{"id":194589,"date":"2024-06-04T09:19:10","date_gmt":"2024-06-04T09:19:10","guid":{"rendered":"https:\/\/ibkrcampus.eu\/?p=194589"},"modified":"2024-06-04T15:06:30","modified_gmt":"2024-06-04T15:06:30","slug":"key-takeaways-from-pimcos-sustainable-investing-report-2023","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.eu\/campus\/traders-insight\/key-takeaways-from-pimcos-sustainable-investing-report-2023\/","title":{"rendered":"Key Takeaways From PIMCO\u2019s Sustainable Investing Report 2023"},"content":{"rendered":"\n

Originally Posted, 23 May 2024 – Key Takeaways From PIMCO\u2019s Sustainable Investing Report 2023<\/a><\/p>\n\n\n\n

PIMCO\u2019s Sustainable Investing Report provides our latest thinking on sustainability. Here, we highlight the report’s key takeaways on engagement, energy transition and carbon analytics.<\/p>\n\n\n\n

The sustainable investing landscape is being transformed by several long-term drivers, from evolving global regulation that will continue to have investment implications, to dominant trends like climate transition risks and the unlocking of capital flows to underserved markets. We are also witnessing a compelling convergence of emerging themes \u2013 such as nature and biodiversity, climate physical risks, and access to affordable housing. These shifts are creating steadfast investment opportunities such as thematic labeled bonds, transition finance, and private credit strategies, and we are excited by these and other possibilities we see emerging over the secular horizon.<\/p>\n\n\n\n

This year PIMCO has focused on expanding our robust platform, deepening our analytical capabilities and diversifying our proprietary frameworks. Consistent with our broader investment platform, our efforts extend beyond traditional areas of fixed income and into alternative asset classes, including private credit, structured products, and real estate. Additionally, we have strengthened our in-depth climate risk and biodiversity analysis, including additional carbon analytics, carbon attribution and projection tools.<\/p>\n\n\n\n

All of this we do with our clients in mind. We are committed to helping clients pursue their investing goals and actively engage with them to implement thoughtful solutions that aim to deliver on their objectives.<\/p>\n\n\n\n

PIMCO\u2019s \u201cSustainable Investing Report\u201d offers detailed insights on these developments, along with our latest thinking on market drivers and trends, and detailed case studies on engagement. Here are some highlights from the report.<\/p>\n\n\n\n

Environmental and climate research<\/h2>\n\n\n\n

In 2023, the transition to a lower-carbon economy was marked by both progress and challenges. For example, the renewable energy sector, including offshore wind, faced issues such as high initial valuations, execution problems, supply chain disruptions, and increased funding costs driven by increasing interest rates. Despite these difficulties, the general commitment to green technologies and climate investment remains strong, bolstered by international and regional policy developments.<\/p>\n\n\n\n

The transition is unrolling at varying paces across different regions, and there is no one-size-fits-all interpretation and implementation of climate transition plans for an issuer or investor. This is in part why we continuously look at ways to enhance and expand our capabilities to assess and manage climate risks, as well as measure and optimize the climate impacts of portfolios. For example, we have deepened our research on topics like Scope 3 (i.e., upstream and downstream) carbon emissions, carbon reporting outside corporates (e.g., sovereign and securitized products) and climate solutions. The goal is to ensure our frameworks and tools reflect market developments and client needs; and in 2023, the focus broadly shifted among many asset owners from setting portfolio climate targets to implementing them at the portfolio level.<\/p>\n\n\n\n

We have developed a proprietary portfolio carbon projection tool to analyze transition risks and decarbonization targets. This tool estimates potential future carbon emissions associated with a portfolio based on various scenarios specifically relevant for fixed income. It considers factors like reinvestments and issuer commitments or their historical emissions. The reinvestment of matured securities, for example, can significantly impact the rate of decarbonization for a portfolio and, if well handled, may create an opportunity to advance a portfolio\u2019s carbon targets while supporting real-economy emissions reductions.<\/p>\n\n\n\n

Structured credit and real estate integration<\/h2>\n\n\n\n

We believe PIMCO\u2019s scale and experience across a range of markets make us well positioned to play a vital role in strategic industry efforts related to sustainable investing. This extends beyond corporate entities, into structured credit, as well as sovereigns, municipals, and alternatives, where applicable. These multifaceted efforts provide a distinctive market perspective that is unique to PIMCO.<\/p>\n\n\n\n

Structured products are significant in the fixed income market, making up about 25% of all outstanding securities. PIMCO considers them an essential investment component in supporting clients in their sustainability journeys. They have unique advantages as well as downsides, but the variety within the asset class has allowed our clients to explore investment opportunities that offer either environmental or social benefits.<\/p>\n\n\n\n

Over the last year we have continued the development of our proprietary frameworks across multiple asset classes and themes, including expanded Environmental, Social and Governance (ESG) scoring coverage and analysis of structured products including auto-asset backed securities (ABS), collateralized loan obligations (CLO), covered bonds, sovereigns, supranationals, and agencies (SSA).<\/p>\n\n\n\n

We also continued building out our real estate platform in 2023. PIMCO invests in a variety of real assets including commercial, residential, and infrastructure investments. In addition to the overarching materiality framework which underpins our alternatives approach, we have developed specific and proprietary tools for broadly assessing material risks which can arise from investing in real assets. This framework includes specialized research and analysis related to physical and transition climate risks, energy usage and efficiency, as well as affordability and access.<\/p>\n\n\n\n

Labeled bonds and role of fixed income in sustainable investing<\/h2>\n\n\n\n

Despite a decrease in absolute issuance of ESG-labeled bonds in 2022 and 2023, the proportion of ESG labels within corporate fixed income indices continues to grow, partly due to a higher rate of traditional bonds exiting these indices. PIMCO applies its fixed income expertise to this area, using tools such as our proprietary relative value tracker to assess the “greenium” or the discount\/premium of ESG-labeled bonds compared to traditional bonds.<\/p>\n\n\n\n

Recognizing the importance of sustainability-linked bonds (SLB) within the ESG labeled bond universe, we have developed a proprietary SLB tracker. This tool assesses bonds with upcoming Key Performance Indicator (KPI) testing dates on a periodic basis. It is critical for portfolio managers, as a growing portion of outstanding SLBs approach milestones for their sustainability KPIs, potentially triggering coupon step-ups.<\/p>\n\n\n\n

However, ESG bonds are only one part of the ESG-investible universe, as many issuers with favorable ESG profiles continue to issue traditional debt, and we will continue to maintain a balanced focus on communication and research for conventional bond investments.<\/p>\n\n\n\n

We believe bond investors can play a pivotal role in the sustainable transition of economies and businesses; and we seek to execute our strategies through research, engagement and investment, leveraging the multiple connections between capital providers and issuers. We employ a forward looking, integrated approach to pursue long-term value for our clients.<\/p>\n\n\n\n

Download our Sustainable Investing Report here to read more of our views and analysis, as well as our engagement case studies<\/a>. Visit here<\/a> to learn more about sustainability at PIMCO.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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