Thornburg Investment Management's vision

Integrating ESG in asset-backed securities analysis


Author: Cecilia Prieto

  1. Investors are coming to understand that ESG factors are material and relevant to security analysis, particularly for a space that, at $12 trillion in total size, accounts for over 25% of the total public fixed income market.
  2. Traditionally, the ESG corporate focus has centered around how management teams evaluate and manage ESG risks and opportunities. Securitized fixed income is unique in that idiosyncratic risk in individual loans is diversified away, necessitating a more holistic focus on how lending and underwriting standards, and broader social factors, impact security cash flow.
  3. It is Thornburg’s belief that an effective ESG securitized framework should center on how the lending process itself ties to ESG considerations. At the investment firm, analysts aim to understand the issuer’s underwriting process for the individual’s ability to repay their loans, which can also include influences related to ESG factors.