This document provides a snapshot of IIGCC’s Net Zero Bondholder Stewardship Guidance, designed to support institutional investors in integrating climate considerations into bondholder stewardship.
As the backbone of global corporate financing, the corporate bond market plays a central role in corporate capital structures and functions as a primary source of financing for the real economy. Accordingly, bondholder stewardship is a critical lever for achieving net zero goals and protecting long-term value.
You can access our full 'Net Zero Bondholder Stewardship Guidance', released in June 2023, here.
The constant cycle of financing and refinancing, the diversity of issuers, and the wide range of actors involved in the bond market, from banks to underwriters to rating agencies, create unique opportunities for bondholders to influence corporate behaviour. Active engagement enables investors not only to support the transition to a net zero economy, but also to manage material financial risks and identify opportunities linked to the low-carbon transition.
Effective stewardship can help safeguard portfolio value, enhance issuer resilience, and align fixed income investments with long-term climate and financial objectives. By engaging actively with issuers, bondholders can help shape climate strategies, support the adoption of sustainable practices, contribute to the broader transition to a net zero economy and therefore protect the long-term value of their investments.
Opportunities
-
Broader issuer engagement scope: Bondholders can engage with a wider range of entities beyond listed companies, including private firms, sovereigns, and sub-sovereigns. This expands the potential for climate-related influence across the full spectrum of debt issuers.
-
Influence on cost of capital: While bondholders lack voting rights, they can influence issuers’ cost of capital in the primary market. This is particularly impactful for capital-intensive sectors, where investor expectations on climate performance can shape financing terms and access.
-
Instrument-specific capital allocation - Bondholders can support climate-aligned activities by engaging and investing in instruments such as labelled green and sustainability-linked bonds. These structures offer opportunities to direct capital toward transition efforts.
-
Long-term investment horizon: Many bondholders, particularly those in portfolios with long durations, are well-positioned to advocate for long-term climate strategies aligned with net zero goals.
-
Collaborative leverage: Bondholder engagement can complement shareholder initiatives