Bonds are a potentially powerful engagement lever, yet most investor stewardship still overlooks them.
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The new ShareAction new report sets out five principles for meaningful bond stewardship: setting red lines, implementing a debt recycling framework, escalating systematically, scrutinising green and sustainability-linked bonds, and engaging the wider bond ecosystem - with a practical case study on fossil fuels.
Corporate bonds are one of the most powerful — and most overlooked — levers in responsible investment. Unlike shares, which simply change hands between investors, bonds provide companies with new capital directly and offer an engagement lever for unlisted companies. That makes them a direct route through which investors' capital can enable, or help prevent, corporate harm.
Yet most stewardship still focuses on listed equity. Where bond engagement does happen, it tends to stop at disclosure requests rather than pushing for real change in company strategy, with little evidence of escalation.
Our new report makes the case for asset owners, especially long-term investors like pension funds and endowments, to put bonds at the heart of their stewardship strategies. It sets out a practical five-point framework for doing so:
- Set clear exclusions and red lines from the outset
- Recycle capital and engagement resource towards companies taking meaningful steps towards sustainability
- Escalate systematically, with genuine willingness to divest or refuse to refinance
- Scrutinise green and sustainability-linked bonds for meaningful targets
- Engage the wider bond ecosystem: banks, index providers and fellow investors
We also set out a caveat: where asset owners face genuine barriers to action, they should be honest about this and advocate for policy change to remove these barriers or meaningfully regulate the industry in question.
The report applies these principles directly to fossil fuel investments, with case studies, sample questions for asset managers, and indicative KPIs to help put the framework into practice.
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