« Guess what ? It does ! », answers Sanda Molotcov, Head of Credit Research at Ostrum Asset Management.
The Renault case which hit the headlines this week is a strong reminder that governance plays a crucial role in assessing a company future risk profile. It’s been our experience that governance may have either neutral, or negative impact on a company credit profile, because governance may simply induce management/board behaviour, which in its turn may have a huge impact on a company risk taking discipline, its oversight, over its decision-making process,its effectiveness and rationale thereof.
In our universe, a third of the companies we deem as unsuitable for bond investment are so for governance reasons.