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HomeMy WebLinkAbout08-11-2022 IOC Agenda PacketCityofSanLuis Obispo, Agenda, Planning Commission Agenda INVESTMENT OVERSIGHT COMMITTEE Thursday, August 11, 2022 3:00 p.m. REGULAR MEETING Council Hearing Room 990 Palm Street San Luis Obispo, CA 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 12, 2022 BUSINESS ITEMS 2. Presentation of the Quarterly Investment Report on Portfolio Performance & Economic Outlook Recommendation: Receive and confirm investment policy compliance. Investment Oversight Committee Agenda for Thursday, August 11, 2022 Page 2 COMMENT AND DISCUSSION 3. Staff Updates and agenda forecast ADJOURNMENT The next Regular Meeting of the Investment Oversight Committee is scheduled for Thursday, November 17, 2022, at 3:00 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, May 12, 2022 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 12, 2022, at 3:00 p.m. in the Council Hearing Room at City Hall, 990 Palm Street, San Luis Obispo, by Chair Brigitte Elke. ROLL CALL Present: Committee Members Natalie Harnett, Debbie Malicoat, Anni Wang, and Chair Brigitte Elke Absent: Committee Members Derek Johnson and Erica A. Stewart Others Present: David Reeser, Managing Director for PFM Asset Management LLC, Monique Spyke, Managing Director for PFM Asset Management LLC, and Deputy City Clerk Megan Wilbanks 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 10, 2022 PUBLIC COMMENT None End of Public Comment-- ACTION: UPON MOTION BY COMMITTEE MEMBER WANG SECONDED BY COMMITTEE MEMBER HARNETT CARRIED 4-0-0 (COMMITTEE MEMBERS JOHNSON AND STEWART ABSENT), to approve the February 10, 2022, minutes, as presented. CityofSanLuisObispo,Title,Subtitle Minutes - Investment Oversight Committee Minutes of Thursday, May 12, 2022 Page 2 BUSINESS ITEMS 2. Presentation of the Quarterly Investment Report on Portfolio Performance & Economic Outlook Monique Spyke and David Reeser, Managing Directors for PFM Asset Management LLC, provided an update via PowerPoint presentation and responded to Committee inquiries. Public Comment None End of Public Comment-- ACTION: UPON MOTION BY COMMITTEE MEMBER MALICOAT, SECONDED BY COMMITTEE MEMBER WANG, CARRIED 4-0-0 (COMMITTEE MEMBERS JOHNSON AND STEWART ABSENT) recommendation accept the report and adheres to the City’s policies. COMMENT AND DISCUSSION None ADJOURNMENT The meeting was adjourned at 4:00 p.m. The next Regular Meeting of the Investment Oversight Committee is scheduled for Thursday, August 11, 2022, at 3:00 p.m. APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/XXXX Quarterly Investment Report AS OF June 30, 2022 August 11, 2022 This report presents the City’s investment portfolio for the quarter ending June 30,2022.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 Considerations U.S. economic conditions were characterized by: •persistently high inflation; •declining consumer sentiment; •slowing economic growth and increasing recession probabilities; •more aggressive Federal Reserve (Fed) monetary policy tightening; •rising yields and decade-high mortgage rates; and •elevated volatility and risk-off sentiment in credit and equity markets. As a result of surging, the Fed lifted the overnight federal funds target rate three times in the first half of 2022, in March, May and June. Source: Bloomberg as of June 30, 2022. 1-5 Year Indices 1.63% 2.95%3.04%3.01%3.18% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 3 M 1 Y 2 Y 3 Y 4 Y 5 Y 10 Y 30 YMaturity U.S. Treasury Yield Curve June 30, 2022 March 31, 2022 December 31, 2021 -0.81%-0.90%-0.68% -1.66% -2.21% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0%U.S. TreasuryAgencyABSCorp A-AAACorp BBBQ2 2022 What we are watching… The economic recovery has developed several risk factors looming over continued recovery, including: •continued price pressures; •increased probability of recession; •aggressive monetary policy tightening; and •the ever-present risk of a Covid resurgence. At quarter end, expectations were for an additional 75-bp Fed rate increase and a terminal rate of 3.25% to 3.75% for the year in order to combat persistent inflation. The Fed has also started the process of balance sheet reduction, with the pace to double beginning in September. Source: Bloomberg as of June 2022. Bloomberg Forecasts Q2 ‘22 Q3 ‘22 Q4 ‘22 Q1 ‘23 8.6% -4% -2% 0% 2% 4% 6% 8% 10% Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Consumer Prices (CPI) Top-Line Contributions and Year-over-Year Reading Services (Ex Food & Energy)Goods (Ex Food & Energy) Food Energy Headline Projection Headline YoY% Current Cash and Investment Summary The following is a summary of the City’s cash and investments based on market value, as of June 30, 2022, compared to the prior quarter. Investment Entity June 30, 2022 March 31, 2022 Percent of Total** City Held Cash & Investments $58,900,007.26 $73,995,643.53 26% LAIF Held Investments $69,043,739.64 $24,024,807.47 30% PFM Managed Investments*$99,744,420.25 $100,438,433.94 44% Trustee Held Investments $72,926.58 $72,869.16 <1% TOTAL $227,761,093.93 $198,531,754.10 100% *Figures shown exclude accrued interest. **Details may not add up to total due to rounding. Current Cash and 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 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. Security Type Market Value % of Portfolio % Change vs. 3/31/22 Permitted by Policy U.S. Treasury 56,725,858.94 56.9%2.0%100% Federal Agency 22,151,947.79 22.2%0.0%100% Municipal Obligations 2,081,844.60 2.1%0.0%30% Negotiable CDs 3,354,299.32 3.4%-1.2%30% Corporate Notes 13,692,136.84 13.7%-0.1%30% Asset-Backed Securities 1,688,831.67 1.7%-0.6%15% Securities Sub-Total 99,694,919.16 Money Market Fund $49,501.29 <0.0%-0.1%20% Accrued Interest 290,441.74 Securities Total 100,034,862.19 100.0% PFMAM Managed 6/30/2022 3/31/2022 Average Maturity (Years)2.04 2.15 Effective Duration1 1.91 2.01 Average Market Yield 2.88%2.10% 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 Total Rate of Return 3 Months 1 Year 3 Years Since Inception City of SLO -0.64%-3.66%0.39%1.16% 0–5 Treasury Index -0.65%-3.68%0.19%0.98% Variance 0.01%0.02%0.20%0.19% 1Effective duration is the approximate percentage change in price for each 1% change in interest rates. 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 June 30, 2022. Source: Sustainalytics. Please see important disclosures at the end of this presentation. ESG Performance SummaryQ2 2022 ESG Rated Portfolio 27/35 issuers with a MV of $100.0 million1 Green shades are ESG-rated sectors 57% 2% 22% 14% 3% 2% Sector Allocation U.S. Treasury Municipal Federal Agency & MBS Corporate Notes Certificates of Deposit ABS $41,053,561 (41%) 0% 47%50% 3%0%0% 47%50% 3%0% 0 20 40 60 80 100 Management Exposure ES G Ris k Rat ing Sustainalytics’ characterizations of ESG performance Source: Sustainalytics. Data as of June 30, 2022 and March 31, 2022, as indicated. Please see important disclosures at the end of this presentation ESG Quarter-Over-Quarter Summary Comparison ESG Risk Rating 21.3 Negligible Low Medium High Severe 21.5 6/30/22 3/31/22 Exposure Management Low Medium High Weak Average Strong 42.042.1 51.951.6 •On average, the portfolio maintained medium ESG risk as of June 30, 2022 •The portfolio’s ESG risk exposure score remained within the medium range. A lower ESG exposure score generally reduces ESG risk •The portfolio’s ESG management rating improved during the quarter, moving further into the strong range. Higher management scores generally reduce ESG risk 29.1 21.4 20.7 24.6 16.6 14.2 24.8 18.7 16.7 14.80 10 20 30 40 ESG Risk Rating by Industry Portfolio holdings and Sustainalytics data as of June 30, 2022. “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 Average ESG Risk Rating = 21.3 Universe Average ESG Risk Rating by Industry 3 7 5 1 1 1 2 4 1 21 Industry Distribution (# of Issuers) 4%60%10%7% 2% 1% 3%8% 1% 3% (Allocation % of Market Value ) Source: Sustainalytics and the Investment Policy Statement as of June 30, 2022. 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 Walmart Inc. Honda Motor Co. Deere and Co. ↓2.8 ↓0.7 ↓0.5 24.6 29.0 16.6 Largest Increases in ESG Risk Rating Nordea Bank AB JPMorgan Chase and Co. Bristol-Myers Squibb Company 22.5 28.9 22.8 ↑1.9 ↑0.6 ↑0.4 Exposure Management Exposure Management 0.0 ↑1.4 Exposure Management ↑2.0 ↑5.0 Exposure Management ↑3.9 0.0 Exposure Management ↑0.8 ↓0.4 Exposure Management ↑0.3 ↓0.5 ↓2.4 ↑3.4 Holdings as of June 30, 2022 –Sorted By ESG Risk Rating Source: Sustainalytics. Holdings as of June 30, 2022. 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, 2022 to March 31, 2022. Issuers with “-” under ESG contributions means data not available. Issuer % Weight Subindustry Subindustry Percentile ESG Risk Rating 6/30/22 QoQ Change in ESG Rating Contributions E S G CarMax Inc.0.7%Automotive Retail 11 12.0 --65%35% Adobe Systems Inc 0.6% Enterprise and Infrastructure Software 2 12.5 -6%45%38% The Home Depot Inc 0.8%Home Improvement Retail 17 12.6 -29%42%29% Walt Disney Co 0.5%Movies and Entertainment 13 14.2 --46%54% Target Corp 0.7%Department Stores 8 14.7 -16%49%35% Deere & Co 0.7%Agricultural Machinery 14 16.6 (0.5)19%41%23% Intel Corp 0.6% Semiconductor Design and Manufacturing 4 16.7 +0.1 32%28%40% Mastercard Incorporated 0.6%Data Processing 17 17.2 --41%52% Federal National Mortgage Association 11.6%Thrifts and Mortgages 14 18.3 --60%40% Federal Home Loan Bank System 2.5%Consumer Finance 9 18.8 --53%47% Bank of New York Mellon Corp 0.9% Asset Management and Custody Services 12 21.5 -6%40%54% Ally Financial Inc.0.0%Consumer Finance 21 22.2 +0.2 -59%41% Nordea Bank AB 1.2%Diversified Banks 22 22.5 +1.9 2%44%54% Capital One Financial Corporation 0.0%Consumer Finance 25 22.6 --61%39% Holdings as of June 30, 2022 –Sorted By ESG Risk Rating Source: Sustainalytics. Holdings as of June 30, 2022. 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, 2022 to March 31, 2022. Issuers with “-” under ESG contributions means data not available. Issuer % Weight Subindustry Subindustry Percentile ESG Risk Rating 3/31/22 QoQ Change in ESG Rating Contributions E S G Bristol-Myers Squibb Company 0.3%Biotechnology 6 22.8 +0.4 -67%33% Federal Home Loan Mortgage Corp 7.3%Thrifts and Mortgages 27 23.2 --58%42% Skandinaviska Enskilda Banken AB 1.2%Diversified Banks 27 24.0 +0.3 3%39%58% Barclays PLC 1.0%Diversified Banks 30 24.3 -7%33%61% Walmart Inc.2.7%Food Retail 39 24.6 (2.8)17%56%27% Pfizer Inc 1.1%Pharmaceuticals 5 25.3 +0.2 5%53%36% Federal Farm Credit Banks Consolidated Systemwide Bonds 0.8%Consumer Finance 45 25.7 ---- Bank of America Corporation 1.5%Diversified Banks 40 27.2 (0.1)5%43%52% Toyota Motor Corporation 1.0%Automobiles 47 28.9 -25%38%36% JPMorgan Chase & Co.1.1%Diversified Banks 45 28.9 +0.6 3%45%52% Honda Motor Co Ltd 0.5%Automobiles 48 29.0 (0.7)28%43%29% Amazon.com Inc 1.1%Online and Direct Marketing Retail 92 30.3 +0.1 19%36%33% Nissan Motor Co Ltd 0.1%Automobiles 76 31.7 +0.1 29%42%29% 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 tables to the right show the Bloomberg Industry Classifications (“BICS”) for all the portfolio’s holdings. Issuer Sector (BICS) Hyundai Auto Receivables Automobiles Manufacturing Honda Auto Receivables Automobiles Manufacturing Carmax Auto Owner Trust Automobiles Manufacturing Capital One Prime Auto Rec Trust Automobiles Manufacturing Ally Auto Receivables Trust Automobiles Manufacturing Nissan Auto Receivables Automobiles Manufacturing Toyota Motor Corp Automobiles Manufacturing Nordea Bank Ab Banks Sumitomo Mitsui Financial Group Inc Banks Barclays Bank PLC Banks Skandinaviska Enskilda Banken Ab Banks Mastercard Inc Consumer Finance JPMorgan Chase & Co Diversified Banks Bank Of America Co Diversified Banks San Diego Ca Cmnty Clg Dist Education University Of California Education Los Angeles Community College District CA Education The Walt Disney Corporation Entertainment Content The Bank Of New York Mellon Corporation Financial Services Issuer Sector (BICS) Dnb Asa Financial Services California Earthquake Authority Financing & Development California St General Government Maryland St General Government FHLB Government Agencies FNMA Government Agencies FFCB Government Agencies FHLMC Government Agencies Deere & Company Machinery Manufacturing Target Corp Mass Merchants Wal-Mart Stores Inc Mass Merchants Bristol-Myers Squibb Co Pharmaceuticals Pfizer Inc Pharmaceuticals Home Depot Inc Retail -Consumer Discretionary Amazon.Com Inc Retail -Consumer Discretionary Intel Corporation Semiconductors Adobe Inc 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. Distribution List City Council Erica A. Stewart Mayor Andy Pease Council Member Michelle Shoresman Council Member Carlyn Christianson Council Member Jan Marx Council Member Investment Oversight Committee Erica A. Stewart Mayor Anni Wang 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 Appendix -Additional ESG Information -ESG Themes Information 0 5 10 15 20 25 30 35 40 Federal Agency & MBS Certificates of Deposit Corporate Notes ABS ESG Risk Rating Source: Sustainalytics. Data as of June 30, 2022. 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) 22.5 22.0 22.6 20.2 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 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 Impact (Social) 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 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 consi stent with the applicable Environmental, Social, and Governance (ESG) guidelines. As a result, the universe of investments availab le 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 Asset Management LLC ("PFMAM") is an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bancorp Asset Management, Inc. ("USBAM"). USBAM is a subsidiary of U.S. Bank National Association ("U.S. Bank"). U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of PFMAM. The information contained is not an offer to purchase or sell any securities. Additional applicable regulatory information is available upon request. For more information regarding PFMAM's services or entities, please visit www.pfmam.com.