Green Bond Investing Across Credit
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Text on screen: Jelle Brons, Portfolio Manager, Global Investment Grade Credit
Brons: So ESG labeled issuance volume and its composition across sectors has remained fairly consistent compared to the prior years with volumes still predominantly in investment grade rather than high yield, and still predominantly in Euros rather in U.S dollar.
Text on screen: First time issuers continue to come to the market
Images on screen: Power lines
Even with this backdrop, we do note that first time issuers continue to come to the market. And that is a good thing.
We believe that certain issuers’ businesses are naturally aligned to environmental goals. For example, buying a regular bond of a railroad company. It is noteworthy that also more data has been made available to make more granular and informed decisions. For example
Text on screen: More issuer data can help screen a company’s decarbonization strategy
Images on screen: PIMCO trade floor
lending to companies that have a credible decarbonization strategy in place and then we just buy the regular bonds instead of focusing just on the green bonds.
We also utilize the data for engagement, targeting specifically areas of interaction with both the issuer and/or with the banking syndicates.
Text on screen: TITLE – Types of green bond opportunities in the market:, BULLETS – Corporate, Sovereign, Covered, Securitized, SUB-BULLET: Mortgage-backed securities (MBS)
And then last but not least, it is not just in the corporate bond market that one can buy green bonds, very important because you can also buy green bonds in the sovereign markets, covered bonds, securitized products, mortgage pools.
At PIMCO we analyze each of those green bonds that come to the market, we want to buy the best structured green bonds.
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Please note that this video contains the opinions of the manager as of the date recorded, and may not have been updated to reflect real time market developments. All opinions are subject to change without notice. Past performance is not a guarantee or a reliable indicator of future results.
ESG-Labelled Bonds are defined as green, social, and sustainable bonds and sustainability-linked bonds. Green Bonds are those issues with proceeds specifically earmarked to be used for climate and environmental projects. Social Bonds are use-of-proceeds bonds earmarked to finance new and existing projects or activities with positive social impacts. Sustainability Bonds are use-of-proceeds bonds earmarked to finance new and existing projects or activities with positive environmental and social impacts. Sustainability-Linked Bonds (SLBs) are bonds that include sustainability-linked covenants, as explained by the issuer through use of a framework and/or legal documentation.
All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. ESG investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by PIMCO or any judgment exercised by PIMCO will reflect the opinions of any particular investor, and the factors utilized by PIMCO may differ from the factors that any particular investor considers relevant in evaluating an issuer’s ESG practices. In evaluating an issuer, PIMCO is dependent upon information and data obtained through voluntary or third-party reporting that may be incomplete, inaccurate or unavailable, or present conflicting information and data with respect to an issuer, which in each case could cause PIMCO to incorrectly assess an issuer’s business practices with respect to its ESG practices. Socially responsible norms differ by region, and an issuer’s ESG practices or PIMCO’s assessment of an issuer’s ESG practices may change over time. There is no standardized industry definition or certification for certain ESG categories, for example “green bonds”; as such, the inclusion of securities in these statistics involves PIMCO’s subjectivity and discretion. There is no assurance that the ESG investing strategy or techniques employed will be successful. Past performance is not a guarantee or reliable indicator of future results.
PIMCO is committed to the integration of Environmental, Social and Governance ("ESG") factors into our broad research process and engaging with issuers on sustainability factors and our climate change investment analysis. At PIMCO, we define ESG integration as the consistent consideration of material ESG factors into our investment research process, which may include, but are not limited to, climate change risks, diversity, inclusion and social equality, regulatory risks, human capital management, and others. Further information is available in PIMCO’s Sustainable Investment Policy Statement.
With respect to comingled funds with sustainability objectives (“ESG-dedicated funds”), we have built on PIMCO’s over 50-year core investment processes and utilize three guiding principles: Exclude, Evaluate and Engage. In this way, PIMCO’s ESG-dedicated funds seek to deliver attractive returns while also seeking to achieve positive ESG outcomes through its investments. Please see each ESG-dedicated fund’s prospectus for more detailed information related to its investment objectives, investment strategies and approach to ESG.
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