealth funds in the Middle East countries of Gulf Cooperation Council (GCC) and in Asia (ex-Japan and ex-China):
“These two regions combined represent less than 3% of UNPRI signatories. Yet, interestingly enough, those regions in themselves represent over 40% of sovereign wealth funds. The opportunities are huge.”
On how Islamic investing fits into the history of socially responsible and sustainable investing:
“Under the sharia complex, or the Islamic faith, arguably you could look to them as having been early founders of sustainable investing…They have always had a heavy social component. Their philosophical bent is basically on this premise that it’s alright to make a profit, but its profit has to be evaluated as to how it impacts society and those in the community broadly…And that really is the essence, in my view, of sustainability.”
On Saturna’s responsible investment process and how to evaluate the green bonds:
“I’m looking for various red flags of ‘Are they engaging in the best practices?’ Surprisingly, you will still find a lot of green bond issuers coming to the market not going through the independent external verification or the auditing that’s so essential to giving me the sense that they’re really taking this with a sense of importance…I’m looking to that management, and if they’ve engaged in a long history of a misfit behavior towards environmental, social, governance priorities. How am I really going to review and verify that they are going to engage in it?”
Patrick Drum MBA, CFA®, CFP®, joined Saturna Capital in October 2014. He has authored a variety of white papers on sustainable fixed income topics, such as Green Bonds: A Growing Market, But Not Without Weeds; Green Sukuk: A New Legacy for Green Sprouts? and How to Evaluate the “Sustainability” of Sustainable Mutual Funds.