Bonnie Wongtrakool on Maximizing the Benefits of ESG Investing

STAY Sustainable

Alec Crawford welcomes Bonnie Wongtrakool to the Stay podcast, a show about sustainability, technology, artificial intelligence, and the individual. Bonnie is a chartered financial analyst and the global head of ESG Investments and portfolio manager at Western Asset Management Co. and is joining Alec to discuss environmental, social and government (ESG) focused investing during Women's History Month. Bonnie explains how she came to ESG by happenstance, as she was previously working as a mortgage portfolio manager. After expressing her interest in something outside of mortgages, her senior management at Western Asset asked her to look into ESG, as they had been hearing about the need for more sustainable investments from international clients.

Western Asset Management is a global fixed income manager with $400 billion under management. Headquartered in Pasadena, California, they also have eight other offices around the world. Western Asset Management manages all types of fixed income, including multi sector mandates, absolute return, corporate only mandates, emerging market, dedicated bank loans, municipal bonds, mortgage backed securities, and asset backed securities. Their investment horizon is long term and they adopt a fundamental value active management approach. They also prioritize ESG, incorporating it into all their mandates to assess a security's intrinsic value. In 2017, the company recognized the trend of ESG and asked the speaker to lead the initiatives in the area.

Bonnie is the global head of ESG investments and a portfolio manager at WAMCO. Her role involves leading ESG initiatives such as research, engagements, and strategy while working with other groups within the firm such as client services, legal and compliance, and information technology. As a portfolio manager, she also manages broad sector portfolios.

When it comes to ESG investing, the process is integrated into the investment process from a bottom-up perspective. This includes research analysts creating ESG frameworks for each subsector and taking a forward-looking approach instead of relying on historical reported data. Additionally, the speaker and his team also engage with management to assess the governance pillar.

Bonnie acknowledges the difficulty of obtaining ESG information from smaller private companies, such as those issuing bank loans or high yield bonds. Despite this, they are still actively looking for ways to assess these companies and factor ESG into the investment process.

Information flow and sustainability have greatly improved in recent years, particularly through the LSTA's ESG questionnaire and increased investor interest. However, the data is still relatively basic and conversations with issuer management are necessary to get more detailed information. For agency mortgage backed securities, we assess the ESG risks and opportunities and give a generally positive rating. Fannie Mae and Freddie Mac have both started issuing green and social impact bonds in response to investor demand, and we take these into account when selecting investments for our clients. When communicating our ESG strategy to investors, we emphasize the importance of sustainability, the use of proceeds, the collateral, the issuer, and the servicer.