We do not have a large allocation to corporate bonds since we will only invest in those corporate bonds where we see an identifiable and impactful use of proceeds. If there is a clear use of proceeds that can be aligned to one or more of our 18 impact themes, the team focuses on the ability for the borrower to meet its debt obligations. This is done by analyzing the offering statements and corresponding financial information, and then discussions with the banker/issuer to get further insight or clarifications. Emphasis is placed on redemption features and/or covenants, any credit enhancements, and the sources that will be used for the payment of interest and repayment of principal. The process also serves as a verification of the purpose of the project to ensure that the impact criteria are indeed met. We need to have transparency into the use of the bond's proceeds to ensure the funds raised will provide provide environmental and social outcomes that can be measured, monitored, and tracked.
The team will also ensure there is no excessive ESG-related risk in regards to the issuer. We will not invest in corporate bonds issued by companies involved in fossil fuel exploration and production or any activity related to coal, tobacco, chemical manufacturing, weapons, and prison management, among others.