HomeMy WebLinkAbout09-09-2021 IOC Agenda PacketCity of San Luis Obispo, Agenda, Planning Commission
Agenda
INVESTMENT OVERSIGHT COMMITTEE
Thursday, September 9, 2021
Due to the recent increase in COVID-19 cases in San Luis Obispo County, City Administration has made the
difficult decision to return to a virtual meeting format. Members of the Investment Oversight Committee (IOC)
are allowed to attend the meeting via teleconference and participate in the meeting to the same extent as if they
were present. 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/84030531030?pwd=QkQ0REM2MnZDZjNmS2thb1g3eisrQT09
➢Call in: 1-669-900-6833
➢Webinar ID: 840 3053 1030
➢Passcode: 986863
2.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 – Join the webinar (instructions above). Once public comment for the item
you would like to speak on is called, please raise your virtual hand, your name will be called, and
your microphone will be unmuted. If you have questions, contact the office of the City Clerk at
cityclerk@slocity.org or (805) 781-7100
All comments submitted will be placed into the administrative record of the meeting.
Investment Oversight Committee Agenda for September 9, 2021 Page 2
1:30 p.m. REGULAR MEETING TELECONFERENCE
Broadcasted via webinar
OATH OF OFFICE: Committee Member Anni Wang
CALL TO ORDER: Chair Brigitte Elke
ROLL CALL : Committee Members Natalie Harnett, Derek Johnson, Debbie Malicoat, Erica
A. Stewart, Anni Wang, and Chair Brigitte Elke
OTHERS PRESENT: David Reeser, Managing Director for PFM Asset Management LLC
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 May 13, 2021
BUSINESS ITEMS
2.Presentation of ESG Investing 101.2
The City’s investment advisor will provide additional insight into ESG investing and the critical
factors to be considered. This information will further develop the commissioners’ ability to read
and interpret the ESG report results and applicable criteria.
3.Presentation of the Quarterly Investment Report on Portfolio Performance
The City’s investment advisor will present the quarterly investment report per June 30, 2021,
provide investment results, and portfolio adherence to the City’s investment policy.
Recommendation: Approve report and confirm investment policy compliance.
4.Retirement of the LIBOR Standard
The City’s investment advisor will provide a report on the retirement of the LIBOR Standard and
what it means for the City’s investments.
Investment Oversight Committee Agenda for September 9, 2021 Page 3
COMMENT AND DISCUSSION
The committee will review topics to discuss at the next regularly scheduled meeting.
ADJOURNMENT
The next Regular Meeting of the Investment Oversight Committee is scheduled for
Thursday, November 18 , 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 meet ings 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, May 13, 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, May 13,
2021, at 1:30 p.m. in the Council Hearing Room at 990 Palm Street, San Luis Obispo, California, by
Chair Brigitte Elke.
ROLL CALL
Present: Committee Members Natalie Harnett, Derek Johnson, Erica A. Stewart, and
Chair Brigitte Elke
Absent: Committee Member Debbie Malicoat
Others Present: David Reeser, Managing Director for PFM Asset Management LLC, Monique
Spyke, Managing Director for PFM Asset Management LLC, Stephanie Xiao,
Senior Analyst 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 February 11, 2021:
ACTION: UPON MOTION BY COMMITTEE MEMBER JOHNSON, SECONDED BY
COMMITTEE MEMBER HARNETT, CARRIED 4-0-1, to approve the February 11, 2021
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, May 13, 2021 Page 2
2. Presentation of the Quarterly Investment Report on Portfolio Performance
Monique Spyke, Managing Director for PFM Asset Management LLC, provided a PowerPoint
presentation and responded to Committee inquiries.
Public Comment
None
--End of Public Comment--
ACTION: UPON MOTION BY COMMITTEE MEMBER JOHNSON, SECONDED BY
COMMITTEE MEMBER STEWART, CARRIED 4-0-1, recommendation.
COMMENT AND DISCUSSION
Committee member Johnson asked that the committee receive a follow-up session on ESG
investing to better understand the applied criteria and the resulting analysis. The session will be
scheduled for the next regular meeting of the committee.
ADJOURNMENT
The meeting was adjourned at 2:19 pm. 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.
APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/XXXX
Quarterly Investment Report
AS OF JUNE 30, 2021
September 9, 2021
This report presents the City’s investment portfolio for
the quarter ending June 30,2021.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
Reopening Economy Drives GDP Growth
6.4%
10.0%
7.0%
5.0%
0%
2%
4%
6%
8%
10%
12%
Q1 Q2 Q3 Q4
2021
U.S. GDP Forecasts
Annualized Rate
Bloomberg Average
forecasts
■Fully open
■Opened in June
■Opening in July
■Criteria but no date set
Reopening Status of U.S. States
Sources: New York Times (left) and Bloomberg (right), Bureau of Economic Analysis, as of June 30, 2021.
Market
Considerations
•The consumer continues to be
the driving force behind recent
GDP growth as consumer
spending rose by 11.4% in Q2,
the second-fastest pace since
the 1960s.
•The U.S. Treasury yield curve
flattened modestly over the
quarter, as longer-term yields
slightly retraced while shorter-
term maturities inched higher
off rock-bottom lows.
Nevertheless, short-term rates
remain near historically low
levels.
Source: Bloomberg as of June 30, 2021.
Source: Bloomberg as of June 30, 2021.
45.2%
7.0%4.9%4.5%3.3%2.6%1.0%1.0%
0%
10%
20%
30%
40%
50%Used Cars &TrucksTobacco &Smoking Prod.ApparelCore CPI YoYNew CarsShelterAirline FareMedical CareYOY Price Change in Key Consumer Price Index
Components (June 2021)
0.04%
0.89%
1.47%
2.09%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3
M
1
Y
2
Y
3
Y
4
Y
5
Y
10
Y
30
YYieldMaturity
U.S. Treasury Yield Curve
June 30, 2021
March 31, 2021
Market
Considerations
•Diversification away from
U.S. Treasuries was again
additive to performance in
the second quarter. Broad
global demand for yield has
continued to push spreads of
most bonds tighter.
•Investment grade corporates
generated positive returns
this quarter as spreads
tightened due to the prospect
of strong corporate earnings
and supportive monetary
policy.
Source: Bloomberg as of June 30, 2021.
1-5 Year Indices
0.11%0.18%0.16%
0.61%
0.95%
-0.5%
0.0%
0.5%
1.0%U.S. TreasuryAgencyABSCorp A-AAACorp BBBSecond Quarter 2021
-0.42%
-0.25%
0.13%
-0.01%
0.49%
-0.5%
0.0%
0.5%
1.0%U.S. TreasuryAgencyABSCorp A-AAACorp BBBYTD 2021
What we are
watching…
•Despite significant progress
toward a comprehensive
economic recovery,
headwinds persist and
mixed signals remain.
Inflation is rising sooner than
in previous cycles, with core
consumer prices recently
showing the sharpest
monthly increase since
1982.
•Economists and strategists
have moderated long-term
growth projections as
uncertainty remains a key
characteristic of our current
environment. Perhaps the
term “cautious optimism”
best describes the current
mood as we near what we
hope to be the final innings
of the pandemic.
Source: Federal Reserve, economic projections as of March 2021 and June 2021.
2.2%2.0%2.1%2.0%
3.4%
2.1%2.2%2.0%
0%
1%
2%
3%
4%
2021 2022 2023 Longer
Run
Federal Reserve Projections
Core PCE Inflation
March Projections June Projections
2.3%
2.5%
0%
1%
2%
3%
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
Breakeven Inflation Rates
10 Yr.5 Yr.
Source: Bloomberg as of June 30, 2021.
Current Cash & Investment Summary
The following is a summary of the City’s cash and
investments based on market value, as of
June 30, 2021, compared to the prior quarter.
Investment Entity June 30, 2021 March 31, 2021 Percent of Total**
City Held Cash & Investments $38,554,679 $34,415,093 23%
LAIF Held Investments $23,976,796 $23,950,630 14%
PFM Managed Investments*$103,481,426 $103,382,052 62%
Trustee Held Investments $72,724 $72,644 <1%
TOTAL $166,085,625 $161,820,420 100%
*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. 3/31/21
Permitted by
Policy In Compliance
U.S. Treasury $49,210,583 47.6%+2.4%100%
Federal Agency $30,045,203 29.0%-1.2%100%
Municipal Obligations $2,214,464 2.1%-30%
Negotiable CDs $5,066,867 4.9%-0.9%30%
Corporate Notes $12,616,246 12.2%-0.1%30%
Asset-Backed
Securities $4,045,197 3.9%-0.2%15%
Securities Sub -Total $103,198,560
Money Market Fund $282,866 0.3%-20%
Accrued Interest $350,003
Securities Total $103,831,429
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-t erm
performance and
growth
•Affected by both yield
an d market valu e
fluctuations
•Reflects “true value” of
t he portfolio
•Recommended
ap proach by th e
Government Finance
Officers Association
PFM Managed 06/30/2021 03/31/2021
Average Maturity
(Years)2.37 2.38
Effective Duration1 2.15 2.16
Average Market Yield 0.45%0.43%
Total Rate
of Return 3 Months 1 Year 3 Years Since
Inception
City of SLO 0.13%0.21%3.15%1.92%
0–5 Treasury
Index 0.09%-0.18%2.91%1.71%
Variance +0.04%+0.39%+0.24%+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 June 30, 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.
I nvestment Portfolio Benefits All Funds
The City’s cash and i nvestment portfolio r epresents
money fr om all City fund s, i ncluding the General Fund,
enterprise funds (Water, S ewer, Parking, T ransit),
special r evenue funds (T ouri sm, D owntown
Assessments), capital projects funds, and other funds
which are restricted to s pecific p urposes.
In general, monies held b y the City ar e either allocated
by the City C ouncil for spending or are p urp osefully
retained in r eserve. F or ex ample, the money i n the
Capital O utlay F und has been i dentified to p rovide
particular capital pr ojects for t he communit y, and there
is a plan for s pending d own the cash b alance as the
projects p rogress. B alances held i n r eserve 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.
ESG Overview
1. Market Value includes accrued interest as of June 30, 2020.
Source: Sustainalytics. Please see important disclosures at the end of this presentation.
ESG Performance Summary Q2 2021
ESG Rated Portfolio
29/39 issuers with a MV of $103.8 million1
$51,177,773 (49%)
Non-ESG Rated Issuers:
U.S. Treasuries, Municipal Bonds, and Federal Farm Credit Banks
Sector Allocation
U.S. Treasury
Municipal
Non ESG-Rated Federal
Agency & Agency MBS
Fannie Mae
Freddie Mac
FHLB
Corporate Notes
Certificates of Deposit
ABS
Green shades are ESG-rated sectors
0%13%
79%
8%0%0%
13%
81%
7%0%
1.Sustainalytics’ characterizations of ESG performance.
Source: Sustainalytics. Data as of June 30, 2021 and March 31, 2021, 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
Exposure
ES
G
Ris
k
Rat
ing
ESG
Risk Rating1
22.7
Negligible Low Medium High Severe
22.7
6/30/21 3/31/21
Exposure1
Management1
Low Medium High
Weak Average Strong
41.4 42.0
47.748.8
•On average, the portfolio
maintained medium ESG risk
as of June 30, 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.
Lower management scores
generally increase ESG risk.
Source: Sustainalytics. ESG Themes were created by PFM based on the material ESG issues (“MEIs”) and ESG indicators developed and
defined by Sustainalytics. Please see the ESG Themes Glossary provided in the Appendix for additional information and details. *Only
applies to financial service industries.
Average ESG Risk by ESG Theme
1.6 8.912.2 Portfolio ESG
Risk Rating:
22.7
E S G
++=
•Environmental risk evaluates
how a company manages its
environmental impact and
carbon footprint
•Social risk analyzes how a
company treats employees,
customers, the community, and
other stakeholders as well as
other companies it interacts
with
•Governance risk assesses how
a company is managed from
the perspective of executive
pay, internal controls, board
composition, lobbying
practices, and related issues
Carbon Output &
Energy Use
5%
Waste &
Pollution
<1%
Resource Use &
Biodiversity
<1%Community Impact
(Environmental)
1%
Human Capital
Management
16%
Product
Governance
28%
Community Impact
(Social)
1%
ESG Financial
Integration &
Resilience*
9%
Corporate
Goverance
40%
Portfolio holdings and Sustainalytics data as of June 30, 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
30.4 22.5 23.7 27.2 14.9 24.4 19.5 17.0 14.0 16.90
10
20
30
40
ESG Risk Rating by Industry
Average ESG Risk Rating = 22.7
4 10 3 1 1 2 3 1 3 1
Industry Distribution
(# of Issuers)
7.8%64.3%
5.5%
5.7%
1.1%
2.9%
5.7%
1.2%
4.0%
2.1%
(Allocation % of Market Value )
Source: Sustainalytics and the Investment Policy Statement as of June 30, 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 Q2
Largest Decreases in ESG Risk Rating
International Business Machines Corp
Credit Suisse Group AG
Skandinaviska Enskilda Banken AB
↓3.4
↓1.8
↓1.4
14.6
30.0
22.4
•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
Amazon.com Inc
Sumitomo Mitsui Financial Group Inc
Bristol-Myers Squibb Company
30.9
27.8
23.0
•Increase in ESG exposure in carbon
output & energy use and human
capital management
•Decrease in ESG management score
•Decrease in ESG management score
↑3.5
↑0.9
↑0.4
Holdings as of June 30, 2021 –Sorted By ESG Risk Rating
Source: Sustainalytics. Holdings as of June 30, 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 June 30 2021 to March 31, 2021. Issuers with “-” under ESG contributions
means data not available.
Issuer % Weight Subindustry Subindustry
Percentile
ESG
Risk
Rating
6/30/21
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
9 11.6 -28%39%33%
CarMax Inc.1.0%Automotive Retail 22 13.1 --67%33%
International
Business Machines
Corp
0.7%IT Consulting 6 14.6 -3.4 3%46%51%
Walt Disney Co 0.5%Movies and
Entertainment 18 14.9 -1.3 -44%56%
DNB ASA 0.6%Diversified Banks 3 15.7 -0.1 4%46%50%
Mastercard
Incorporated 0.6%Data Processing 14 16.3 --47%53%
Apple Inc 1.0%Technology
Hardware 15 16.9 0.2 6%39%55%
Intel Corp 0.6%
Semiconductor
Design and
Manufacturing
4 17.0 0.1 29%30%42%
Federal National
Mortgage
Association
15.0%Thrifts and
Mortgages 10 20.2 --61%39%
Nordea Bank AB 1.1%Diversified Banks 13 21.4 -0.2 2%44%53%
Skandinaviska
Enskilda Banken AB 1.2%Diversified Banks 16 22.4 -1.5 4%43%54%
Bristol-Myers Squibb
Company 0.3%Biotechnology 4 23.0 0.4 -68%32%
Holdings as of June 30, 2021 –Sorted By ESG Risk Rating
Source: Sustainalytics. Holdings as of June 30, 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 June 30 2021 to March 31, 2021. Issuers with “-” under ESG contributions
means data not available.
Issuer % Weight Subindustry Subindustry
Percentile
ESG
Risk
Rating
6/30/21
QoQ
Change
in ESG
Rating
Contributions
E S G
Capital One
Financial
Corporation
0.1%Consumer Finance 15 23.2 0.1 -58%42%
Ally Financial Inc.0.0%Consumer Finance 20 23.5 -0.2 -59%41%
Federal Home Loan
Bank System 2.5%Consumer Finance 22 23.7 --56%44%
Pfizer Inc 1.1%Pharmaceuticals 4 24.8 -0.5 6%56%38%
Federal Home Loan
Mortgage Corp 10.7%Thrifts and
Mortgages 28 24.8 0.3 7%56%37%
Societe Generale SA 0.8%Diversified Banks 26 25.7 -0.2 5%33%62%
Bank of America
Corporation 0.6%Diversified Banks 28 26.4 -5%43%51%
Walmart Inc.2.8%Food Retail 52 27.2 -0.3 14%62%24%
Sumitomo Mitsui
Financial Group Inc 0.6%Diversified Banks 33 27.8 0.9 7%46%47%
JPMorgan Chase &
Co.0.5%Diversified Banks 35 28.2 0.3 3%48%49%
Honda Motor Co Ltd 1.5%Automobiles 46 28.8 0.2 24%43%32%
Credit Suisse Group
AG 0.6%Diversified Banks 41 30.0 -1.8 5%40%56%
Toyota Motor
Corporation 1.6%Automobiles 54 30.4 -0.2 22%44%34%
Holdings as of June 30, 2021 –Sorted By ESG Risk Rating
Source: Sustainalytics. Holdings as of June 30, 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 June 30 2021 to March 31, 2021. Issuers with “-” under ESG contributions
means data not available.
Issuer % Weight Subindustry Subindustry
Percentile
ESG
Risk
Rating
6/30/21
QoQ
Change
in ESG
Rating
Contributions
E S G
Amazon.com Inc 1.1%Online and Direct
Marketing Retail 99 30.9 3.5 25%43%32%
Nissan Motor Co Ltd 0.6%Automobiles 74 32.8 -0.3 29%43%28%
Hyundai Motor
Company 0.2%Automobiles 92 36.1 -0.1 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
Capital One Prime Auto Receivables Automobiles Manufacturing
Carmax Auto Owner Trust Automobiles Manufacturing
Honda Auto Receivables Automobiles Manufacturing
Hyundai Auto Receivables Automobiles Manufacturing
Nissan Auto Receivables Automobiles Manufacturing
Toyota Motor Corp Automobiles Manufacturing
Credit Suisse Group 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 Earthquake Authority Financing & Development
California St General Government
Maryland St 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
Source: Bloomberg. BICs is an industry classification system developed and utilized by Bloomberg that classifies
securities based on business, economic function, and other characteristics.
Appendix
- Additional ESG Information
-ESG Themes Information
Source: Sustainalytics. ESG Themes were created by PFM based on the material ESG issues (“MEIs”) and ESG indicators developed and
defined by Sustainalytics. Please see the ESG Themes Glossary provided in the Appendix for additional information and details. *Only
applies to financial service industries.
ESG Risk Exposure by ESG Theme
0%10%20%30%40%50%
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
1%
23%
% ESG Managed Risk% of ESG Risk Exposure
40%
11%
15%
1%
8%
Percentages represent total exposure
E S G
<1%%
1%
0 5 10 15 20 25 30 35 40
Federal Agency
Certificates of Deposit
Corporate Notes
ABS
ESG Risk Rating
Source: Sustainalytics. Data as of June 30, 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
26.0
23.5
22.3
ESG Themes Glossary
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
•Carbon intensity
•Renewable energy use
•Env. Mgt. System certification
•GHG reporting / risk management
•Hazardous products
•Sustainable products & services
Waste & Pollution
Evaluates the management of emissions
and releases from a company’s own
operations to air, water, and land, excluding
greenhouse gas emissions
•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
•Site closure & rehabilitation
•Water intensity & risk management
•Forest certifications
•Supplier environmental programs / certifications
•Sustainable agriculture programs
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
•Env Impact –Community Relations
•Env Impact –Products & Services
•Env Impact –Occupational Health and Safety
•Env Impact –Product Governance
ESG Themes Glossary
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
•Discrimination policy
•Diversity programs
•Gender pay equality / disclosures
•Employee development
•Supply chain management / standards
•Human rights policies & programs
•Employee health & safety
Product
Governance
Focuses on the management of risks
related to product quality, safety,
wellness, and nutrition, as well as
customer data privacy & cybersecurity
•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
•Human rights / indigenous policy
•Community involvement programs
•Noise management
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
•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
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