United States
May 1, 2018
Environmental, Social and Governance Factors in Global Macro Investing
Systematically measuring ESG conditions for country comparisons detailed in Global Macro Shifts.
Environmental, social and governance (ESG) factors are being recognized in fixed income investing as value-added indicators of potential economic performance. In this edition of Global Macro Shifts, Templeton Global Macro outlines how it integrates ESG factors into its research process. The team has developed a proprietary ESG scoring system called the Templeton Global Macro ESG Index (TGM-ESGI), to assess current and projected ESG conditions in various countries, and to facilitate macroeconomic country comparisons around the world.
ESG Factors in Fixed Income Investing
Dr. Michael Hasenstab discusses how ESG factors have always been a critical prong of Templeton Global Macro's research process, while Vivian Guo outlines why the team's ESG analysis differs from the rest.
TGM-ESGI Case Studies: A Tale of Two Countries
Dr. Michael Hasenstab highlights why Argentina stands out among the countries ranked by the TGM-ESGI, while Vivian Guo discusses the dire situation in Venezuela.
Summary Version
Other Issues
Global Macro Shifts: ESG Considerations within Our Outlook
Dr. Michael Hasenstab offers insights into how his team's rigorous approach to ESG is embedded within his current global economic outlook.
Contributors
FOOTNOTES
- Source: World Economic Outlook Database, April 2018. There is not assurance that any estimate, forecast or projection will be realized. Important data provider notices and terms available at franklintempletondatasources.com
- Source: Bloomberg. Important data provider notices and terms available at franklintempletondatasources.com. Most recent data available.
- Source: US Federal Reserve. Most recent data available.
- Source: Thomson Reuters for AAA taxable municipal bond yields; Bloomberg for government bond yields. Important data provider notices and terms available at franklintempletondatasources.com
What Are the Risks?
All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds adjust to a rise in interest rates, the share price may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging market countries involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Such investments could experience significant price volatility in any given year. High yields reflect the higher credit risk associated with these lower-rated securities and, in some cases, the lower market prices for these instruments. Interest rate movements may affect the share price and yield. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Treasuries, if held to maturity, offer a fixed rate of return and fixed principal value; their interest payments and principal are guaranteed.
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