Our Investment Grade Corporate Credit team in Vancouver believes that, due to the impact of ESG factors on investment risks and opportunities, the implications of ESG factors should be evaluated in the same manner as other credit factors within the applicable context of fixed income investing and the idiosyncrasies of each issuer. The team uses a robust approach to integrate ESG factors into the investment process, focusing on material ESG risks that can affect the credit quality of issuers. Thorough research, team discussions, internal credit ratings informed by ESG factors and engagement all play key roles in the investment decision.
Accordingly, when reviewing a multinational convenience store and gas station operator, the team identified several material ESG factors. For instance, at the industry level, the company's operating environment is susceptible to a number of ESG-related tail risks due to shifting consumer trends and evolving regulations. This includes a weakening tobacco industry, the expanding market share of fuel-efficient vehicles, and more stringent environmental regulations on carbon emissions.