Motability Operations Group plc (MO Group)

Corporate fixed income: integration of financial and sustainability research into investment decision-making

 

The issue

MO Group is a finance leasing company which operates a vehicle leasing scheme on behalf of Motability, a registered charity intended to help individuals with disabilities, their families, and their carers to lease new cars, scooters, or powered wheelchairs using their disability benefit. In 2023,  MO Group came to market with a dual-tranche new issue. They came to market again in 2024 with a new issue.

Activity

We assessed the new issuance. From a credit point of view, MO Group’s unique relationship with the UK government through the Department for Work and Pensions, combined with its size, scale, and concessions, gives the issuer a key and sustainable competitive advantage over private sector competitors. MO Group has demonstrated robustness through the economic cycle and, historically, has been conservatively managed while maintaining a high level of reserves.

This issuance fell under the social bond framework (the SBF), which was established in 2021. The capital raised from social bonds issued under this framework are allocated, in part or in full, to social projects which meet certain eligibility criteria. In the case of MO Group, these are aligned with the International Capital Market Association (ICMA).

Social Bond Principles

In addition to the bonds being issued under its SBF, MO Group’s sole objective is to fulfil a public policy mandate under contract to the Motability charity by delivering access to affordable motor-leasing solutions for recipients of certain UK government mobility allowances, which supports the investment case. There has been direct action taken by the group to address affordability concerns for customers, as well as the availability of various supportive grant schemes.

Outcome

This case study illustrates how we integrate financial and sustainability considerations into our investment analysis and decision-making. We consider the financial and financially material sustainability opportunities and risks associated with the investment with the objective of protecting long-term value for our clients, shareholders, and other stakeholders. It also shows how we may seek to grow our exposure to investee companies where the investment case supports such action, subject to any internal limits and controls.

 

The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice.