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Economic and Market Commentary

Key Takeaways From PIMCO’s Sustainable Investing Report

PIMCO’s Sustainable Investing Report provides our latest thinking on sustainability. Here, we highlight the report's key takeaways on engagement, human capital, and carbon analytics.

Sustainable investing has gone through several evolutionary stages. What began as a largely equities-oriented negative screening approach for socially responsible investors, has diffused into a global, multi-asset class investing movement. In recognition of this transformation, we have changed the title of this year’s annual report from Environmental, Social and Governance (ESG) to Sustainable Investing, highlighting the significance of this deemed global megatrend.

PIMCO’s Sustainable Investing Report provides our latest thinking on sustainability, detailed case studies on engagement efforts, and key topical features related to: Human Rights; Human Capital; Natural Capital; and Carbon Analytics. Here, we highlight some key takeaways from the report, with a focus on engagement, human capital, and carbon analytics.

Engagement and collaboration: influencing change

As one of the largest bondholders in the world, PIMCO has a significant platform with which to engage issuers on ESG topics and sustainability goals (including climate change), to help drive long-term investment value for our clients. In 2022, PIMCO analysts engaged approximately 1,370 corporate bond issuers across a range of industries and regions on ESG topics, and deepened our engagements across themes.

Four main themes that are particularly important for us when assessing an issuer’s long-term resilience against ESG risks may include:

Climate change: We can engage with companies on their climate ambitions, goals and implementation plans, notably on methane and emissions reductions in the real economy.

Human rights: As an investor, we share responsibility, where appropriate, to recognize and address any potential human rights violations through our investments. We can conduct thorough due diligence on human rights risks embedded across an issuer’s value chain.

Human capital: When engaging with issuers we may seek to identify an effective, transparent and inclusive human capital strategy for talent retention and operational productivity.

Natural capital: Resources such as air, water, soils, raw materials, wildlife, biodiversity and the oceans – are entrenched across most or all aspects of the economy. Through our engagement with issuers, we can seek to gain a solid understanding of their impact and dependency on natural capital.

Human capital: managing workforce risks

A resilient and productive workforce can indicate a long-term sustainable growth strategy, and companies with robust recruitment and retention programs may help improve our confidence to make longer-term investments. Also, organizations that prioritize their workforce among stakeholders may see less attrition in a tight labor market, improved productivity, and positive market perception regarding its talent management. On the other hand, workforce mismanagement can have material implications and negatively affect our view of a company’s growth projections.

We can focus our engagement and analysis on a company’s approach to hiring, training and development, and target the disclosure of data that could signal the efficacy of policy implementation. Also, depending on the country in which a company operates, we may engage on various diversity and inclusion themes. We often focus in particular on how these efforts pertain to liabilities, headline risks, talent retention, and pay equity.

Carbon analytics: developing effective measurement tools

A climate-related theme that has been gaining momentum is the importance of identifying drivers for changes in a portfolio’s carbon footprint over time. A historical challenge has been the lack of data or standard to quantify whether portfolio decarbonization can be linked to actual greenhouse gas emission reductions in the real economy.

In response to these challenges, PIMCO has developed a proprietary framework for interested investors seeking to target long-term decarbonization in their portfolios. Our proprietary carbon attribution tool measures and reports the contribution of different factors to carbon emissions across corporate issuers in a portfolio. It can also measure emission data against a broad benchmark and across time periods. As a result, this tool can help make more informed decisions on the most effective levers to potentially decarbonize a portfolio's emissions while encouraging actual emissions reduction from issuers.

Download our Sustainable Investing Report here to read more of our views and analysis, as well as our engagement case studies. Visit here to learn more about sustainability at PIMCO.


1 PIMCO engaged with 1,370 corporate bond issuers in 2022, referring to all tracked engagements that discussed ESG topics. Corporate bond issuers refers to ultimate parent entities, which year-on-year figures are subject to changes in PIMCO’s internal entities mapping.

2 United National Guiding Principles on Business and Human Rights: www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf

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