Prasad Gollakota was co-head of the global capital solutions group at UBS in the aftermath of the 2007-08 financial crisis. He was there at the beginning of the Additional Tier 1 securities market. Here he shares his view on the write-down of Credit Suisse’s AT1s by Swiss authorities. Spoiler: angry fund managers feeling hard done by don’t have a leg to stand on. It has been fascinating to watch the uproar around the apparent breach of the so-called creditor hierarchy since the announcement of the write-down of Credit Suisse Group’s AT1 securities – and the talk of class action litigation that followed. It’s not new for investors to cry over spilled milk, but they can’t say they weren’t warned. This topic is close to my heart, as I was involved in the early development of Additional Tier 1 securities and recall the conceptual discussions with regulators and policymakers, bank issuers, industry bodies and investors. I am keen to ensure past mistakes don’t repeat themselves. The notion that holding a bond makes the bondholder a creditor is inaccurate. That is simply the form of the instrument. At its essence, a creditor is one who has rights to enforce against the borrower in the event of non-payment at predetermined dates. This is simply not the case with AT1 securities: there is no predetermined legally enforceable entitlement to receive a coupon or repayment of principal at a fixed point in time. In this way, they are more akin to equity. I note some regulators have come out since Credit Suisse’s AT1s were written down to reinforce the traditional creditor hierarchy, but in those jurisdictions issuers of AT1s typically do not use a permanent write-down in distress structure. I also note that some investors have been exercised by the fact that the Swiss authorities chose to issue an emergency law confirming that the AT1s were to be written down in the context of the UBS takeover. But this does not deny the operation of the terms of AT1s. Their terms and Article 29 of Finma’s Regulation about Own Funds are clear. Having sat at the table on several messy bailouts, standard operating procedure is belts and braces. This is how the emergency law should be viewed in the context of the AT1s. It should not be viewed as an acknowledgment that the terms of the AT1s were ineffective and would not result in a write-down. This was confirmed as much by Finma's announcement on 23 March. As such, I will focus on the terms of the relevant AT1 securities. Not black and white AT1 capital securities feature what’s referred to as “going concern principal loss absorption”. These are essentially contingent features which allow securities to morph from being akin to subordinated debt to being akin to equity, in times of distress, with certain write-down features if specific events are triggered. The “times of distress” are both hard coded and malleable. The latter point is key to the situation that transpired at Credit Suisse. The principal point to highlight is that capital securities, and most acutely AT1 securities, have a “living” function, and while the terms in the prospectus explain how it functions in some instances, to assume the terms are black and white and static is naive. The operation of the security changes depending on the viability of the bank, ie, the health of the bank and the regulator’s stance in times of distress should be incorporated into investors’ expectation of how the security functions. To understand how loss absorption works for any particular deal, there are two clauses to focus on: One, what happens to the principal value of the security in times of distress (the write-down)? Two, what qualifies as distress? Let’s consider each of these in turn in the context of Credit Suisse’s AT1 Securities, using the 9.75% non-call 2027 (ISIN: US225401AX66) as an example. Loss absorption Write-down mechanism
Investment-grade borrowers dived into the bond market on Thursday, a day after the US Federal Reserve hiked interest rates by 25bp. Despite the US central bank's decision to raise its benchmark interest rate, market participants may have taken heart in the Fed's more cautious tone on the prospect of additional rate hikes. The US 10-year Treasury note yield traded at 3.46% today, after trading as high as 3.64% on Wednesday. "A bullish pivot likely doesn’t await investors, but by delivering a 25bp rate hike, the Fed may have decreased the chance of a policy error that could send bond yields markedly higher," said Jason England, portfolio manager at Janus Henderson Investors, in a note. Companies continued to target the long-end of the corporate bond market, as the inverted yield curve and the slide in US Treasury yields made it attractive to term out debt. Four of the seven high-grade issuers on Thursday are issuing 30-year tenors. That was the case with UnitedHealthGroup. The health insurer launched a US$6.5bn four-part senior unsecured note that will replace a chunk of its short-term borrowings, which stood at US$15.4bn as of March 15. UnitedHealthGroup's US$1.25bn five-year, US$1.5bn 10-year, US$2bn 30-year and US$1.75bn 40-year landed at US Treasuries plus 88bp, 118bp, 143bp and 158bp, respectively. Some infrequent issuers made an appearance on Thursday. Medical devices maker Medtronic is issuing five and 10-year senior unsecured notes to repay debt, including a portion of its outstanding ¥297bn (US$2.3bn) term loan. Though seen as a US-based company, Medtronic has been more active in the European bond market, reflecting its global business. Last year, it printed one of the biggest reverse Yankee deals, grabbing €3.5bn (US$3.8bn) from a four-part offering in September. The medical devices maker has more euro denominated bonds outstanding then US dollar denominated bonds, with €20.4bn of senior notes versus US$4.9bn of bonds, according to the company's filings. Issuance this week has been reciprocated by strong investor demand, despite jitters around the health of some US regional banks and the possibility of tighter financial conditions wrought by recent bank failures. "Big picture, as markets adapt to a higher rate regime, we continue to favor high quality fixed income," wrote Ashish Shah, Goldman Sachs' chief investment officer of its public markets arm, on Wednesday. The five other issuers on Thursday were American International Group, Marriott International, Prologis, Nutrien and Public Service Electric and Gas.
Fiber network operator MetroNet returned to the asset-backed market this week following its successful debut securitization last year that tapped into investors eager to fund telecom and internet-related assets. Investor enthusiasm for fiber networks and other digital assets has been justified by growing demand for high-speed internet access for business and online entertainment services. The industry also received a boost in 2021 with the passage of the Bipartisan Infrastructure Deal (Infrastructure Investment and Jobs Act) which allocated US$65bn to promote high-speed internet access to every American household, market participants said. The Indiana-based company is in the market with a US$690.113m fixed-rate offering with a weighted-average life of 4.87 years. There is a US$487.139m A-rated note; a US$67.387m BBB-rated class; and a US$135.587m BB-minus note. Initial price thoughts on the A-rated note was US Treasuries plus 300bp-325bp and the BBB-rated paper US Treasuries plus 450bp-475bp. The BB-minus note was pre-placed, a portfolio manager said. Last October, MetroNet priced its US$1.219bn inaugural fiber network ABS. The two deals are supported by revenues generated from MetroNet's fiber network that serves 323,723 customers in nine US states, Fitch said in a pre-sale report issued on Thursday. Goldman Sachs and KKR Capital Markets are the joint structuring agents and underwriters for the offering, called MetroNet Infrastructure Issuer LLC 2023-1. Year-to-date digital ABS issuance has reached US$2.84bn, which is more than half of last year's total of US$4.39bn, according to IFR data.
Fiber network operator MetroNet returned to the asset-backed market this week following its successful debut securitization last year that tapped into investors eager to fund telecom and internet-related assets. Investor enthusiasm for fiber networks and other digital assets has been justified by growing demand for high-speed internet access for business and online entertainment services. The industry also received a boost in 2021 with the passage of the Bipartisan Infrastructure Deal (Infrastructure Investment and Jobs Act) which allocated US$65bn to promote high-speed internet access to every American household, market participants said. The Indiana-based company is in the market with a US$690.113m fixed-rate offering with a weighted-average life of 4.87 years. There is a US$487.139m A-rated note; a US$67.387m BBB-rated class; and a US$135.587m BB-minus note. Initial price thoughts on the A-rated note was US Treasuries plus 300bp-325bp and the BBB-rated paper US Treasuries plus 450bp-475bp. The BB-minus note was pre-placed, a portfolio manager said. Last October, MetroNet priced its US$1.219bn inaugural fiber network ABS. The two deals are supported by revenues generated from MetroNet's fiber network that serves 323,723 customers in nine US states, Fitch said in a pre-sale report issued on Thursday. Goldman Sachs and KKR Capital Markets are the joint structuring agents and underwriters for the offering, called MetroNet Infrastructure Issuer LLC 2023-1. Year-to-date digital ABS issuance has reached US$2.84bn, which is more than half of last year's total of US$4.39bn, according to IFR data.
With Additional Tier 1 yields still elevated after the wipe-out of Credit Suisse's SFr16bn (US$17.5bn) stack, Deutsche Pfandbriefbank has announced that it will extend its €300m AT1 next month. Aareal Bank is likely to follow suit, but bigger tests are on the horizon. The Swiss regulator's unexpected move to write down Credit Suisse's AT1s while giving equity holders shares in UBS – thereby inverting the typical creditor hierarchy – triggered a dramatic sell-off across the AT1 market on Monday. Statements published by regulators in Europe and the UK later that day, in which they sought to reassure investors that AT1s under their jurisdiction will only be written down after common equity instruments have absorbed losses, helped prices to recover. But the product is still under scrutiny and levels remain elevated. Market participants and analysts said it will probably be some time until AT1 issuance can resume, putting issuers with upcoming call decisions in a challenging position. "I think a lot of banks won't call their AT1s going forward," said John Cronin, financials analyst, UK lead at Goodbody Financials. "While the ECB and BoE interventions are helpful, they are not a panacea. There is mistrust now among investors or maybe heightened awareness around the fact that this may not be a one-off event. To be fair, I think it's very unlikely that we would see a similar situation arise in the UK or other jurisdictions, but the sense we get from investors is that they've raised the fear factor now, which will drive coupons upwards on AT1." Pbb cited market conditions and economic costs as it announced on Wednesday that it will not call its €300m 5.75% AT1 at its first call date on April 28. The bond's coupon will reset to five-year euro mid-swaps plus 538.3bp. At today's rates, that would translate to a coupon of around 8.436%, which bankers said would be substantially lower than the clearing level of an equivalent new issue from pbb. The yield of the Bank of America CoCo index hit an all-time high of 10.02% on Monday and closed at 9.065% on Wednesday. Bankers said pbb's decision was therefore unsurprising, noting that the bank similarly chose to extend a Tier 2 transaction last year. The next potential AT1 call in the calendar is the April 30 call date of Aareal's €300m 7.321% transaction. The German issuer has kept the bond outstanding after skipping its first call date in April 2020 and is expected to do the same this time around. An Aareal spokesperson told IFR that a final decision has not already been made regarding the upcoming call option but said that "from today's perspective, we assume that the AT1 bond will not be called". While the market is still clouded in uncertainty, bankers and investors disagreed on the level of extension risk now present, with some arguing it is being mis-priced. "There is not a single bond that trades above its issue price (usually par), which implies that investors believe that none of the approximately 200 AT1 bonds currently outstanding will be called at their first call date," wrote Alexander Pelteshki, investment manager at Aegon Asset Management. "We believe this is wrong, which offers an enormous alpha-generating opportunity." As ever, decisions will hinge on the issuer's circumstances, market access and the economics at play. Looking ahead to individual call dates on the horizon, bankers predict that issuers will take divergent approaches. The next AT1 from a major European bank up for call is UniCredit's €1.25bn 6.625% transaction. The deal, which has a reset spread of 638.7bp, is callable on June 3. UniCredit has stated plans to issue AT1 this year and is yet to do so. However, if markets remain challenging some bankers speculated that the Italian lender's strong capital position means it could call the AT1 without having to immediately replace it – should it gain regulatory approval. UniCredit reported a common equity Tier 1 ratio of 14.9
Volkswagen has laid the foundations for other corporates to get their funding plans back on track, with a popular €1.75bn green dual-tranche offering on Thursday. The deal was the first in the euro investment-grade market in more than a week and only the second in nearly a fortnight, as a series of banking disasters stopped supply. But the German automaker's €1bn three-year and €750m six-year green notes should help restore confidence. The bonds were more than 3.5 times covered, with combined final books of over €6.3bn. Cheap initial pricing levels helped the blue-chip credit build momentum, while VW (A3/BBB+) also targeted defensive tenors with an ESG label. "Volkswagen is really the perfect name to reopen primary - strong credit, very well covered name, green label and generous IPTs to attract investor attention. Demand was very strong, highlighting how much cash still remains on the sidelines," said a portfolio manager. The March 2026s and March 2029s landed at mid-swaps plus 85bp and 135bp, respectively, on final books of over €3.35bn and €2.95bn, via Commerzbank, Deutsche Bank, NatWest Markets, RBC Capital Markets and Societe Generale. Only the longer tranche saw some attrition from peak orders of €3.1bn. Initial price thoughts were in the areas of 115bp and 160bp, which were seen as 40bp wide of fair value, according to bankers on and away from the trade. That means the issuer paid final concessions of 10bp–15bp, in line with what most market participants expected for a reopening trade. Even those that thought the final concessions were a bit too big, still said the outcome was good. "A little cheap but you can't blame them. Good deal, lots of demand," said a banker away from the deal. While some bankers questioned the quality of the books given the juicy spread levels for a low-beta credit, a lead said real money accounts were the anchors of the deal. "Yes, there may be some tourists in the middle portion of the book, but among the top 10 lines, not one of them is a fast money account," he said. Though the deal had to pay up in terms of spreads, the respective overall yields of 3.963% and 4.277% were broadly in line with its previous November issue. The November 2025s, February 2028s and May 2030s landed at yields of 4.141%, 4.297% and 4.467%. Controversial green Volkswagen's green bonds came as non-profit research group International Council on Clean Transportation revealed on March 22 that millions of diesel cars producing "extreme" levels of toxic air pollution are still on the roads in Europe and the UK, seven years after the Dieselgate scandal first broke. The highly polluting vehicles include Volkswagen's models. "VW's ESG story does continue to divide opinion. Those taking a forward looking approach will hone in on the shift to battery powered vehicles but, on the other hand, many cannot forget the Dieselgate scandal, which continues to be fought in the courts," said the portfolio manager. The company is also under fire over its plant in China's Xinjiang region, which rights groups have documented human rights abuses, including mass forced labour in detention camps. China has denied any abuses in Xinjiang, according to a Reuters report last month, while Volkswagen said it has never found evidence of forced labour among its Xinjiang workforce and its presence is positive for locals. Despite such ESG concerns, the new bonds were smooth-sailing, according to the lead. "It was a topic for some investors but the deal still went well," he said. Volkswagen told IFR that the company is in "continuous and intense exchange with our investors and have a very good understanding" of the ESG concerns. Volkswagen International Finance is the issuer of the new bonds and Volkswagen is the guarantor.
With Additional Tier 1 yields still elevated after the wipe-out of Credit Suisse's SFr16bn (US$17.5bn) stack, Deutsche Pfandbriefbank has announced that it will extend its €300m AT1 next month. Aareal Bank is likely to follow suit, but bigger tests are on the horizon. The Swiss regulator's unexpected move to write down Credit Suisse's AT1s while giving equity holders shares in UBS – thereby inverting the typical creditor hierarchy – triggered a dramatic sell-off across the AT1 market on Monday. Statements published by regulators in Europe and the UK later that day, in which they sought to reassure investors that AT1s under their jurisdiction will only be written down after common equity instruments have absorbed losses, helped prices to recover. But the product is still under scrutiny and levels remain elevated. Market participants and analysts said it will probably be some time until AT1 issuance can resume, putting issuers with upcoming call decisions in a challenging position. "I think a lot of banks won't call their AT1s going forward," said John Cronin, financials analyst, UK lead at Goodbody Financials. "While the ECB and BoE interventions are helpful, they are not a panacea. There is mistrust now among investors or maybe heightened awareness around the fact that this may not be a one-off event. To be fair, I think it's very unlikely that we would see a similar situation arise in the UK or other jurisdictions, but the sense we get from investors is that they've raised the fear factor now, which will drive coupons upwards on AT1." Pbb cited market conditions and economic costs as it announced on Wednesday that it will not call its €300m 5.75% AT1 at its first call date on April 28. The bond's coupon will reset to five-year euro mid-swaps plus 538.3bp. At today's rates, that would translate to a coupon of around 8.436%, which bankers said would be substantially lower than the clearing level of an equivalent new issue from pbb. The yield of the Bank of America CoCo index hit an all-time high of 10.02% on Monday and closed at 9.065% on Wednesday. Bankers said pbb's decision was therefore unsurprising, noting that the bank similarly chose to extend a Tier 2 transaction last year. The next potential AT1 call in the calendar is the April 30 call date of Aareal's €300m 7.321% transaction. The German issuer has kept the bond outstanding after skipping its first call date in April 2020 and is expected to do the same this time around. An Aareal spokesperson told IFR that a final decision has not already been made regarding the upcoming call option but said that "from today's perspective, we assume that the AT1 bond will not be called". While the market is still clouded in uncertainty, bankers and investors disagreed on the level of extension risk now present, with some arguing it is being mis-priced. "There is not a single bond that trades above its issue price (usually par), which implies that investors believe that none of the approximately 200 AT1 bonds currently outstanding will be called at their first call date," wrote Alexander Pelteshki, investment manager at Aegon Asset Management. "We believe this is wrong, which offers an enormous alpha-generating opportunity." As ever, decisions will hinge on the issuer's circumstances, market access and the economics at play. Looking ahead to individual call dates on the horizon, bankers predict that issuers will take divergent approaches. The next AT1 from a major European bank up for call is UniCredit's €1.25bn 6.625% transaction. The deal, which has a reset spread of 638.7bp, is callable on June 3. UniCredit has stated plans to issue AT1 this year and is yet to do so. However, if markets remain challenging some bankers speculated that the Italian lender's strong capital position means it could call the AT1 without having to immediately replace it – should it gain regulatory approval. UniCredit reported a common equity Tier 1 ratio of 14.9
Italian gaming firm Lottomatica, sponsor-owned Swiss skincare firm Galderma and Romanian power producer Hidroelectrica are the most likely candidates for a heavily thinned-down post-Easter IPO pipeline, a London-based investor has told IFR. Earlier in the year, there had been positive noises from syndicate desks that several reasonably large and well-flagged floats would likely launch in the first half, with the bulk coming after Easter. That has now been reduced to an expectation of two to three IPOs, with Lottomatica and Hidroelectrica the most likely candidates, with Nordic private equity firm EQT potentially pushing ahead with a listing for the skincare business it acquired in 2019 for an enterprise value of SFr10.2bn (US$11bn). “There was also consideration for a small regional bank listing in Germany with recent deep dives going on for that, but that is now off given the meltdown in banking stocks,” said the investor. “EQT will see if there is a window to do Galderma after Easter, but it’s likely to be a €3bn deal, which is really big and I’m not sure if there is the demand for that right now. “Hidroelectrica will get done and has to get done because of the dynamics with government ownership but it’s a local deal and not really of interest to us. Lottomatica, on the other hand, is a crown jewel asset; it’s likely a €1bn deal, which is not small but doable; it’s in a straightforward sector and has decent scale with good comps.” The investor said that, ideally, IPO candidates will be the market leader in their sector or in the top few, with growth but not reliant on growth for revenues. “It is asset-specific in terms of valuation being a sticking point, it’s really more about whether there is fundamental long-term interest in deploying cash, what the composition is of that interest and whether the deal size matches up with demand. If it can’t, then maybe it shouldn’t come to market. Finding the lowest common denominator on value is not a good approach and we saw that with Ionos.” Lottomatica is expected to be around €1bn in size and garnered shareholder approval for a listing alongside full-year 2022 numbers in late February. For full year 2022, Lottomatica reported revenue of €1.4bn with €460m Ebitda and an operating cashflow of €391m. Net debt/pro forma run-rate Ebitda is 3.2 times. The float is expected to involve new cash and a sale of shares by owner Apollo Global Management, which acquired Gamenet Group for €950m in May 2021 and renamed the business Lottomatica, with casino operator Betflag bought for €310m in November 2022. Barclays, BNP Paribas, Credit Suisse, Goldman Sachs, JP Morgan and UniCredit are expected to be involved. A board member of Hidroelectrica part owner Fondul Proprietatea told attendees at an energy seminar in late February that a May or June listing was anticipated. The Romanian government has committed to listing Hidroelectrica by June. Local reports have suggested a banking syndicate of Citigroup, Morgan Stanley, Erste, Jefferies, Bank of America, Barclays, UBS, UniCredit and Wood & Co are mandated on the IPO, which has been mooted since 2008. Listed Nordic private equity house EQT confirmed in February that it had undergone preparation work for a listing of Galderma and was monitoring market conditions. Goldman Sachs, Morgan Stanley and Credit Suisse are reportedly joint global coordinators and Lazard is advising. A banker involved in the Galderma listing said that the numbers were in the right ballpark for Galderma and that it was a likely candidate for a post-Easter launch alongside Lottomatica and Hidroelectica. He disagreed that sizing in the region of €3bn would be an issue for the market if the name is right, pointing to the success of Porsche’s €9.08bn October 2022 float. The banker also said that some IPO candidates are being pitched with
Volkswagen has laid the foundations for other corporates to get their funding plans back on track, with a popular €1.75bn green dual-tranche offering on Thursday. The deal was the first in the euro investment-grade market in more than a week and only the second in nearly a fortnight, as a series of banking disasters stopped supply. But the German automaker's €1bn three-year and €750m six-year green notes should help restore confidence. The bonds were more than 3.5 times covered, with combined final books of over €6.3bn. Cheap initial pricing levels helped the blue-chip credit build momentum, while VW (A3/BBB+) also targeted defensive tenors with an ESG label. "Volkswagen is really the perfect name to reopen primary - strong credit, very well covered name, green label and generous IPTs to attract investor attention. Demand was very strong, highlighting how much cash still remains on the sidelines," said a portfolio manager. The March 2026s and March 2029s landed at mid-swaps plus 85bp and 135bp, respectively, on final books of over €3.35bn and €2.95bn, via Commerzbank, Deutsche Bank, NatWest Markets, RBC Capital Markets and Societe Generale. Only the longer tranche saw some attrition from peak orders of €3.1bn. Initial price thoughts were in the areas of 115bp and 160bp, which were seen as 40bp wide of fair value, according to bankers on and away from the trade. That means the issuer paid final concessions of 10bp–15bp, in line with what most market participants expected for a reopening trade. Even those that thought the final concessions were a bit too big, still said the outcome was good. "A little cheap but you can't blame them. Good deal, lots of demand," said a banker away from the deal. While some bankers questioned the quality of the books given the juicy spread levels for a low-beta credit, a lead said real money accounts were the anchors of the deal. "Yes, there may be some tourists in the middle portion of the book, but among the top 10 lines, not one of them is a fast money account," he said. Though the deal had to pay up in terms of spreads, the respective overall yields of 3.963% and 4.277% were broadly in line with its previous November issue. The November 2025s, February 2028s and May 2030s landed at yields of 4.141%, 4.297% and 4.467%. Controversial green Volkswagen's green bonds came as non-profit research group International Council on Clean Transportation revealed on March 22 that millions of diesel cars producing "extreme" levels of toxic air pollution are still on the roads in Europe and the UK, seven years after the Dieselgate scandal first broke. The highly polluting vehicles include Volkswagen's models. "VW's ESG story does continue to divide opinion. Those taking a forward looking approach will hone in on the shift to battery powered vehicles but, on the other hand, many cannot forget the Dieselgate scandal, which continues to be fought in the courts," said the portfolio manager. The company is also under fire over its plant in China's Xinjiang region, which rights groups have documented human rights abuses, including mass forced labour in detention camps. China has denied any abuses in Xinjiang, according to a Reuters report last month, while Volkswagen said it has never found evidence of forced labour among its Xinjiang workforce and its presence is positive for locals. Despite such ESG concerns, the new bonds were smooth-sailing, according to the lead. "It was a topic for some investors but the deal still went well," he said. Volkswagen told IFR that the company is in "continuous and intense exchange with our investors and have a very good understanding" of the ESG concerns. Volkswagen International Finance is the issuer of the new bonds and Volkswagen is the guarantor.
The US's largest asset managers including Franklin Templeton, California State Teachers’ Retirement System and New York State Common Retirement Fund, which combined manage more than $2 trillion in assets are leading the charge urging US policymakers to protect their ability to invest responsibly as Republican-led states seek to curtail sustainable investing. More than 250 companies and investors signed a statement released Thursday saying that ignoring ESG considerations like climate change would betray their duty to their beneficiaries to manage risk. “Managing risk and opportunities is our job as investors,” Anne Simpson, Franklin Templeton global head of sustainability said in an accompanying press release. The move follows US President Biden’s veto earlier this week of a Republican legislation to ban pension fund managers from considering ESG principles in their investment decisions, marking the first veto of his presidency. Calling ESG investing “woke capitalism”, Republican politicians argued that sustainable investment prioritizes liberal values over financial returns. Last week, Florida Governor Ron DeSantis formed an alliance with 18 other states to push back against what they described as “Biden’s ESG agenda." Signatories of Thursday’s statement said ESG investing was not about politics, but that climate change and extreme weather have significant financial impacts on supply chains and the capital markets, and that neglecting the economic benefits of clean energy would lead to missed opportunities. “Our consideration of material environmental, social, and governance factors is not political or ideological,” the statement said. “Incorporating these issues into financial decision-making represents good corporate governance, prudent risk management, and smart investment practice.” The statement was coordinated by non-profit Ceres and We Mean Business Coalition. “If we don’t pay attention to the accelerating frequency of severe weather disasters and the hundreds of billions of dollars they cause, nor to scientists’ forecasts for severe risk of more of that, and to entrepreneurial companies’ innovations for solving the resulting market needs, then we are not fulfilling our fiduciary duty," Simpson said. Kirsty Jenkinson, investment director of sustainable investment and stewardship strategies at CalSTRS, said investment professionals should assess all risks and opportunities facing their portfolios, such as interest-rate changes, supply-chain disruptions and damages from extreme weather events. “To ask us to ignore pervasive risks such as the market disruptions caused by climate change and to ignore investment opportunities in the transition to a low-carbon economy is asking us to stop doing our jobs,” Jenkinson said in a statement.
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