The Independent employs reporters around the world to bring you truly independent journalism. To support us, please consider a contribution.
Corporate bondholders don’t, in theory, have as loud of a voice as shareholders.
They take less risk. Their interest payments, or coupons, are preserved even when dividends are being suspended or slashed, as they are now.
Their money is repaid at maturity unless a company goes insolvent, at which time they have a prior call on the assets. As a a result, they don’t get a vote on big corporate decisions; takeovers and mergers, approving the new CEO and suchlike.
Kames Capital argues that they nonetheless can, and should, still bring their influence to bear on corporate behaviour.
The money manager, which has a long presence in the ethical investment market, says its programme of engagement with companies that its bond funds invest in has proven effective.
This isn’t too surprising. Companies need to find buyers for their IOUs, so it pays to keep big bondholders sweet, now more than ever given the impact of the novel coronavirus on corporate balance sheets.
A lot of them are going to be knocking on doors in the hopes of finding fresh financing. Some of them may need to ask their lenders for help, which could include their bondholders as well as their banks.
Just as with equities, investors in bond funds have a choice to make over the level of ESG (Environmental, Social, Governance) screening.
Take Kames, for example. It has an Ethical Corporate Bond Fund and a Cautious Managed Fund, which is made up of 60 per cent equities, 40 per cent bonds.
The two have the same screening criteria as the ethical equity fund, which is very much at the stricter, or “dark green” end of the industry.
Just as with shares, bonds issued by companies are excluded if they have a poor record on the environment, or animal welfare issues. Armaments, nuclear power, genetic engineering, pornography are similarly grounds for ruling out investment.
Ditto the paper of companies deriving more than 10 per cent of their business from alcohol, tobacco or gambling. Operating in countries poor human rights records is a no no. So is making political donations of more than £25,000. Banks with large exposures to third world debt are out too.
That’s a rather extensive list, one that may be too much for some. There are plenty of people who may, for example, be untroubled by investing in debt issued by brewers or distillers which would be excluded by those funds.
Gambling is no less controversial, but a lot of people like to spin the wheel and mightn’t be too worried about having holdings in debt issued by the companies that provide them with their thrills. If the house always wins, it pays to have some money in the house.
1/13 Flybe collapses
Airline Flybe has collapsed. All future flights on the Exeter-based airline have been cancelled – leaving more than 2,300 staff facing an uncertain future, and wrecking the travel plans of hundreds of thousands of passengers.
The chief executive, Mark Anderson, said: “Europe’s largest independent regional airline has been unable to overcome significant funding challenges to its business.
AFP via Getty
2/13 Future product placement will be ‘tailored to individual viewers’
Marketing executives say that product placement in films and televison shows on streaming services such as Netflix may be tailored to individuals in future. For instance, if data shows that a viewer is a fan of pepsi, a billboard in the background of a shot would host an advert for pepsi, while for a viewer known to have different tastes it could be for Coca-Cola
Paramount
3/13 Corbyn wishes Amazon a happy birthday
In a card sent to Amazon CEO Jeff Bezos on the company’s 25th birthday, Labour leader Jeremy Corbyn writes: “You owe the British people millions in taxes that pay for the public services that we all rely on. Please pay your fair share”
4/13 No deal, no tariffs
The government has announced that it would slash almost all tariffs in the event of a no-deal Brexit. Notable exceptions include cars and meat, which will see tariffs in place to protect British farmers
Getty
5/13 Fingerprint payment
NatWest is trialling a new bank card that will allow people to touch their hand to the card when paying rather than typing in a PIN number. The card will work by recognising the user’s fingerprint
NatWest/PA Wire
6/13 Mahabis bust
High-end slipper retailer Mahabis has gone into administration. 2 Jan 2019
Mahabis
7/13 Costa Cola
Coca-Cola has paid £3.9bn for Costa Coffee. A cafe chain is a new venture for the global soft drinks giant
PA
8/13 RIP Payday Loans
A funeral procession for payday loans was held in London on September 2. The future of pay day lenders is in doubt after Wonga, Britain’s biggest, went into administration on August 30
PA
9/13 Musk irks investors and directors
Elon Musk has concluded that Tesla will remain public. Investors and company directors were angry at Musk for tweeting unexpectedly that he was considering taking Tesla private and share prices had taken a tumble in the following weeks
Getty
10/13 Jaguar warning
Iconic British car maker Jaguar Land Rover warned on July 5, 2018 that a “bad” Brexit deal could jeopardise planned investment of more than $100 billion, upping corporate pressure as the government heads into crucial talks
AFP/Getty
11/13 Spotif-IPO
Spotify traded publically for the first time on the New York Stock Exchange on Tuesday. However, the company isn’t issuing shares, but rather, shares held by Spotify’s private investors will be sold
AFP/Getty
12/13 French blue passports
The deadline to award a contract to make blue British passports after Brexit has been extended by two weeks following a request by bidder De La Rue. The move comes after anger at the announcement British passports would be produced by Franco-Dutch firm Gemalto when De La Rue’s contract ends in July.
The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process.
13/13 Beast from the east economic impact
The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.
1/13 Flybe collapses
Airline Flybe has collapsed. All future flights on the Exeter-based airline have been cancelled – leaving more than 2,300 staff facing an uncertain future, and wrecking the travel plans of hundreds of thousands of passengers.
The chief executive, Mark Anderson, said: “Europe’s largest independent regional airline has been unable to overcome significant funding challenges to its business.
AFP via Getty
2/13 Future product placement will be ‘tailored to individual viewers’
Marketing executives say that product placement in films and televison shows on streaming services such as Netflix may be tailored to individuals in future. For instance, if data shows that a viewer is a fan of pepsi, a billboard in the background of a shot would host an advert for pepsi, while for a viewer known to have different tastes it could be for Coca-Cola
Paramount
3/13 Corbyn wishes Amazon a happy birthday
In a card sent to Amazon CEO Jeff Bezos on the company’s 25th birthday, Labour leader Jeremy Corbyn writes: “You owe the British people millions in taxes that pay for the public services that we all rely on. Please pay your fair share”
4/13 No deal, no tariffs
The government has announced that it would slash almost all tariffs in the event of a no-deal Brexit. Notable exceptions include cars and meat, which will see tariffs in place to protect British farmers
Getty
5/13 Fingerprint payment
NatWest is trialling a new bank card that will allow people to touch their hand to the card when paying rather than typing in a PIN number. The card will work by recognising the user’s fingerprint
NatWest/PA Wire
6/13 Mahabis bust
High-end slipper retailer Mahabis has gone into administration. 2 Jan 2019
Mahabis
7/13 Costa Cola
Coca-Cola has paid £3.9bn for Costa Coffee. A cafe chain is a new venture for the global soft drinks giant
PA
8/13 RIP Payday Loans
A funeral procession for payday loans was held in London on September 2. The future of pay day lenders is in doubt after Wonga, Britain’s biggest, went into administration on August 30
PA
9/13 Musk irks investors and directors
Elon Musk has concluded that Tesla will remain public. Investors and company directors were angry at Musk for tweeting unexpectedly that he was considering taking Tesla private and share prices had taken a tumble in the following weeks
Getty
10/13 Jaguar warning
Iconic British car maker Jaguar Land Rover warned on July 5, 2018 that a “bad” Brexit deal could jeopardise planned investment of more than $100 billion, upping corporate pressure as the government heads into crucial talks
AFP/Getty
11/13 Spotif-IPO
Spotify traded publically for the first time on the New York Stock Exchange on Tuesday. However, the company isn’t issuing shares, but rather, shares held by Spotify’s private investors will be sold
AFP/Getty
12/13 French blue passports
The deadline to award a contract to make blue British passports after Brexit has been extended by two weeks following a request by bidder De La Rue. The move comes after anger at the announcement British passports would be produced by Franco-Dutch firm Gemalto when De La Rue’s contract ends in July.
The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process.
13/13 Beast from the east economic impact
The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.
There are “lighter” green options available for those in these groups but it would still pay to pick one run by a manager willing to engage with these type of businesses with a view to keeping them responsible.
Whether to exclude or invest and engage is a matter of personal preference.
But while bond investors mightn’t have votes, they are still capable of twisting arms being the scenes, especially at a time like now. Some are willing to do that. Some will just sit back and pocket the fees they charge you.
