While equity stewardship has historically received much attention, most corporate financing activity takes place in the debt markets, giving bondholders significant power to influence bond issuers. Because fixed income investors are exposed primarily to downside and default risk, the credibility of an issuer’s climate and nature strategy is central to long-term portfolio resilience. At the same time, debt markets differ structurally from equities, characterised by dispersed ownership, and governed by contractual frameworks that require their own engagement approaches.
Against this backdrop, this research paper examines the practical mechanisms, or 'tools', through which asset owners and investment managers can exert meaningful influence, with more collaboration, over bond issuers on transition matters. It identifies 11 engagement tools - grouped under contractual, strategic, collaborative, and regulatory categories - and these range from bondholder meetings and timing engagement around refinancing windows to the use of indices, and more ambitious investment mandate terms.
Our full assessment explains each of the 11 tools in detail, and explains the detailed feasibility and impact scoring framework used to ascertain the most powerful of the toolkit.
Link to full paper at SSRN (60min read)
The paper also positions these tools within broader themes: the under-utilisation of debt markets for transition engagement, the alignment between transition performance and credit quality, and successes and missed opportunities to date for bondholder engagement. The paper aims to help fixed income teams operationalise engagement in a way that complements thematic and issuer-specific stewardship work.
