06 August 2019
A major boost to ESG investing in recent years has been its growing adoption by the $100 trillion bond market.
California-based Pimco, with about $1.8 trillion under management, is one of the biggest investors in the global debt markets and is a firm believer in the importance of ESG issues. Its view is that "ESG-based analysis should be as natural a part of the fixed income investment process as the assessment of credit duration or other risk factors".
Pimco's influence is such that it is "forcing others to think seriously about ESG," said one judge.
Pimco introduced its first socially responsible bond fund in 1991 and has since embedded material ESG factors into its company-wide investment process. It has also launched a dedicated ESG platform for investors seeking even greater ESG orientation in their portfolios.
Scott Mather, CIO responsible for ESG strategies and a member of the investment committee, is leading this effort.
"Pimco's view is that ESG fits well with our fiduciary mandate: We rigorously pursue attractive risk-adjusted returns for our clients ... and we believe that means incorporating ESG risk analysis and evaluating sustainable investment opportunities," he said in a recent blog.
Mather believes the UN's Sustainable Development Goals (SDGs) are an important mechanism to help fixed income investors direct capital toward issuers making a greater positive impact. But he says current corporate disclosures make this very difficult. So a key part of Pimco's engagement strategy with issuers is to set targets for how they can best contribute to the SDGs.
Engagement is a key plank in PImco's ESG screening process, alongside exclusions (of issuers fundamentally misaligned with sustainability practices) and evaluations (to identify best-in-class ESG issuers).
The company's latest ESG offering is the Pimco GIS Emerging Markets Bond ESG Fund, launched on 5 August. It comes less than 12 months after the launch of the Pimco GIS Global Investment Grade Credit ESG Fund.