In this day and age of low yields combined with the rising popularity of environmental, social and governance (ESG) investing, PIMCO was quick to see an opportunity as it initiated a filing with the Securities Exchange Commission (SEC) for the PIMCO ESG Income Fund. The fund will apparently invest in corporate bonds and high yield debt.
“PIMCO has previously launched ESG versions of existing strategies, but these ultimately differ from their traditional counterparts, as the ESG funds may exclude companies that fall foul of PIMCO’s sustainability principles or prioritize higher-quality ESG investments,” a City Wire USA article noted.
Within the ETF space, PIMCO already has a couple of ESG funds:
- PIMCO Rafi ESG U.S. ETF PIMCO Rafi ESG U.S. ETF (RAFE): seeks to provide total return that closely corresponds, before fees and expenses, to the total return of the RAFI ESG US Index. The fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its total assets in the component securities of the RAFI ESG US Index. The underlying index is constructed by RAFI Indices, LLC using a rules-based approach within publicly traded U.S. equities to create an integrated ESG strategy that overweights companies that rate well across various ESG themes and excludes companies with major involvement in industries such as tobacco, gaming, weapons, and fossil fuels.
- PIMCO Enhanced Short Maturity Active ESG Exchange-Traded Fund (EMNT): seeks maximum current income, consistent with preservation of capital and daily liquidity while incorporating PIMCO’s ESG investment strategy. The fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in a diversified portfolio of Fixed Income Instruments of varying maturities, which may be represented by forwards. It may avoid investment in the securities of issuers whose business practices with respect to the environment, social responsibility, and governance (“ESG practices”) are not to PIMCO’s satisfaction.
For ETF investors looking for additional ESG exposure within the fixed income asset class, they can look to the iShares ESG U.S. Aggregate Bond ETF (EAGG). EAGG seeks to track the investment results of the Bloomberg Barclays MSCI US Aggregate ESG Focus Index, which has been developed by Bloomberg Barclays Capital Inc. with environmental, social and governance (“ESG”) rating inputs from MSCI ESG Research LLC pursuant to an agreement between MSCI ESG Research and Bloomberg Index Services Limited or an affiliate.