ESG Portfolio Spotlight: May 2022

ESG Portfolio Spotlight: May 2022

Westmount’s Environmental, Social and Governance (ESG) Portfolio allocates client assets across a diverse selection of investment managers that directly support innovative companies driving positive social change. Westmount’s ESG managers are aligned with the United Nations Sustainable Development Goals, a globally recognized framework adopted by the U.N. General Assembly to collaboratively tackle humanity’s most pressing issues.

Portfolio Spotlight: PIMCO ESG Income Fund

PIMCO is a premier fixed income manager with over 30 years of experience managing socially responsible portfolios. The PIMCO ESG Income Fund seeks to maximize current income and preserve capital while excluding industries misaligned with responsible investing, emphasizing those committed to sustainability, and proactively engaging with issuers on key sustainability topics. They directly influence CEOs and government officials to promote sustainable changes and improve regulatory standards.

Redefining Responsible Sourcing with Recycled Materials and EVs

In 2020, popular luxury car manufacturer BMW announced its voluntary alignment with the goals of the Paris Climate Agreement and pledged to drastically cut emissions over the coming decades.1 PIMCO, an investor in BMW through the PIMCO ESG Income fund, has engaged with the BMW Group to support the company's electrification strategy and climate ambitions by focusing on the German automaker's sourcing of raw materials.

The issue of responsible sourcing has become more important to investors as global demand shifts in favor of electric vehicles (EVs). While conventional wisdom usually points to driving as the biggest source of emissions, studies have found it is the underlying supply chain that tends to leave a larger carbon footprint.2

Accordingly, BMW has set a goal to increase the percentage of recycled and reused materials used in the manufacture of its vehicles from 30% to 50%. Furthermore, the company is on track to reduce its total carbon emissions per car by 40% by 2030, as part of an initiative first launched in 2019.3 Consumers are responding positively to these initiatives: in 2021, sales of fully electric vehicles increased by 121.4%, and by 2040 BMW expects nearly 100% of new vehicles sold in major markets to be zero-emission.4

Prioritizing Workers' Rights Throughout the COVID-19 Pandemic

Tesco, another holding in PIMCO's ESG Income Fund, is the UK's largest food retailer and a leader in ESG practices within the food retail industry. A longtime industry leader in its own right with regard to innovative recyclable products, the grocery chain has demonstrated resilience and responsiveness in upholding human rights and workers' rights with regard to employee health and benefits in the wake of the COVID-19 pandemic.

As the pandemic set in, many grocery chains required their workers to continue working or take unpaid leave if they contracted the virus on the job. As a result, at least 158 grocery workers died from the virus, and at least 35,100 workers were infected or exposed, according to data from the United Food and Commercial Workers International Union.5 By contrast, Tesco encouraged vulnerable staff to remain at home in self-isolation from the outset and granted full paid leave to minimize health risks. Rather than engage in layoffs, Tesco managed to add 16,000 permanent jobs during this period.6

Pandemic notwithstanding, Tesco has also maintained focus on sustainable packaging and minimizing waste by finding ways to prolong the shelf life of goods and reduce food waste. The company has established a closed loop for plastics and works with suppliers to remove hard-to-recycle materials.

Expanding Renewable Energy Through Pure Green Bonds

ReNew is India's largest renewable energy producer. The company develops, builds, owns, and operates utility-scale wind, solar, and hydro projects for commercial and industrial customers.

ReNew is also a “pure” green bond issuer. A green bond—sometimes also known as a climate bond or sustainable bond—is a fixed income security that is specifically earmarked to raise money for climate and environmental projects. Through its green bond program, ReNew has so far raised more than $3.5 billion across eight issuances.

Most recently, in January 2022, the company announced it had raised more than $400 million.7 The bonds are senior secured dollar notes issued at 4.5% and will be used to refinance existing debt and fund capital expenditures in renewable energy assets like wind and solar energy generation, and infrastructure across India.8

Using funds raised from these bonds, coupled with additional engagement from PIMCO, ReNew has helped create a total capacity of approximately 10.3 gigawatts of renewable energy as of November 30, 2021 (1 gigawatt provides enough energy to power roughly 750,000 homes)9,10.

Have a question about our ESG offering or investment platform? Call us at 310-556-2502 or email info@westmount.com to speak with an advisor today.

Sources
1BMW Group | Sustainable Solutions for CO2 Reductions
2McKinsey Sustainability | The Surprising Change Can Help the Auto Industry Tackle Emissions Goals
3,4BMW Group | CO2 Reduction
5NBC News | Grocery Workers Died Feeding the Nation
6The Guardian | Tesco Gives Permanent Jobs to 16,000 Staff Taken on in COVID Crisis
7,8,9ReNew Power | ReNew Raises $400 Million by Issuing Green Bonds
10CNet | Gigawatt: The Solar Energy Term You Should Know About

 

Disclosures
This report was prepared by Westmount Asset Management, LLC (“Westmount”). Westmount is registered as an investment advisor with the U.S. Securities and Exchange Commission. The information contained in this report was prepared using sources that Westmount believes are reliable, but Westmount does not guarantee its accuracy. The information reflects subjective judgments, assumptions and Westmount’s opinion on the date made and may change without notice. Westmount undertakes no obligation to update this information. It is for information purposes only and should not be used or construed as investment, legal or tax advice, nor as an offer to sell or a solicitation of an offer to buy any security. No part of this report may be copied in any form, by any means, or redistributed, published, circulated or commercially exploited in any manner without Westmount’s prior written consent. If you have any comments or questions about this report, please contact us at info@westmount.com.