Fund Rationale: PIMCO GIS Climate Bond Fund

PIMCO GIS Climate Bond (the “Fund”)
SGD Hedged Institutional Accumulation Shares (ISIN: IE00BNC43S98)
Fund Manager Page
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Endowus have selected the PIMCO GIS Climate Change Fund for its diversified exposure to global climate action leaders in fixed income, its robust investment process and ESG methodology.

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Key Information

Fund Objective: Aims to help foster the transition to a net zero carbon economy while seeking risk-adjusted returns comparable to an investment grade portfolio by investing in a diversified portfolio of multi-sector global bonds from issuers of labeled and unlabeled green bonds, as well as companies demonstrating climate change leadership across the value chain.

Suitability: Investors who are seeking to maximise total return through a combination of both income and capital growth through a medium to long-term investment in a diversified portfolio of investment-grade fixed income markets subject to climate-related risks and opportunities, and are willing to accept the risks and volatility associated with investing in such markets.

Cost: 
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* Total Fund-level Fees include fund management fee of 0.52%.
** Endowus does not charge a preliminary sales charge or any other additional fees, other than the all-in Endowus Access Fee.

Fund Characteristics

Fund Inception: 23 September 2010
Share Class Inception: 26 February 2021
Benchmark:
Bloomberg Barclays MSCI Green Bond Index

Fund AUM: SGD 181m
Source: MorningStar as of 26 February 2021. Allocation data indicate actual exposure as a percentage of the Fund's total Net Asset Value. Please refer to the Fund Manager Page for the most updated information on Fund Holdings and Breakdown.

🌱EU SFDR Rating: Article 9
Article 9 Funds are  committed to sustainable investing, contributing to environmental and/or social objectives and following good governance practices. Please refer to “Sustainable Investing Methodology” below for more information.

Regional Allocation:

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Sector Allocation:

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Source: MorningStar as of 31 January 2021. Allocation data indicate actual exposure as a percentage of the Fund's total Net Asset Value. Please refer to the Fund Manager Page for the most updated information on Fund Holdings and Breakdown.

Selection Criteria

Endowus have selected  the PIMCO Climate Change Fund for its diversified exposure to global climate action leaders in fixed income, its robust investment process and ESG methodology. 

The Fund offers a multi-sector credit portfolio that aims to foster the transition to a net zero-carbon economy while seeking risk-adjusted returns comparable to an investment-grade credit portfolio. Its investment universe includes green bonds, unlabelled green bonds and climate leaders. Green bonds are designated bonds whose proceeds target climate-related investments. Unlabeled green bonds are issuers materially exposed to low carbon products and services; climate leaders are issuers that lead in mitigating carbon emissions and broader environmental externalities across their value chain. 

The Fund employs a robust investment process, led by 4 portfolio managers with an average of 20 years’ experience. They are supported by sector specialists and over 70 bottom-up analysts across the firm including 9 ESG credit researchers. The Fund follows a top down & bottom up approach, with portfolio managers setting macro outlook and sector allocation, and sector specialists proposing best security selection ideas. 

The Fund has a robust ESG incorporation and analysis process. This is particularly important because there are many funds in the market that are labelled ESG but, in reality, take a superficial approach to ESG (greenwashing). In contrast, PIMCO has developed a number of in-house frameworks and tools which demonstrates their commitment and capability in ESG investing. Some examples of such tools include 1) proprietary ESG scoring system on credits 2) proprietary scoring system for green, social and SDG bond, assessing its use of proceeds alignment and positive impact 3) tools and analytics for assessing climate risk and integrating it into investment decisions and 4) framework for climate change engagement. 

The SGD-hedged institutional share class PIMCO launched with Endowus provides Singapore-based investors FX-efficient access to the fund at attractive pricing.

🌱Sustainable Investing Methodology

PIMCO GIS Climate Bond Fund has been classified as an Article 9 Fund under the EU Sustainable Finance Disclosure Regulation (SFDR). Article 9 Funds are funds committed to sustainable investing, contributing to environmental and/or social objectives and following good governance practices.

In making investment decisions the Investment Adviser considers various quantitative and qualitative data relating to (i) global economies, (ii) projected growth of various industrial sectors and asset classes and (iii) issuers demonstrating leadership with respect to addressing climate related factors as further outlined below. Given the long term nature of the risks and opportunities presented by climate change and resource depletion, the Investment Advisor may emphasise a more strategic, or long-term in nature investment strategy. 

The Investment Advisor uses a three-factor approach to evaluating asset classes and their risks in seeking to achieve the Fund’s investment objective which consists of 1) fundamental analysis relating to global economics, projected growth of various industrial sectors and climate related factors, 2) valuation analysis, and 3) assessment of market demand of and supply for asset classes. The Investment Advisor evaluates these factors on an ongoing basis and uses a combination of direct investment and derivative exposure to implement the Fund’s investment objective.

The Fund will ordinarily be comprised of labeled and unlabelled green Fixed Income Securities as well as the debt of issuers demonstrating leadership in addressing risk and opportunities around climate related change. Labeled green Fixed Income Securities are those issues with proceeds specifically earmarked to be used for climate and environmental projects. Green labeled bonds are often verified by a third party (such as an audit firm), which certifies that the bond will fund projects that include environmental benefits. Unlabelled green Fixed Income Securities are securities with proceeds used for climate-aligned projects and initiatives (such as renewable energy and municipal owned water systems) but are issued without formal certifications. When considering whether an issuer has demonstrated leadership in addressing risk and opportunities around climate related change, the Investment Advisor will consider numerous factors, such as whether an issuer provides low carbon solutions, has implemented or prepared a transition plan to a low carbon economy or such other factors that the Investment Advisor may determine are relevant.

When considering an investment, the Investment Advisor may utilise the following resources to evaluate climate related factors: the Investment Advisor’s internal research and scoring process relating to climate factors, third party research and data providers, an issuer’s alignment with international commitments deemed relevant by the Investment Advisor (such as the 2016 Paris Agreement on climate change), and/or information made available by the issuer, such as carbon emissions and intensity. In determining the efficacy of an issuer’s environmental practices, the Investment Advisor will use its own proprietary assessments of material environmental and climate-oriented issues and may also reference standards as set forth by recognised global organisations, such as entities sponsored by the United Nations.

The Fund may avoid investment in the securities of issuers whose business practices with respect to climate specific factors do not meet criteria established by the Investment Advisor. Additionally, the Investment Advisor may engage proactively with issuers to encourage them to improve their environmental practices or preparations for a low carbon economy. Through these engagement activities, the Investment Advisor will seek to identify opportunities for a company to improve its climate focused practices and will endeavour to work collaboratively with company management to establish concrete objectives and to develop a plan for meetings these objectives. The Fund may invest in securities of issuers whose climate-related practices are currently suboptimal, with the expectations that these practices may improve overtime either as a result of the Investment Advisor’s engagement efforts or through the company’s own initiatives. The Fund may exclude those issuers that are not receptive to the Investment Advisor’s engagement efforts, as determined in the Investment Advisor’s sole discretion.

Given the climate orientation of the strategy, the Fund will not invest in the securities of any issuer determined by the Investment Advisor to be engaged principally in the fossil fuel industry, including distribution and/or retail, equipment and services, extraction and production, petrochemicals, pipelines and transportation and refining, and the production, distribution of coal and coal fired generation, but excluding biofuel production, natural gas generation and sales and trading activities. Moreover, the Fund will not invest in the securities of any issuer determined by the Investment Advisor to be engaged principally in the manufacture of alcoholic beverages, tobacco products or military equipment, the operation of gambling casinos, or in the production or trade of pornographic materials. To the extent possible on the basis of information available to the Investment Advisor, an issuer will be deemed to be principally engaged in an activity if it derives more than 10% of its gross revenues from such activities. However, green labeled Fixed Income Securities from issuers involved in fossil fuel-related sectors, as described above, may be permitted.

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Updated by Endowus: March 2021

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