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Sustainable investing, already a global megatrend, is entering a new era, presenting a range of opportunities and challenges for investors interested in environmental, social and governance (ESG) strategies. PIMCO’s ESG platform is evolving to respond to multiple changing dynamics to allow us not only to lead, but also to learn. Against this backdrop we believe that active fixed income continues to have a unique role. Test your knowledge on ESG facts and figures and find out what PIMCO are doing to optimise outcomes over the long-term.
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What sectors are the largest sources of methane emissions?
Q1: Methane emissions are major cause of climate change*.
PIMCO has been engaging extensively with more than 50 energy companies on reducing methane emissions. We shared our view and recommendations on measurement-based emissions reporting, best practices in target setting, and adopting industry standards for disclosure. Various companies acknowledged the importance and benefits of better methane management and are assessing the next steps based on our discussions. We have also engaged with the US Environmental Protection Agency by endorsing robust regulatory support for methane emissions abatement. Learn more about PIMCO’s engagement on Methane Emissions
What is PIMCO doing?
The energy sector is the second-largest source of methane emissions after agriculture Existing technology could cut methane emissions in half by 2030, slow global warming by 30%, and avoid a quarter of a degree Celsius in global warming by 2050**
Did you know
Correct
Agriculture sector
SKIP TO ANSWER
*https://www.iea.org/reports/methane-emissions-from-oil-and-gas **https://iopscience.iop.org/article/10.1088/1748-9326/abf9c8/pdf
Methane Emissions
For illustrative purposes only. Refer to disclaimers page at the end for additional outlook, ESG risks and risk information.
Drag the icons into the correct circle to answer
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*https://www.iea.org/reports/methane-emissions-from-oil-and-gas
q 1/5
What country best represents the land space destroyed every year?
Q2: More than half the world’s tropical forests have been destroyed since the 1960s*.
According to satellite data, from 2001 through 2021, global tropical forest loss totalled 437 million hectares* (8.8 million acres) a year — an area larger than Belgium. At the current rate of deforestation, the world’s rainforests will be gone by 2100. Up to 28,000 species are expected to become extinct by the next quarter century due to deforestation**. 12% of the total carbon dioxide emission that is responsible for global warming comes from clearing down of the forests by burning the trees***.
While our direct exposure to forest-risk commodities is limited, we engaged more than 20 companies, including food manufacturers, retailers, and banks, on their commitment to eliminating deforestation in their value chain. We emphasised the importance of supply chain traceability, independent verification and grievance mechanisms to form a robust due diligence process. We found some companies moving gradually towards physical certification and full traceability of commodities while the link between zero deforestation and net zero commitment could be further solidified in banks’ climate strategy. Learn more about PIMCO’s Net Zero Framework
Singapore
Luxembourg
Belgium
Switzerland
180,000 acres
639,000 acres
7.6 million acres
10.2 million acres
Correct: Belgium
Incorrect The answer is Belgium
* https://www.globalforestwatch.org/dashboards/global ** https://www.unep.org/news-and-stories/press-release/our-global-food-system-primary-driver-biodiversity-loss *** https://www.un.org/esa/forests/wp-content/uploads/2019/03/UNFF14-BkgdStudy-SDG13-March2019.pdf Country sizes: https://worldpopulationreview.com/country-rankings/smallest-countries
* https://www.globalforestwatch.org/dashboards/global
Deforestation
q 2/5
According to Oxfam, how much private wealth does just 1% of the world’s population hold?
Q3: Social and economic inequality remain pressing social issues. COVID-19 and the worsening physical impacts of climate change have exacerbated social hardships across the planet, compounding effects on challenges such as economic inequality, food insecurity, unemployment and housing uncertainty.
The richest 1% in the world have more than double the wealth of 6.9 billion people
PIMCO looks to engage directly with issuers on social issues and social bond issuance (financial instruments with proceeds earmarked for social projects). For example, we engaged with a US non-profit foundation whose mission is to reduce inequality in all forms, on issuing social bonds. PIMCO participates in these issuances and has significantly increased our exposure to social and sustainability-linked debt in 2021. Learn more about PIMCO on Sustainability-Linked Bonds
Correct: 35%
https://www.weforum.org/agenda/2020/01/5-shocking-facts-about-inequality-according-to-oxfam-s-latest-report/
INEQUALITY
q 3/5
Inequality, poverty and social access are priorities across global initiatives , or example the UN Sustainable Development Goals (Goal 1: No Poverty; Goal 10: Reduce Economic inequality within and among countries) The market for social bonds has more than $400bn outstanding. Bonds can be focused on affordable housing, access to water, housing and education, helping marginalised communities, among other things.
What is the current size of the ESG Bond Market?
Q4: ESG-labelled bonds - green, social, sustainability and sustainability-linked debt instruments - allow issuers to raise capital to fund projects with positive environmental and/or social benefits.
Sustainability-linked bonds – unique, as they are general-purpose with sustainability-linked terms in their contracts – have seen exponential growth.
Correct: $3 trillion
$3 billion
(the equivalent in numbers of the world population in 1960)
$50 billion
(the equivalent net worth of Phil Knight, founder of shoe giant Nike, in October 22)*
$2 trillion
(the equivalent of PIMCO total $AuM as at 31 March 22)
$3 trillion
(the equivalent worth of Apple as at 3 Jan 22)*
Incorrect The answer is $3 trillion
PIMCO strives to advance global sustainability efforts. We have been a member of the International Capital Market Association (ICMA) executive committee since 2019, which helps shape the evolution of the green bond and social bond markets. Through this, PIMCO promotes building internationally accepted standards of best practice in markets through the development of appropriate, broadly accepted guidelines, rule, recommendations, and standard documentation. See our recently published best practice guidance documents for sustainable bond issuance available here. Over 2021, PIMCO engaged with several issuers on best practice ESG-labelled bond issuance, including encouraging best practice reporting and frameworks.
Source: BNEF
PIMCO strives to advance global sustainability efforts. We have been a member of the International Capital Market Association (ICMA) executive committee since 2019, which helps shape the evolution of the green bond and social bond markets. Through this, PIMCO promotes building internationally accepted standards of best practice in markets through the development of appropriate, broadly accepted guidelines, rule, recommendations, and standard documentation. See our recently published best practice guidance documents for sustainable bond issuance available here. Over 2021, PIMCO engaged with several issuers on best practice ESG labelled bond issuance, including encouraging best practice reporting and frameworks.
ESG Bond Market
q 4/5
The first green bond was issued in 2007 by the European Investment Bank and the World Bank. Issuance kicked off in 2014 and reached all-time highs in 2021 ($700bn+ issued!)
Green bonds have remained dominant in the market, making up more than 50% of total debt outstanding
*forbes.com/billionaires **cnbc.com
What is the current world temperature rise pathway vs. pre-industrial levels?
Q5: Net Zero refers to the concept of negating the amount of greenhouse gases produced by human activity. With carbon dioxide (CO2) emissions concentrations reaching new record levels, seven world leaders announced new Nationally Determined Contributions (NDCs).
At PIMCO, we are committed to providing best-in-class advice and solutions for clients on sustainability and net zero PIMCO also manages significant assets on behalf of 34 of the 71 asset owners who have committed to transition their portfolios to net zero GHG emissions by 2050 We continue to participate in collaborative engagement initiatives such as Climate Action 100+, an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
Correct: 2-3 degrees
0.5 degrees
0.5-1 degrees
1-2 degrees
2-3 degrees
3-4 degrees
4+ degrees
DISCLAIMER
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Move the dial to the correct temperature
Incorrect The answer is 2-3 degrees
Net Zero
q 5/5
To achieve net zero emissions by 2050, it is estimated that we must align to a 1.5-degree temperature rise pathway The Paris Agreement sets out a global framework to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C.
Disclaimer MARKETING COMMUNICATION This is a marketing communication. This is not a contractually binding document and its issuance is not mandated under any law or regulation of the European Union or the United Kingdom. This marketing communication does not include sufficient detail to enable the recipient to make an informed investment decision. This article contains the current opinions of the manager and such opinions are subject to change without notice. This presentation has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this presentation may be reproduced in any form, or referred to in any other publication, without express written permission. All investments contain risk and may lose value. Investing in the bond market and/or investing in bond strategies 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. 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 Environmental, Social and Governance (ESG) Investment Policy Statement. 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 assurance that the ESG investing strategy or techniques employed will be successful. Outlook Statements concerning financial market trends are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice. Past performance is not a guarantee or reliable indicator of future results. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. For Professional Investors Only. PIMCO Europe Ltd (Company No. 2604517) is authorised and regulated by the Financial Conduct Authority (12 Endeavour Square, London E20 1JN) in the UK. PIMCO Europe Ltd services are available only to professional clients as defined in the Financial Conduct Authority’s Handbook and are not available to individual investors, who should not rely on this communication. ©2022, PIMCO. A company of Allianz. Note that there are different ESG expectations and definitions, there is no guarantee that the strategy would fulfill the ESG capabilities. Please refer to the strategy document for complete information relating to the strategy's consideration of ESG factors.
