Templeton Global Bond Fund

The environmental and social characteristics of the product include the binding considerations of:

• Unsustainable practices, extreme weather risk and resource insecurity
• Social cohesion and stability, infrastructure, health security, human capital, labour and demographics

The product is also bound to consider governance characteristics such as: Effectiveness, policy mix, corruption, institutional strength, and business climate.

The Fund pursues an actively managed investment strategy and invests mainly in, debt securities of any quality issued by governments and government-related entities located in any developed or emerging markets. The Fund can invest to a lesser extent in debt securities of any quality issued by corporations located in any country, debt securities of supranational entities, such as the European Investment Bank, mainland China through the Bond Connect or directly (less than 30% of assets).

The Environmental, Social and Governance (ESG) methodology is applied to 100% of the sovereign debt holdings in the Fund’s portfolio and is binding for the portfolio construction.  As an initial step in its methodology, the Investment Manager evaluates countries that issue sovereign debt that may be potential investments for the Fund (the “Fund’s Investment Universe”). Each country in the Fund’s Investment Universe is scored on a scale of 0–100 (100 being the highest) in various ESG subcategories that the Investment Manager has determined to have significant impact on macroeconomic conditions.

The Investment Manager monitors countries that (i) are below the minimum ESG threshold (the lowest 20% of ESG rated countries) and (ii) present meaningful projected deteriorating scores, with a view to evaluate the potential divestment of sovereign bonds issued by countries that demonstrate no improvement over time.  

Within the ESG subcategories, the methodology leverages baseline rankings from a set of recognized global indexes providers.  The Investment Manager’s team will then use internal proprietary research as a forward-looking overlay on those baseline current scores, to assess whether the Investment Manager expects countries to improve or deteriorate in each of the subcategories.

Projected scores in anticipation of how conditions will change in the medium term are emphasized as part of the research process. Preference is given to countries with higher ESG ratings or projected neutral to improving ESG ratings. The weighted average base ESG score of the issuers in the Fund’s portfolio is higher than the average base ESG score of its Investment Universe.

The countries in the Fund’s Investment Universe, the ESG subcategories, weightings for environment, social and governance, and the global reference indices used for scoring are reviewed at least bi-annually and may change over time.

The Fund employs a proprietary ESG rating methodology. The methodology leverages baseline rankings from a set of recognised global index providers, examples include the United Nations Institution for Environment and Human Security World Risk Report, the Global Health Security Index, and the World Bank Governance Index – Control of Corruption.

No index has been designated as a reference benchmark for sustainability.