Latest / Bloomberg Intelligence / TIAA's Liberatore on Growing Interest in 'Green' Bonds (Audio)

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TIAA's Liberatore on Growing Interest in 'Green' Bonds (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Gloomberg eleventh, Brio to Washington,
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  Speaker 1: pim Fox. Time to take a look PM at green bonds.
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  Speaker 1: What do you think green bonds means socially responsible debtors?
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  Speaker 1: I guess so. All right, we're gonna be talking to
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  Speaker 1: Steve Liberta tour. He is managing director and fixed income
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  Speaker 1: portfolio manager at t I A A Creft Investment Management.
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  Speaker 1: That's coming up right now. Let's put to Charlie Pellett
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  Speaker 1: has a credibility Well, look, they went into this year uh,
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  Speaker 1: Business flash. You're listening to taking stock with Kathleen Hayes
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  Speaker 1: and Pim Fox on Bloomberg Radio. Green bonds a green investing.
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  Speaker 1: More broadly, is it getting much more popular? Is it's
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  Speaker 1: something that is still a good idea without a lot
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  Speaker 1: of investor interests. We're gonna ask this question now from
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  Speaker 1: Steve Libertor. He is managing director and fixed income portfolio
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  Speaker 1: manager at t I A, a global asset management. He's
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  Speaker 1: based in Charlotte, but in our New York studio today. Steve, welcome,
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  Speaker 1: Thanks for having me so green bonds, What do you
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  Speaker 1: have to do to be a green bond? It's really
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  Speaker 1: a new concept or when it's really evolved over the past,
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  Speaker 1: you know, ten years or so to one where it's
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  Speaker 1: a concept where you're issuing a security that has an
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  Speaker 1: environmental outcome associated with a positive environmental outcome, and it
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  Speaker 1: continues to evolve even today. So have the example of
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  Speaker 1: a popular green bond right now. Sure, UM. Really the
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  Speaker 1: first green bond that was ever issued really wasn't even
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  Speaker 1: called a green bond, was called a climate awareness bond
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  Speaker 1: by the European Investment Bank UM. And we've really, we've
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  Speaker 1: really evolved since then to include green bonds from corporate
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  Speaker 1: issuers like Apple, Regency Centers, Bank of America, UM, Georgia Power,
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  Speaker 1: Southern Power Company, to a B S issuers UM Solar
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  Speaker 1: City has transactions UM in that space as well, so
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  Speaker 1: you really see municipal issuers as well have really started
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  Speaker 1: issuing more securities in this space. I was looking at
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  Speaker 1: the fund and the symbol there is t s b
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  Speaker 1: I X yere. To date, you've got a gain of
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  Speaker 1: three and a quarter percent. Congratulations, thank you. But I
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  Speaker 1: was looking at the holdings of the fund bond fund
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  Speaker 1: and I noticed you've got a lot of treasury, you
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  Speaker 1: have a lot of bonds from the Federal Home Loan Bank.
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  Speaker 1: You've also got into America Development Bank plus the National
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  Speaker 1: Credit Union. Are these investments really better than other bonds
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  Speaker 1: because intrinsically there's something about these entities that are is better.
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  Speaker 1: Or is it really that this is just getting more popular,
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  Speaker 1: so you've got to have an offering that satisfies the
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  Speaker 1: psychological predisposition we want to do good with our money,
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  Speaker 1: so we're going to buy something like this. So as
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  Speaker 1: it was all the value increases well. Our strategy in
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  Speaker 1: the way that we manage our fund is really as
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  Speaker 1: a core actively managed strategy benchmark to the Barquays aggregate.
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  Speaker 1: We just happened to employ um social criteria to our funds.
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  Speaker 1: So what we're trying to do is really deliver a
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  Speaker 1: double bottom line of excess financial return, but also delivering
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  Speaker 1: a return for the environment and social issues as well,
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  Speaker 1: more of a positive impact type of strategy. So the
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  Speaker 1: securities that you mentioned, UM, those are all ones that
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  Speaker 1: fit into the concept of investing in leaders within their
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  Speaker 1: respective spaces. And in core fixed income there's a real
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  Speaker 1: advantage we think in using environmental, social and governance criteria
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  Speaker 1: in managing a core fixed income fund because at the
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  Speaker 1: end of the day, you will get paid for UM
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  Speaker 1: not picking winners, but by avoiding the losers. So when
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  Speaker 1: you look at utilizing that kind of criteria puts you
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  Speaker 1: a competitive advantage. I think and fixed income over the
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  Speaker 1: long run broadly and fixed income in bonds right now?
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  Speaker 1: Where are you placing your bet in terms of maturity
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  Speaker 1: right A two your note probably not versus a thirty
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  Speaker 1: year bond. I don't know about that one either. And
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  Speaker 1: also in terms of like safe safe US government bonds
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  Speaker 1: versus credit you know, other large corporations or you know
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  Speaker 1: even unis. I guess yeah. We're of the view at
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  Speaker 1: the moment that we are in a lower for longer cycle. UM.
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  Speaker 1: I have been a little more I've been a little
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  Speaker 1: less sanguine on the state of the economy. I think
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  Speaker 1: that we wanted to be longer duration flat around the
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  Speaker 1: yield curve UM as we think that in this lower
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  Speaker 1: for longer period of time, low growth, low inflation, that's
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  Speaker 1: really the second best environment to be in spread products.
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  Speaker 1: So we're generally gonna be overweight and spread product. And
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  Speaker 1: that's also works to our strengths as a credit shop.
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  Speaker 1: Where we have fifty analysts at average about eleven years
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  Speaker 1: of experience, we have twelve traders at also oddly average
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  Speaker 1: about eleven years of experience UM. So it allows us
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  Speaker 1: to utilize our skill and expertise and evaluating securities and
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  Speaker 1: really digging down and getting the real valuation out of
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  Speaker 1: them relative to looking to say, a pure treasury in
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  Speaker 1: this environment, Well, you do have a lot of pure treasuries, right,
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  Speaker 1: I mean, it's the largest holding in the fund by
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  Speaker 1: about two percent. Uh. And I noticed that this goes
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  Speaker 1: out to what what do you make of the current
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  Speaker 1: yield environment in terms of taking on that kind of debt,
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  Speaker 1: that kind of credit for such a long period of time. Yeah,
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  Speaker 1: I think at this point in time where we are
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  Speaker 1: is I'm anticipating the FED. And I've thought this at
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  Speaker 1: the beginning of the year as well, when the FED
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  Speaker 1: was originally talking about raising four times, I thought then
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  Speaker 1: and still think now that maybe it would be two
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  Speaker 1: times at the most with downside to only once. And
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  Speaker 1: and with that type of environment, you look globally and
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  Speaker 1: the you're being capped. Domestic yields are being capped just
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  Speaker 1: purely by the relative valuation versus other foreign um treasure
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  Speaker 1: foreign government securities really makes treasuries look more relatively attractive.
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  Speaker 1: So for us, you know, looking at the way that
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  Speaker 1: the market is evolving in this lower go lower inflation
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  Speaker 1: type environment, taking some credit risk and looking further out
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  Speaker 1: the curve makes sense. And that's especially the case If
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  Speaker 1: the FED does insist on raising rates in here, that
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  Speaker 1: really should damp and off and choke off future inflation
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  Speaker 1: concerns when we already have very low inflation expectations. Quick
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  Speaker 1: final question, Just give me an example of one green
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  Speaker 1: bond issue that people could look at to study what
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  Speaker 1: it's done, who issued it, and why it informs him
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  Speaker 1: about the space. Sure, A great example would be um
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  Speaker 1: Georgia Power Company. Georgia Power is a subsidiary of Southern Company,
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  Speaker 1: and they recently issued a green bond, the second US
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  Speaker 1: utility green bond, and they actually was very unique in
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  Speaker 1: that they partnered with the U S Defense Department to
• 10:32
  Speaker 1: take on unused space on at five defense bases in Georgia,
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  Speaker 1: put up solar panels and solar power to generate solar
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  Speaker 1: power there to generate enough for about forty thou homes,
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  Speaker 1: which is going to take out you know, roughly forty
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  Speaker 1: tho cars. Thank you very much for spending time with us,
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  Speaker 1: as Steve LiBeratur is Managing Director, Fixing Income Portfolio Manager
• 10:53
  Speaker 1: t I A a global asset management This this Bloomberg
• 10:57
  Speaker 1: Radio homebuilder's doing better today, banks doing better as well.
• 11:04
  Speaker 1: A lot of this is riding on a more positive
• 11:06
  Speaker 1: view of the US economy after a big jump in
• 11:09
  Speaker 1: new home sales. We're gonna find out what this means
• 11:11
  Speaker 1: for stocks down the road on Broomberg Radio.