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

Steve Liberta tour. He is managing director and fixed income portfolio manager at t I A A Creft Investment Management. That's coming up right now. Let's put to Charlie Pellett in the Bloomberg news room, Fred Bloomberg Business flat and I thank you him, Thank you, Kathleen, the dal the SMP NEZ thank all. Surging trading very close to the

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More broadly, is it getting much more popular? Is it's something that is still a good idea without a lot of investor interests. We're gonna ask this question now from Steve Libertor. He is managing director and fixed income portfolio manager at t I A, a global asset management. He's based in Charlotte, but in our New York studio today. Steve, welcome, Thanks for having me so green bonds, What do you

have to do to be a green bond? It's really a new concept or when it's really evolved over the past, you know, ten years or so to one where it's a concept where you're issuing a security that has an environmental outcome associated with a positive environmental outcome, and it continues to evolve even today. So have the example of a popular green bond right now. Sure, UM. Really the first green bond that was ever issued really wasn't even called a green bond, was called a climate awareness bond

by the European Investment Bank UM. And we've really, we've really evolved since then to include green bonds from corporate issuers like Apple, Regency Centers, Bank of America, UM, Georgia Power, Southern Power Company, to a B S issuers UM Solar City has transactions UM in that space as well, so you really see municipal issuers as well have really started issuing more securities in this space. I was looking at the fund and the symbol there is t s b I X yere. To date, you've got a gain of

three and a quarter percent. Congratulations, thank you. But I was looking at the holdings of the fund bond fund and I noticed you've got a lot of treasury, you have a lot of bonds from the Federal Home Loan Bank. You've also got into America Development Bank plus the National Credit Union. Are these investments really better than other bonds because intrinsically there's something about these entities that are is better.

Or is it really that this is just getting more popular, so you've got to have an offering that satisfies the psychological predisposition we want to do good with our money, so we're going to buy something like this. So as it was all the value increases well. Our strategy in the way that we manage our fund is really as a core actively managed strategy benchmark to the Barquays aggregate. We just happened to employ um social criteria to our funds.

So what we're trying to do is really deliver a double bottom line of excess financial return, but also delivering a return for the environment and social issues as well, more of a positive impact type of strategy. So the securities that you mentioned, UM, those are all ones that fit into the concept of investing in leaders within their

respective spaces. And in core fixed income there's a real advantage we think in using environmental, social and governance criteria in managing a core fixed income fund because at the end of the day, you will get paid for UM not picking winners, but by avoiding the losers. So when you look at utilizing that kind of criteria puts you a competitive advantage. I think and fixed income over the long run broadly and fixed income in bonds right now?

Where are you placing your bet in terms of maturity right A two your note probably not versus a thirty year bond. I don't know about that one either. And also in terms of like safe safe US government bonds versus credit you know, other large corporations or you know even unis. I guess yeah. We're of the view at the moment that we are in a lower for longer cycle. UM. I have been a little more I've been a little

less sanguine on the state of the economy. I think that we wanted to be longer duration flat around the yield curve UM as we think that in this lower for longer period of time, low growth, low inflation, that's really the second best environment to be in spread products. So we're generally gonna be overweight and spread product. And that's also works to our strengths as a credit shop.

Where we have fifty analysts at average about eleven years of experience, we have twelve traders at also oddly average about eleven years of experience UM. So it allows us to utilize our skill and expertise and evaluating securities and really digging down and getting the real valuation out of them relative to looking to say, a pure treasury in this environment, Well, you do have a lot of pure treasuries, right, I mean, it's the largest holding in the fund by

about two percent. Uh. And I noticed that this goes out to what what do you make of the current yield environment in terms of taking on that kind of debt, that kind of credit for such a long period of time. Yeah, I think at this point in time where we are is I'm anticipating the FED. And I've thought this at the beginning of the year as well, when the FED was originally talking about raising four times, I thought then and still think now that maybe it would be two

times at the most with downside to only once. And and with that type of environment, you look globally and the you're being capped. Domestic yields are being capped just purely by the relative valuation versus other foreign um treasure foreign government securities really makes treasuries look more relatively attractive. So for us, you know, looking at the way that the market is evolving in this lower go lower inflation type environment, taking some credit risk and looking further out

the curve makes sense. And that's especially the case If the FED does insist on raising rates in here, that really should damp and off and choke off future inflation concerns when we already have very low inflation expectations. Quick final question, Just give me an example of one green bond issue that people could look at to study what it's done, who issued it, and why it informs him about the space. Sure, A great example would be um

Georgia Power Company. Georgia Power is a subsidiary of Southern Company, and they recently issued a green bond, the second US utility green bond, and they actually was very unique in that they partnered with the U S Defense Department to take on unused space on at five defense bases in Georgia, put up solar panels and solar power to generate solar power there to generate enough for about forty thou homes, which is going to take out you know, roughly forty

tho cars. Thank you very much for spending time with us, as Steve LiBeratur is Managing Director, Fixing Income Portfolio Manager t I A a global asset management This this Bloomberg Radio homebuilder's doing better today, banks doing better as well. A lot of this is riding on a more positive view of the US economy after a big jump in new home sales. We're gonna find out what this means for stocks down the road on Broomberg Radio.