HomeMy WebLinkAbout05-13-2021 IOC Agenda PacketCity of San Luis Obispo, Agenda, Planning Commission
Agenda
INVESTMENT OVERSIGHT COMMITTEE
Thursday, May 13, 2021
Based on the threat of COVID-19 as reflected in the Proclamations of Emergency issued by both the Governor of
the State of California, the San Luis Obispo County Emergency Services Director and the Investment Oversight
Committee (IOC) of the City of San Luis Obispo as well as the Governor’s Executive Order N-29-20 issued on
March 17, 2020, relating to the convening of public meetings in response to the COVID-19 pandemic, the City of
San Luis Obispo will be holding all public meetings via teleconference. There will be no physical location for
the Public to view the meeting. Below are instructions on how to view the meeting remotely and how to leave
public comment.
Additionally, members of the Investment Oversight Committee are allowed to attend the meeting via teleconference
and to participate in the meeting to the same extent as if they were present.
Using the most rapid means of communication available at this time, members of the public are encouraged
to participate in Committee meetings in the following ways:
1.Remote Viewing - Members of the public who wish to watch the meeting can view:
➢View the Webinar:
➢Webinar link: https://slocity-
org.zoom.us/j/92974019602?pwd=UnMxWnJoYVRZSG5OYUU0akZaYjNYUT09
➢Call in: 1-669-900-6833
➢Webinar ID: 929 7401 9602
➢Passcode: 6714282.Public Comment - The Investment Oversight Committee will still be accepting public comment. Public
comment can be submitted in the following ways:
•Mail or Email Public Comment
➢Received by 10:00 AM on the day of meeting - Can be submitted via email to
advisorybodies@slocity.org or U.S. Mail to City Clerk at 990 Palm St. San Luis Obispo, CA 93401
➢Emails sent after 10:00 AM and up until public comment is opened on the item – Limited to
one page emailed to cityclerk@slocity.org, which will then be read aloud during the public comment
period on the item specified.
•Verbal Public Comment
➢Received by 10:00 AM on the day of the meeting - Call (805) 781-7164; state and spell your
name, the agenda item number you are calling about and leave your comment. The verbal
comments must be limited to 3 minutes. All voicemails will be forwarded to the IOC and saved as
Agenda Correspondence.
➢During the meeting – Comments can be submitted up until the Public Comment period is opened
for the item when joining via the webinar (instructions above). Once you have entered the
webinar/meeting please type your name and the Item # in the questions box. Your mic will be
unmuted when Public Comment is called for the item you indicated.
All comments submitted will be placed into the administrative record of the meeting.
Investment Oversight Committee Agenda for May 13, 2021 Page 2
1:30 p.m. REGULAR MEETING TELECONFERENCE
Broadcasted via webinar
CALL TO ORDER: Chair Brigitte Elke
ROLL CALL: Committee Members Natalie Harnett, Derek Johnson, Debbie Malicoat, Erica
A. Stewart, and Chair Brigitte Elke
OTHERS PRESENT: Monique S. Spkye, Managing Director for PFM Asset Management LLC,
and Serenity Whorley, Recording Secretary
PUBLIC COMMENT: At this time, people may address the Committee about items not on the
agenda. Persons wishing to speak should come forward and state their name and address.
Comments are limited to three minutes per person. Items raised at this time are generally referred
to staff and, if action by the Committee is necessary, may be scheduled for a future meeting.
CONSIDERATION OF MINUTES
1. Minutes of the Investment Oversight Committee of February 11, 2021
BUSINESS ITEMS
2.Presentation of the Quarterly Investment Report on Portfolio Performance
Recommendation: Approve and confirm investment policy compliance.
COMMENT AND DISCUSSION
The committee will review topics to discuss at the next regularly scheduled meeting.
Investment Oversight Committee Agenda for May 13, 2021 Page 3
ADJOURNMENT
The next Regular Meeting of the Investment Oversight Committee is scheduled for
Thursday, August 12, 2021 at 1:30 p.m., in the Council Hearing Room, 990 Palm Street, San
Luis Obispo, California.
The City of San Luis Obispo wishes to make all of its public meetings accessible to the
public. Upon request, this agenda will be made available in appropriate alternative formats to
persons with disabilities. Any person with a disability who requires a modification or
accommodation in order to participate in a meeting should direct such request to the Finance
Department at (805) 781-7125 at least 48 hours before the meeting, if possible.
Telecommunications Device for the Deaf (805) 781-7107.
Meeting audio recordings can be found at the following web address:
http://opengov.slocity.org/WebLink/1/fol/61037/Row1.aspx
Minutes - Draft
Investment Oversight Committee
Thursday, February 11, 2021
Regular Meeting of the Investment Oversight Committee
CALL TO ORDER
A Regular meeting of the Investment Oversight Committee was called to order on Thursday, February
11, 2021, at 1:31 p.m. in the Council Hearing Room at 990 Palm Street, San Luis Obispo, California,
by Chair Brigitte Elke.
Committee Members Heidi Harmon, Natalie Harnett, Debbie Malicoat, and
Chair Brigitte Elke
ROLL CALL
Present:
Absent: Committee Members Derek Johnson
Others Present: Tavy Garcia, Staff, David Reeser, Managing Director for PFM Asset
Management LLC, Monique Spyke, Managing Director for PFM Asset
Management LLC, and Serenity Whorley, recording secretary.
PUBLIC COMMENT ITEMS NOT ON THE AGENDA
None
--End of Public Comment--
APPROVAL OF MINUTES
1.Review of Minutes of the Investment Oversight Committee Meeting of November 12,
2020:
ACTION: UPON MOTION BY COMMITTEE MEMBER MALICOAT, SECONDED BY
COMMITTEE MEMBER HARMON, CARRIED 4-0-1, to approve the NOVEMBER 11,
2020 minutes, as presented.
PUBLIC COMMENT
None
--End of Public Comment--
BUSINESS ITEMS
City of San Luis Obispo, Title, Subtitle
Minutes - Investment Oversight Committee Minutes of Thursday, February 11, 2021 Page 2
2. Presentation of the Quarterly Investment Report on Portfolio Performance
Monique Spyke, Managing Director for PFM Asset Management LLC, and David Reeser,
Managing Director for PFM Asset Management LLC, provided a PowerPoint presentation and
responded to Committee inquiries.
Finance Director Elke (or whomever presents the report) provided a PowerPoint presentation and
responded to Committee inquiries.
Public Comment
None
--End of Public Comment--
ACTION: UPON MOTION BY COMMITTEE MEMBER HARMON, SECONDED BY
COMMITTEE MEMBER MALICOAT, CARRIED 4-0-1, recommendation.
COMMENT AND DISCUSSION
3. Presentation of 2019-20 AFR Investment Report
Tavy Garcia presented the 2019-20 AFR Investment Report.
ADJOURNMENT
The meeting was adjourned at 2:21 pm. The next Regular Meeting of the Investment Oversight
Committee is scheduled for Thursday, May 13, 2021, at 1:30 p.m., in the Council Hearing
Room, 990 Palm Street, San Luis Obispo, California.
APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/XXXX
Quarterly Investment Report
AS OF MARCH 31, 2021
May 13, 2021
This report presents the City’s investment portfolio for
the quarter ending March 31,2021.It has been
prepared to comply with regulations contained in
California Government Code Section 53646.The report
includes all investments managed by the City on its
own behalf as well as for other third-party agencies on
a fiduciary basis such as the Whale Rock Commission.
It also includes all City-related investments held by
trustees for bond debt service obligations.As required,
the report provides information on the investment type,
issuer, maturity date,cost,and current market value for
each security.
Market Themes
The Fight Against the COVID-19 Pandemic Continues
Enactment Date Congressional Actions
March 6, 2020 $7.8 billion Coronavirus Preparedness and Response Supplemental Appropriations Act
March 18 $15.4 billion Families First Coronavirus Response Act (FFCRA)
March 27 $2.1 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act
April 24 $483 billion Paycheck Protection Program and Health Care Enhancement Act
Dec 27 $900 billion Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act
March 11, 2021 $1.9 trillion American Rescue Plan (ARP) Act of 2021
?$2 trillion proposed “American Jobs Plan”
COVID-19 cases fell by 66% in the U.S. during the first quarter.
Approximately 95 million Americans received at least one vaccination by quarter-end.
Market Considerations
•The Fed reaffirmed its
commitment to keep short-term
rates near zero and continued
their asset purchase program.
Increasing inflation expectations
were fueled by a combination of
stronger recovery and
additional stimulus.
•The U.S. Treasury yield curve
steepened dramatically during
the quarter. Yields on very
short-term maturities under a
year remained anchored to the
Fed’s near-zero rate policy.
Yields on 2- to 3-year
maturities hovered near record
lows, while yields on maturities
five years and longer increased
by 50 to 90 basis points
(0.50% to 0.90%).
Source: Bloomberg as of April 5, 2021.
Source: Bloomberg as of March 31, 2021.
0.02%
0.94%
1.74%
2.41%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3M 1Y 2Y 3Y 4Y 5Y 10Y 30YYield
Maturity
U.S. Treasury Yield Curve
March 31, 2021
December 31, 2020
Fed’s average
inflation target
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2017 2018 2019 2020 2021
Inflation Indicators
Core CPI YoY Core PCE YoY
Market Considerations
•The federal agency sector
offered record low yield
spreads and posted modest
positive excess returns for
the quarter. On balance,
diversification remained a net
positive to performance
relative to Treasuries, but by
a much smaller amount than
in recent periods.
•Investment grade corporates
eked out muted excess
returns as higher income
offset modestly wider yield
spreads. Supply was strong
and rising rates put natural
upward pressure on yields
spreads.
Source: Bloomberg as of March 31, 2021.
1-5 Year Indices
-0.52%-0.44%
-0.03%
-0.61%-0.45%
-1.0%
-0.5%
0.0%
0.5%
1.0%U.S. TreasuryAgencyABSCorp A-AAACorp BBBFirst Quarter 2021
4.25%
3.35%3.22%
5.41%6.00%
0%
2%
4%
6%
8%U.S. TreasuryAgencyABSCorp A-AAACorp BBBFull Year 2020
What we are watching…
•The vaccine rollout,
accommodative monetary
policy, and the new $1.9
trillion of fiscal stimulus all
point to continued
improvement in U.S.
economic fundamentals.
•GDP projections for 2021
have been revised up
several times, with current
forecasts pointing to growth
of 6% or more this year.
That optimism, however, has
also translated into
increased inflation
expectations, which is likely
to continue to put upward
pressure on longer-term
rates.
Source: Federal Reserve, economic projections as of December 2020 and March 2021.
6.5%
3.3%
2.2%1.8%
0%
2%
4%
6%
8%
2021 2022 2023 LongerRun
U.S. Real GDP
December Projections March Projections
4.5%
3.9%3.5%
4.0%
0%
2%
4%
6%
2021 2022 2023 LongerRun
Unemployment Rate
December Projections March Projections
Current Cash & Investment Summary
The following is a summary of the City’s cash and
investments based on market value, as of
March 31, 2021, compared to the prior quarter.
Investment Entity March 31, 2021 December 31, 2020 Percent of Total**
City Held Cash & Investments $34,415,093 $23,330,369 21%
LAIF Held Investments $23,950,630 $23,912,821 15%
PFM Managed Investments*$103,382,052 $103,665,721 64%
Trustee Held Investments $72,644 $72,529 <1%
TOTAL $161,820,420 $150,981,441 100%
*Figures shown exclude accrued interest. **Details may not add up to total due to rounding.
Current Cash & Investment Summary
There are several factors which
result in changes in cash and
investment balances from
month-to-month and quarter-to-
quarter, dependent on the
receipt of revenues or a large
disbursement.
•Some major City revenues are received on a periodic rather
than a monthly basis. Property Tax is received in December,
January, April, and May of each year. Transient Occupancy
Tax is received monthly but varies considerably due to
seasonality.
•Payments for bonded indebtedness or large capital projects
can reduce the portfolio substantially in the quarter in which
they occur.
•The City pays its CalPERS obligation in a lump sum at the
beginning of the fiscal year to achieve interest savings.
Factors
Securities Security Type Market Value
% of
Portfolio
% Change
vs. 12/31/20
Permitted by
Policy In Compliance
U.S. Treasury $46,689,762 45.2%+18.9%100%
Federal Agency $31,204,065 30.2%-0.1%100%
Municipal Obligations $2,212,480 2.1%+0.2%30%
Negotiable CDs $6,016,673 5.8%+0.9%30%
Corporate Notes $12,665,891 12.3%-0.8%30%
Asset-Backed
Securities $4,279,524 4.1%-15%
Securities Sub-Total $103,068,395
Money Market Fund $313,657 0.3%-19.1%20%
Accrued Interest $311,042
Securities Total $103,693,095
Securities in the City’s
portfolio are priced by
Refinitiv, an independent
pricing service at the end of
every month. In some
cases, the City may have
investments with a current
market value that is greater
or less than the recorded
value. These changes in
market value are due to
fluctuations in the
marketplace having no
effect on yield, as the City
does not intend to sell
securities prior to maturity.
Nevertheless, these market
changes can impact the
total value of the portfolio.
Total Return
Total return is calculated
based on interest and both
realized and unrealized
changes in market value;
this is expressed as a rate of
return over a specified
period of time based on cost
and is backward-looking.
•Focused on long-term
performance and
growth
•Affected by both yield
and market value
fluctuations
•Reflects “true value” of
the portfolio
•Recommended
approach by the
Government Finance
Officers Association
PFM Managed 03/31/2021 12/31/2020
Average Maturity
(Years)2.38 2.38
Effective Duration1 2.16 2.11
Average Market Yield 0.43%0.34%
Total Rate of Return 3 Months 1 Year 3 Years Since Inception
City of SLO -0.32%1.26%3.23%1.98%
0–5 Treasury
Index -0.39%-0.04%2.95%1.77%
Variance +0.07%+1.30%+0.28%+0.21%
1Effective duration is the approximate percentage change in price for each 1% change in interest rates.
Summary of Activity for the Quarter & Future Liquidity
As of March 31, 2021, the investment portfolio was in compliance with all State laws,
the City's Statement of Investment Policy, and the City’s Investment Management Plan.
Cash receipts and disbursements are consistent with past trends for the
quarter. The cash management program contains enough liquidity to meet
at least the next three months of expected expenditures by the City as well
as by related parties.
If you have any questions concerning this report, or require additional
information, contact Brigitte Elke, Finance Director at (805) 781-7510.
Investment Portfolio Benefits All Funds
The City’s cash and investment portfolio represents
money from all City funds, including the General Fund,
enterprise funds (Water, Sewer, Parking, Transit),
special revenue funds (Tourism, Downtown
Assessments), capital projects funds, and other funds
which are restricted to specific purposes.
In general, monies held by the City are either allocated
by the City Council for spending or are purposefully
retained in reserve. For example, the money in the
Capital Outlay Fund has been identified to provide
particular capital projects for the community, and there
is a plan for spending down the cash balance as the
projects progress. Balances held in reserve per the
City’s financial policies equate to 20% of the operating
budget. For the fiscal year 2020-21, they are listed in the
chart to the left.
Fund FY 2020–21
General $ 10,251,000
Water $ 4,377,000
Sewer $ 2,311,000
Parking $548,000
Transit $734,000
Tourism $100,000
Investment Objectives
The investment objectives of the City of San Luis Obispo are first, to
provide safety of principal to ensure the preservation of capital in the
overall portfolio; second, to provide sufficient liquidity to meet all operating
requirements; and third, to earn a commensurate rate of return consistent
with the constraints imposed by the safety and liquidity objectives. The
City follows the practice of pooling cash and investments for all funds
under its direct control. Funds held by outside fiscal agents under
provisions of bond indentures are maintained separately. Interest earned
on pooled cash and investments is allocated quarterly to the various
Quarterly Investment Report funds based on the respective fund’s
average quarterly cash balance. Interest earned from cash and
investments with fiscal agents is credited directly to the related accounts.
It is common for governments to pool the cash and investments of various
funds to improve investment performance. By pooling funds, the City can
benefit from economies of scale, diversification, liquidity, and ease of
administration. The City uses the services of an investment advisor, PFM
Asset Management, to manage a portion of the City’s portfolio. The City’s
strategy is to retain approximately 25% of the portfolio to manage its day-
to-day cash flow needs, while PFM’s focus is on longer-term investment
management. In addition, the City has retained direct control of several
investments that had been acquired before the City began to use
investment advisors. All investments are held by the City in a safekeeping
account with Bank of New York Mellon, except for investments held by
trustees related to bond financings, which are held by either US Bank or
Bank of New York Mellon.
Environmental, Social, and Governance (ESG) Investment Objectives
ESG investing is the process of incorporating the analysis of non-
financial environmental, social, and governance factors into investment
decisions alongside traditional financial criteria. As set forth in the City’s
Investment Management Plan dated August 18, 2020, it is City’s
objective to integrate environmental, social, and governance (“ESG”)
factors into investment decisions for its investment portfolio to the
extent practical and possible.
In order to achieve this objective, the City will apply the ESG
Investment Criteria to the following Investments: Asset-Backed
Securities, Bankers’ Acceptances, Commercial Paper, Corporate,
Medium-Term & Bank Notes, and Negotiable Bank Deposit Obligations.
The ESG investment criteria is based on ESG Risk Ratings, industry
and subindustry definitions, and subindustry rankings as provided by
Sustainalytics.
1. Market Value includes accrued interest as of March 31, 2021.
Source: Sustainalytics. Please see important disclosures at the end of this presentation.
ESG Performance SummaryQ1 2021
ESG Rated Portfolio
30/40 issuers with a MV of $103.4 million1
$50,865,264 (49%)
Non-ESG Rated Issuers:
U.S. Treasuries, Municipal Bonds, Federal Home Loan Banks, and Federal Farm
Credit Banks
Sector Allocation
U.S. Treasury
Municipal
Non ESG-Rated FederalAgency & Agency MBS
Fannie Mae
Freddie Mac
Corporate Notes
Certificates of Deposit
ABS
Green shades are ESG-rated sectors
1Characterizations of ESG performance.Source: Sustainalytics: Data as of March 31,2021 and December 31, 2020, as indicated. Please see important disclosures at the end of this
presentation.
ESG Quarter-Over-Quarter Summary Comparison
0 20 40 60 80 100
Management
Exposur e
ESGRiskRating
0%13%
81%
7%0%0%12%
77%
10%0%
ESG
Risk Rating1
22.7
Negligible Low Medium High Severe
23.0
3/31/21 12/31/20
Exposure1
Management1
Low Medium High
Weak Average Strong
42.044.9
48.848.2
•On average, the portfolio
maintained medium ESG risk
as of March 31, 2021.
•The Portfolio’s ESG risk
exposure score remained
within the medium range. A
lower ESG exposure score
generally decreases ESG risk.
•The Portfolio’s ESG
Management rating also
remained within the average
range quarter-over-quarter.
Higher management scores
generally reduce ESG risk.
9.0 (39%)
2.0 (9%)
0.1 (1%)
6.2 (27%)
3.7 (16%)
0.3 (<1%)
0.1 (<1%)
0.1 (1%)1.3 (6%)
SLO as of 3/31/21
Carbon Output & Energy Use
Waste & Pollution
Resource Use & Biodiversity
Community Impact(Environmental)
Human Capital Management
Product Governance
Community Impact (Social)
ESG Financial Integration &Resilience*Corporate Goverance
Source: Sustainalytics. ESG Themes were created by PFM based on the material ESG issues (“MEIs”) and ESG indicators developed and defined by Sustainalytics. Issuers with no MEIs rating are excluded from the calculation. Please see the ESG Themes Glossary provided in the
Appendix for additional information and details. *Only applies to financial service industries.
Material ESG Issues Exposure
Portfolio ESG Risk Rating: 22.7
Environmental8%
Social53%
Governance39%
Risk Contribution by ESG Pillar
1.7 9.012.0
E S G
Risk Contribution by ESG Themes
Portfolio holdings and Sustainalytics data as of March 31, 2021. “ESG Risk Rating by Industry” represents the market value-weighted average
ESG risk rating for each industry, as classified by Sustainalytics. “Industry Distribution” charts show the total number of issuers per industry and the allocation as percentage of portfolio market value.
Industry Diversification 30.6 22.4 23.1 25.0 27.5 16.2 24.7 17.5 16.9 15.3 16.70
10
20
30
40
ESG Risk Rating by Industry
Average ESG Risk Rating = 22.7
4 11 2 1 1 1 2 3 1 3 1
Industry Distribution
(# of Issuers)
8.7%68.7%
0.4%
0.6%
5.7%
1.1%
2.9%
4.6%
1.2%
4.0%
2.1%
(Allocation % of Market Value )
0 10 20 30 40
Federal Agency
Certificates of Deposit
Corporate Notes
ABS
ESG Risk Rating
Source: Sustainalytics. Data as of March 31, 2021. Bars represent the range of held issuers’ ESG risk rating that fall under each sector, and
lines indicate the sectors market value-weighted average ESG risk rating. Please see important disclosures at the end of this presentation.
ESG Risk Rating by Sector
Maximum
Medium
ESG Risk Score
Maximum Permitted
ESG Risk Score
(Top Subindustry
Performer)
22.4
27.5
23.6
21.9
Source: Sustainalytics and the Investment Policy Statement as of March 31, 2021. Changes in approved list shown reflect issuers eligible for
purchase in the portfolio based on ESG criteria and IPS limitations but may not be held by the client.
Top Changes in ESG Risk Ratings in Q1
Largest Decreases in ESG Risk Rating
Pfizer Inc
Nissan Motor Co Ltd
CarMax Inc.
↓4.8
↓1.0
↓0.4
25.3
33.1
13.1
•Improvement in ESG management –
increase in management score
•Improvement in ESG management
–increase in management score
•Improvement in ESG management –
increase in management score
Largest Increases in ESG Risk Rating
Intel Corp
Mizuho Financial Group Inc
Toyota Motor Corporation
16.9
20.9
30.6
•Decrease in ESG management score
•Involvement in negative news headline
surrounding default risks
•Decrease in ESG management score
↑1.1
↑1.1
↑0.3
Holdings as of March 31, 2021 –Sorted By ESG Risk Rating
Source: Sustainalytics. Holdings as of March 31, 2021. Quarter-over-quarter (“QoQ”) change in ESG risk rating reflects the overall change in risk rating for each issuer, as defined by Sustainalytics, from December 31, 2020 to March 31, 2021. Under QoQ Change, reductions in green indicate
rating improvements, increases in red indicate higher risk rating. "-" represents 0 or no data available.
Issuer % Weight Subindustry Subindustry
Percentile
ESG
Risk Rating
3/31/21
QoQ
Change in ESG
Rating
Contributions
E S G
Adobe Systems Inc 0.6%
Enterprise and
Infrastructure
Software 1 10.9 -7%49%44%
The Home Depot Inc 0.8%
Home Improvement
Retail
6 11.6 0.2 28%39%33%
CarMax Inc.0.7%Automotive Retail 22 13.1 -0.4 -67%33%
DNB ASA 0.6%Diversified Banks 3 15.7 -3%47%50%
Walt Disney Co 0.5%Movies and Entertainment 41 16.2 --48%52%
Mastercard
Incorporated 0.6%Data Processing 16 16.3 --47%53%
Apple Inc 1.0%Technology Hardware 12 16.7 0.2 5%40%55%
Intel Corp 0.6%
Semiconductor Design and
Manufacturing
3 16.9 1.1 29%30%41%
International Business Machines
Corp 0.7%IT Consulting 15 18.0 0.1 2%56%42%
Federal National Mortgage
Association
16.2%Thrifts and Mortgages 7 20.2 --61%39%
Mizuho Financial Group Inc 0.9%Diversified Banks 11 20.9 1.1 5%46%49%
Nordea Bank AB 1.1%Diversified Banks 12 21.6 -0.3 2%45%53%
Bristol-Myers Squibb Company 0.3%Biotechnology 3 22.6 --69%31%
Holdings as of March 31, 2021 –Sorted By ESG Risk Rating
Source: Sustainalytics. Holdings as of March 31, 2021. Quarter-over-quarter (“QoQ”) change in ESG risk rating reflects the overall change in risk rating for each issuer, as defined by Sustainalytics, from December 31, 2020 to March 31, 2021. Under QoQ Change, reductions in green indicate
rating improvements, increases in red indicate higher risk rating. "-" represents 0 or no data available.
Issuer % Weight Subindustry Subindustry
Percentile
ESG
Risk Rating
3/31/21
QoQ
Change in ESG
Rating
Contributions
E S G
Capital One
Financial
Corporation 0.2%Consumer Finance 14 23.1 -0.1 -59%41%
Ally Financial Inc.0.0%Consumer Finance 19 23.7 -0.2 -58%42%
Skandinaviska
Enskilda Banken AB 1.2%Diversified Banks 19 23.8 -0.1 3%46%51%
Federal Home Loan Mortgage Corp 10.7%Thrifts and Mortgages 21 24.5 -0.3 7%55%38%
The Hershey Company 0.3%Packaged Foods 5 25.0 -0.3 38%40%21%
Pfizer Inc 1.1%Pharmaceuticals 4 25.3 -4.8 6%55%40%
Societe Generale SA 0.8%Diversified Banks 26 25.9 -5%33%62%
Bank of America Corporation 0.6%Diversified Banks 28 26.4 0.1 5%43%51%
Sumitomo Mitsui Financial Group Inc 0.6%Diversified Banks 29 26.9 -7%40%53%
Amazon.com Inc 0.8%Online and Direct Marketing Retail 94 27.4 -23%41%36%
Walmart Inc.2.8%Food Retail 56 27.5 0.3 14%61%25%
JPMorgan Chase & Co.0.5%Diversified Banks 34 27.9 -3%48%49%
Honda Motor Co Ltd 1.6%Automobiles 39 28.5 -24%44%32%
Holdings as of March 31, 2021 –Sorted By ESG Risk Rating
Source: Sustainalytics. Holdings as of March 31, 2021. Quarter-over-quarter (“QoQ”) change in ESG risk rating reflects the overall change in risk rating for each issuer, as defined by Sustainalytics, from December 31, 2020 to March 31, 2021. Under QoQ Change, reductions in green indicate
rating improvements, increases in red indicate higher risk rating. "-" represents 0 or no data available.
Issuer % Weight Subindustry Subindustry Percentile
ESG
Risk Rating
3/31/21
QoQ
Change in ESG
Rating
Contributions
E S G
Toyota Motor Corporation 1.7%Automobiles 59 30.6 0.3 22%44%34%
Credit Suisse Group AG 0.6%Diversified Banks 49 31.8 -4%39%57%
Nissan Motor Co Ltd 0.8%Automobiles 74 33.1 -1.0 29%43%29%
Hyundai Motor
Company 0.2%Automobiles 90 36.2 -26%43%31%
Socially Responsible Investment Policy
In addition to the ESG criteria,
the City’s Socially Responsible
Investment (SRI) Policy restricts
from the portfolio issuers who
generate revenue from casinos,
gambling, racetracks, brewery,
wine/spirits, tobacco, electronic
cigarette, or tobacco-related
products, or who support the
direct production or drilling of
fossil fuels. The City’s portfolio is
in compliance with SRI
restrictions. The tables to the
right show the Bloomberg
Industry Classifications (“BICS”)
for all the portfolio’s holdings.
Issuer Sector (BICS)
Ally Auto Receivables Trust Automobiles Manufacturing
American Honda Finance Automobiles Manufacturing
Carmax Auto Owner Trust Automobiles Manufacturing
Copart, Inc.Automobiles Manufacturing
Honda Auto Receivables Automobiles Manufacturing
Hyundai Auto Receivables Automobiles Manufacturing
Nissan Auto Receivables Automobiles Manufacturing
Toyota Motor Credit Corp Automobiles Manufacturing
Credit Suisse Group Banks
Mizuho Financial Group Inc.Banks
Nordea Bank Ab Banks
Skandinaviska Enskilda Banken Ab Banks
Societe Generale Banks
Sumitomo Mitsui Financial Group Inc Banks
Apple Inc Communications Equipment
Mastercard Inc Consumer Finance
Bank Of America Co Diversified Banks
JPMorgan Chase & Co Diversified Banks
LA Community College District Education
San Diego Community College District Education
University Of California Education
Issuer Sector (BICS)
The Walt Disney Corporation Entertainment Content
Dnb Asa Financial Services
California State Earthquake Authority Financing & Development
Hershey Company Food & Beverage
California State General Government
Maryland State General Government
FHLB Government Agencies
FFCB Government Agencies
FHLMC Government Agencies
FNMA Government Agencies
Wal-Mart Stores Inc Mass Merchants
Bristol-Myers Squibb Co Pharmaceuticals
Pfizer Inc Pharmaceuticals
Amazon.Com Inc Retail -Consumer Discretionary
Home Depot Inc Retail -Consumer Discretionary
Intel Corporation Semiconductors
Adobe Inc Software & Services
IBM Corp Software & Services
United States Treasury Sovereigns
New Jersey Turnpike Authority Transportation
ESG Themes Glossary
ESG Themes listed w ere created by PFM for educational purposes based on the material ESG issues (“MEIs”) and ESG indicators developed and defined by Sustainalytics.
ESG Theme Theme Description Key Indicators
Environment
Carbon Output &
Energy Use
Refers to a company’s management of
risks related to its energy efficiency and greenhouse gas emissions in its
operation as well as its products and
services in the production phase and
during the product use phase
Waste & Pollution
Evaluates the management of emissions
and releases from a company’s own operations to air, water, and land,
excluding greenhouse gas emissions
•Carbon intensity
•Renewable energy use•Env. Mgt. System certification
•GHG reporting / risk management
•Hazardous products
•Sustainable products & services
•Emergency response program
•Solid waste management
•Effluent management
•Radioactive waste management•Hazardous waste management
•Non-GHG air emissions programs
•Oil spill disclosure & performance
•Recycled material use
Resource Use &
Biodiversity
Analyzes how efficiently and effectively a
company uses its raw material inputs and water in production. It also
encompasses how a company manages the impact of its operations on land,
ecosystems, and wildlife
•Biodiversity programs
•Deforestation programs / polices
Community Impact
(Environmental)
Evaluates the community impact from an environmental risk perspective based on an assessment of Community Relations,
Products & Services, Occupational Health and Safety, and Product
Governance
•Site closure & rehabilitation
•Water intensity & risk management
•Forest certifications
•Supplier environmental programs / certifications
•Sustainable agriculture programs
•Env Impact –Community Relations
•Env Impact –Products & Services
•Env Impact –Occupational Health and Safety
•Env Impact –Product Governance
ESG Themes Glossary
* Only applies to financial service industries
ESG Themes listed w ere created by PFM for educational purposes based on the material ESG issues (“MEIs”) and ESG indicators developed and defined by Sustainalytics.
ESG Theme Theme Description Key Indicators
Social
Human Capital
Management
Evaluates the management of risks
related to human rights, labor rights, equality, talent development, employee retention, and labor health and safety
Product
Governance
Focuses on the management of risks
related to product quality, safety, wellness, and nutrition, as well as
customer data privacy & cybersecurity
•Discrimination policy
•Diversity programs•Gender pay equality / disclosures
•Employee development
•Supply chain management / standards
•Human rights policies & programs•Employee health & safety
•Product & service safety programs /
certifications
•Data privacy management
•Media & advertising ethics policy•Organic products / GMO policy
•Product health statement
Community
Relations
Assesses how companies engage with local communities and their management of access to essential products or
services to disadvantaged communities or groups
•Equitable pricing and availability
•Access to health care•Price transparency
ESG Financial
Integration &
Resilience*
Analyzes financial stability and issues
that pose systemic risks and potential external costs to society in the financial
services industry. Also measures ESG activities by financial institutions
•Human rights / indigenous policy•Community involvement programs
•Noise management
•Systemic risk management / reporting
•Tier 1 capital•Leverage ratio
•Responsible investment / asset management
•Underwriting standards
•Financial inclusion
•Credit & loan standards
•Green buildings investments
ESG Themes Glossary
ESG Theme Theme Description Key Indicators
Governance Corporate
Governance
Evaluates a company’s rules, policies,
and practices with a focus on how a company's board of directors manages
and oversees the operations of a company. Also assesses the
management of general professional ethics and lobbying activities
•Board/management quality & integrity
•Board structure
•Ownership & shareholder rights
•Remuneration•Audit & financial reporting
•Stakeholder governance
•Bribery & corruption policies / programs
•Money laundering policy
•Whistleblower programs
•Business ethics programs•Political involvement policy
•Lobbying and political expenses
* Only applies to financial service industries
ESG Themes listed w ere created by PFM for educational purposes based on the material ESG issues (“MEIs”) and ESG indicators developed and defined by Sustainalytics.
Disclosures
This material is based on information obtained from sources generally believed to be reliable and available to the public, however
PFM Asset Management LLC cannot guarantee its accuracy, completeness or suitability. This material is for general information
purposes only and is not intended to provide specific advice or a specific recommendation.All statements as to what will or may
happen under certain circumstances are based on assumptions, some but not all of which are noted in the presentation.
Assumptions may or may not be proven correct as actual events occur, and results may depend on events outside of your or our
control. Changes in assumptions may have a material effect on results. Past performance does not necessarily reflect and is not
a guaranty of future results. The information contained in this presentation is not an offer to purchase or sell any securities.
There is no guarantee the investment objectives will be achieved as the investment portfolio will only include holdings consistent
with the applicable Environmental, Social, and Governance (ESG) guidelines. As a result, the universe of investments available
will be more limited. ESG criteria risk is the risk that because the investment portfolio ESG criteria excludes securities of certain
issuers for nonfinancial reasons, the investment portfolio may forgo some market opportunities that would be available to
investment portfolios that do not apply ESG criteria.
PFM is the marketing name for a group of affiliated companies providing a range of services. All services are provided through
separate agreements with each company. This material is for general information purposes only and is not intended to provide
specific advice or a specific recommendation. Investment advisory services are provided by PFM Asset Management LLC, which
is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The information contained
is not an offer to purchase or sell any securities. The material contained herein is for informational purposes only. This content is
not intended to provide financial, legal, regulatory or other professional advice. Applicable regulatory information is available upon
request. For more information regarding PFM’s services or entities, please visit www.pfm.com.
Distribution List
City Council
Heidi Harmon
Mayor
Andy Pease
Vice Mayor
Aaron Gomez
Council Member
Erica A. Stewart
Council Member
Carlyn Christianson
Council Member
Investment Oversight
Committee
Heidi Harmon
Mayor
Daniel Humphrey
Public Member
Derek Johnson
City Manager
Brigitte Elke
Director of Finance
Debbie Malicoat
Accounting Manager/Controller
Natalie Harnett
Principal Financial Analyst—Budget
Independent Auditor
Badawi & Associates
PFM Asset
Management LLC
Monique Spyke
Managing Director