The global bond selloff isn't as global as it looks
Developed-market bond yields have risen together, but for very different reasons. The contrast between the UK and US shows why investors need to look beneath the headline move.
9 Nov 2022
2 minutes
09 November 2022, There is only one way to ensure an inclusive and effective transition to net zero. By providing the financial means. We must finance the reduction of carbon by directing capital to high-emitting regions and sectors where real-world change is most needed. This will achieve not just impact, but will also offer investors an appropriate return.
We can’t allow greenwashing or divisive politics to stymie the effort. The worst mistake would be to isolate carbon-heavy places and enterprises by starving them of capital. Stepping back simply exacerbates the problem. Divestment may feel virtuous. But it would be ruinous.
The UN says incremental change is no longer an option. The urgency to find a path to net zero is greater than ever. Heavy emitters cannot decarbonise alone. Investment will be the inducement. Importantly, the condition of finance is for investees to show they will achieve a timely net zero.
At least two different types of finance are essential. Investment in the high-emitting sectors -- power, buildings, mobility, and industry – that are responsible for about 85% of global emissions. And then, also, in infrastructure that builds toward a net zero future and companies finding ways to control, reduce, and capture carbon.
According to the Sustainable Markets Initiative Transition Finance Working Group, the world’s economy requires approximately $4 trillion a year to reach net zero by 2050. Emerging markets need about 25% of this investment. Though they are responsible for only one-seventh of legacy emissions per capita, they are set for 90% of global-emission increases by 2030. Emerging markets have historically contributed least to the problem but are suffering the most.
Only 15% of the necessary finance has been made available. The time to mobilise capital at scale is now. GFANZ, whose members represent about $130 trillion of AUM, estimates private actors could provide 70% of the financing. The market and asset owner scrutiny would direct capital to where it is most needed while earning an appropriate return.
Ninety One’s independently conducted The rise of transition finance research found 60% of asset owners say fighting climate change is a strategic objective. While only 16% say their fund invests in transition-finance assets in emerging markets, there is conviction among this group, with 86% saying expansion of such finance is a priority. The research showed that 56% of asset owners believe that without greater investment in transition-finance assets, the world will not be able to meet climate-change goals.
The time to act is now.
Ninety One’s Capital Market Assumptions framework focuses on the key drivers of long-term performance. We do this to better understand possible future returns, enriching discussions with our clients.
Ninety One's multi-asset growth team provides insights into the macroeconomic environment that informs our investment outlook for the coming quarter. This includes concise summaries of our asset class views.
Darpan Harar, Co-Head Developed Markets Specialist Credit, and Jared Cook, Portfolio Specialist, discuss the big theme moving credit markets this year: the surge in bond issuance by tech giants to fund spending on AI. Investors can find better value for similar underlying risk to this ‘hyperscaler issuance’ in other corners of the credit market. Darpan explains where to look and what to look for.
A week in the Corn Belt, including farm visits and meetings with companies across the US agricultural value chain, highlighted that the backdrop in agriculture is changing. We see selective opportunities for long-term investors.
From generic manufacturing to developing innovative medicines, China’s pharmaceutical industry is moving up the value chain, creating new opportunities for equity investors.
A weaker dollar has long been a tailwind for emerging market returns. The US currency may trade sideways for a spell, while Paris and Beijing hold back the euro and Asian currencies, but its structural downcycle is far from over. Meanwhile, emerging market asset classes still offer plenty of opportunity for selective investors.
Clyde Rossouw, Head of Quality, discusses two high-quality medical device companies operating in different areas of healthcare - Align Technology in orthodontics and Edwards Lifesciences in structural heart diseases – and what makes their businesses so durable.
Europe’s record-breaking summer could add further momentum to the energy transition. There are multiple ways investors can access the opportunity.
Our credit experts review how credit markets fared in the third quarter of the year and share the latest scorecards for the global credit universe.
EM debt remains an asset class in which asset allocators favour an active management approach, but the passive versus active debate continues. Here we outline the key considerations – relating to returns, fees and benchmark construction – behind our view that passive approaches are sub-optimal for EM debt investors.
While many people still associate the Motorola name with the flip phones of the 1990s and early 2000s, this nostalgia is a thing of the past. Over time, the business has transformed itself into a provider of critical communication networks for emergency services globally. Paul Jones explains why this makes the company an ideal candidate for the Quality universe.
Our EM Debt team shares its latest outlook and positioning across the investment universe.
Markets diverged in the third quarter, with equities holding firm while bonds sold off as yields rose. A renewed US-Iran escalation lifted Brent crude sharply, reviving inflation concerns and prompting central banks in the US, Eurozone and Japan to raise rates in September. Equities still made modest gains, led by the US and supported by resilient growth and robust earnings, while gold and copper also rose.
A trip to the US over the summer to speak with allocators highlighted strong interest in EM equities. But it also flagged important questions about investing in this dynamic and recently underexplored part of the stock market.
Central banks have returned to the gold market in force since the Q1 slowdown. With the gold price appearing better supported than many market participants had assumed, the case for a re-rating of gold equities is strengthening.
The Value team explains how it hunts for mispricings in moments of rising uncertainty in markets.
Developed-market bond yields have risen together, but for very different reasons. The contrast between the UK and US shows why investors need to look beneath the headline move.
Our EM Debt team shares its latest outlook and positioning across the investment universe.
EM equity gains in 2026 have been narrow, concentrated in AI-driven information technology. Archie Hart and Varun Laijawalla explain why this memory upcycle looks structurally different to previous ones, with recent earnings from the key players supporting a fundamentals story. They believe the theme is early, rather than exhausted.
Growth momentum is building across the Chinese economy, not solely in technology-linked sectors. We see opportunities for investors to align with the country’s ongoing structural transformation.
Important Information
This communication is provided for general information only should not be construed as advice.
All the information in is believed to be reliable but may be inaccurate or incomplete. The views are those of the contributor at the time of publication and do not necessary reflect those of Ninety One.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
All rights reserved. Issued by Ninety One.