Investing

XTB Emerald Fixed Income Managed Portfolio

Australia’s first fixed income ESG managed portfolio

About the XTB Emerald Fixed Income Managed Portfolio

The XTB Emerald Fixed Income Portfolio is a managed portfolio of individual bond units (XTBs) from some of Australia’s top companies which have been classified as ‘light green’ investments. The companies have been chosen by The Emerald Club, a responsible investment promoter whose purpose is to make responsible investing more accessible and attractive to investors.

The screening process explained:

STEP PROCESS
Step 1: Screen Negatively screen full list of available investment-grade XTBs and other listed senior investment grade bonds to remove companies whose primary activities negatively impact people or the environment such as gambling, tobacco, casinos & fossil fuels.
Step 2: Rank Rank companies by Bloomberg ESG scores taking into consideration Sustainalytics Rank and Roboeco SAM Sustainability Rank.
Step 3: Monitor Monitor changes to – Percentage Women on Boards, CEO Tenure as of FY End, Percentage Women Employees, Energy Intensity Per Sales, UN Global Compact Signatory, GHG Intensity Per Sales, Water Intensity Per Sales, Climate Change Policy, Renewable Energy Use and ESG Linked Bonus.
Step 4: Engage Engagement with the ESG focused advice community to co-develop and validate the portfolio and process.
Step 5: Construct XTB portfolio construction, rules based approach to maximise yield, consider duration and manage sector exposures.

Portfolio Overview: A ‘Light Green’ Investment

The Portfolio is made up of companies who are able to provide viable returns to investors while mitigating the environmental and social (ESG) impacts of their business activity, operating in a manner respectful of society and managing within emerging ecological constraints.

Investors are increasingly concerned about where their money is being invested. This is driving increased demand for ESG investment solutions that assist investors in aligning their investments with their ethical beliefs.

ESG has become shorthand for investment methodologies that embrace sustainability factors and is a means for helping to identify companies with superior business models. ESG factors offer portfolio managers added insight into the quality of a company’s management, culture, risk profile and other characteristics.

Responsible investment does not necessarily require ruling out investment in any sector or company. It simply involves including ESG information as part of investment decision-making, to ensure that all relevant factors are accounted for when assessing risk, return and investor alignment.

The Emerald Club runs a screen, by conducting an analysis of ESG factors based on a company’s annual disclosure of various metrics in its corporate social responsibility (CSR) report. Examples of this include:

  • Total greenhouse gas (GHG) emissions
  • Water intensity per sales and
  • Renewable energy use.

Investment Objective

The Portfolio aims to provide:

  • A portfolio of ASX-traded fixed income securities (XTBs) considered to have sound environmental, social and governance (ESG) policies and/or contribute in some way positively towards the transition to a low carbon economy
  • Investment-grade fixed income securities traded on ASX
  • Focus on yield to maturity, liquidity and risk weightings
  • A regular and predictable income stream
  • A capital preservation focus and low levels of price volatility
  • An absolute return that is 1% higher than cash
  • Liquidity, to ensure investment flexibility
  • An investment risk profile less than equities and hybrids, and a higher return than ‘cash-like’ investments.

The portfolio brings together the access and transparency of XTBs with the investment expertise of Ian Martin (Chief Investment Officer). Advisers can now access a managed model portfolio that consists of individual fixed income securities over ASX listed companies.

 

Portfolio Details

Portfolio XTB Emerald Fixed Income Managed Portfolio
Inception Date April 2018
Platform HUB24
Portfolio Manager Australian Corporate Bond Company Limited (“ACBC”)
Minimum model investment No minimum
Benchmark RBA Cash Rate + 1%
Investment Universe
  • Total universe of XTBs (Exchange Trade Bond units) available on ASX
  • Investment Grade only
  • Individual XTBs which meet The Emerald Club Limited ESG/SRI screening process.
Typical Number of Stocks 8-15
Asset Allocation Ranges %
  • Australian Fixed Income: 85% – 100%
  • Cash: 0% – 15%
Investment Management Fee 0.275% p.a. (inc GST)
Performance Fee Nil
Minimum Suggested Time frame 2 years

About the Portfolio Manager: Ian Martin – Chief Investment Officer

Ian picture-min

Ian has over 30 years’ experience in fixed income markets globally. Prior to the formation of ACBC, Ian held the position of Head of Rates Australia and New Zealand for Deutsche Bank Australia. He was a member of the Australian Financial Markets Association (AFMA) Market Governance Committee, a board member of Yieldbroker and a member of Deutsche Bank’s Global Rates Executive Committee. Prior to relocating to Australia, Ian was Head of Trading Fixed Income in London for General Re Financial Products Limited.

Ian advised major banks, insurance companies and superannuation funds on the construction and implementation of their fixed income portfolios to meet their Asset and Liability needs.

Portfolio Management Experience

Ian advised major banks, insurance companies and superannuation funds on the construction and implementation of their fixed income portfolios to meet their Asset and Liability needs.

About The Emerald Club

Emerald Club Logo

The Emerald Club came about from a desire to increase the adoption of responsible investing by Australians. They believe financial advisers needed to have better access to information and benefits that they could pass on to their clients, as well as more adaptable tools that catered for the values and needs of Australian investors. This is delivered via a range of investment product and platform solutions.

The Emerald Club provides the screening of individual XTBs selected for this Managed Portfolio. The number of companies that are eligible to be included is reduced through careful analysis – the company must have a focus on how their products and services reduce the impact of carbon emissions, relative to alternatives.

What are Managed Portfolios?

Managed Portfolios offer investors easy access to expert knowledge in a transparent, practical, and cost-effective manner, while also allowing full ownership of the underlying instruments.

Potential benefits to your clients

  • Access to professional investment management
  • Transparency
  • Individual accounts
  • Tax position unaffected by other investors.

Potential benefits to your business

  • Business efficiency
  • Compliance control
  • Less administration.

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Contact Us

For further details please contact us:

T: 1800 995 993
E: SMAs@xtbs.com.au

Useful Tools

Cash Flow Tool
Our cash flow tool allows you to chart the coupon payments for a selection of up to 10 XTBs. Build a cash flow

Yield Calculator
Our yield calculator provides a yield to maturity for any bond price entered, or a price when a yield is entered. Calculate a yield

Key Bond Terms
A list of key bond market terms with explanations is available. View here

 

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