Foreword Welcome to the first report in our Impact Series, showcasing groundbreaking research into the effect of environmental, social and governance investing on bond portfolio performance. Across the world, individual and institutional investors If ESG attributes are aligned with bond returns as our seek attractive financial returns while helping to achieve study suggests, we can expect the move to sustainable a positive impact on the communities around them. With investing to endure. As our analysts remind us in this growing concerns over climate change and global warming, report: “As ESG considerations play out over a long horizon, geopolitical instability and uncertainty in financial markets, and as they increasingly become a priority for company this has become even more pressing. managers, they may help alleviate the pressure for short- The growing awareness of and support for responsible termism and encourage a focus on long-term value investing has led to it becoming inherent to the investment creation – to the mutual benefit of the firm, its investors processes of many institutional investors. These responsible and the world at large.” investors often hope to improve sustainability by engaging with corporate managers, allocating capital to more virtuous companies and lobbying for broader reporting standards and changes in regulations. Much research has been done on the relationship between environmental, social and corporate governance (ESG) Jes Staley, Chief Executive Officer of Barclays investing and performance in equity markets, but far less on its effect on the credit markets. This study by the Barclays Research team into the behaviour of corporate bond portfolios makes a significant contribution to the available body of evidence on sustainable investing. The research shows that applying ESG factors resulted in a small but steady performance benefit and the team could find no evidence of a negative effect. 3