Loading...
HomeMy WebLinkAbout11-17-2022 IOC Agenda PacketCity of San Luis Obispo, Agenda, Planning Commission Agenda INVESTMENT OVERSIGHT COMMITTEE Thursday, November 17, 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 Teresa Purrington, 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 August 11, 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, November 17, 2022 Page 2 COMMENT AND DISCUSSION 3. Staff Updates and agenda forecast a. JP Morgan Liquidity Solution b. CAMP Investment options ADJOURNMENT The next Regular Meeting of the Investment Oversight Committee is scheduled for Thursday , February 9, 2023 , 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 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, August 11, 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 3:04 p.m. in the Council Hearing Room at City Hall, 990 Palm Street, San Luis Obispo, by Member Debbie Malicoat. ROLL CALL Present: Committee Members Natalie Harnett, Debbie Malicoat, Derek Johnson and Erica A. Stewart Absent: Committee Members Anni Wang, and Chair Brigitte Elke Others Present: David Reeser, Sarah Meacham, and Sarah Walsh, Managing Director for PFM Asset Management LLC and City Clerk Teresa Purrington 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 May 12, 2022 PUBLIC COMMENT None --End of Public Comment-- ACTION: UPON MOTION BY COMMITTEE MEMBER HARNETT SECONDED BY COMMITTEE MEMBER JOHNSON CARRIED 4-0-2 (COMMITTEE MEMBER WANG AND CHAIR ELKE ABSENT), to approve the May 12, 2022, minutes, as presented. City of San Luis Obispo, Title, Subtitle Minutes - Investment Oversight Committee Minutes of Thursday, August 11, 2022 Page 2 BUSINESS ITEMS 2. Presentation of the Quarterly Investment Report on Portfolio Performance & Economic Outlook Sarah Meacham, Sarah Walsh, and David Reeser, 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 HARNETT, SECONDED BY COMMITTEE MEMBER STEWART, CARRIED 4-0-2 (COMMITTEE MEMBER WANG AND CHAIR ELKE ABSENT) recommendation accept the report and adheres to the City’s policies. COMMENT AND DISCUSSION None ADJOURNMENT The meeting was adjourned at 3:58 p.m. The next Regular Meeting of the Investment Oversight Committee is scheduled for Thursday, November 17 , 20 22, at 3:00 p.m. APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/XXXX Quarterly Investment Report AS OF September 30, 2022 This report presents the City’s investment portfolio for the quarter ending September 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: •Persistent high inflation •A deteriorating housing market •Continued personal consumption that is impacting household savings and balance sheets •Increasing hard recession probabilities The Federal Reserve has committed to a heavy-handed policy •Expectations have shifted from a soft landing to a moderate/hard landing, with increased recession risks •Short-term fed funds rate projected to reach 4.25% to 4.50% by year end As a result of rising rates and increased volatility, quarterly and trailing total returns were negative. Source: Bloomberg as of September 30, 2022. 1-5 Year Indices 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 3 M 1 Y 2 Y 3 Y 4 Y 5 Y 10 Y 30 YMaturity U.S. Treasury Yield Curve September 30, 2022 June 30, 2022 December 31, 2021 -2.28%-2.17% -0.85% -2.18% -1.84% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0%U.S. TreasuryAgencyABSCorp A-AAACorp BBBQ3 2022 What we are watching… The overall economic outlook has deteriorated as recessionary risks begin to mount. The housing market cooled, and the combination of higher prices and borrowing rates has negatively affected housing affordability. Strong jobs reports and cheaper gasoline prices have helped consumer confidence, but the direct impact of higher prices is coming at the expense of personal balance sheets. We expect the Federal Reserve to implement restrictive monetary policy through continued rate hikes and balance sheet reductions. We are likely to maintain our short- duration posture and continue to utilize Treasury allocations to take advantage of opportunities to diversify portfolios as they present themselves. Source: Federal Reserve, latest economic projections as of September 2022. 0.2% 1.2% 1.7%1.8% 0% 1% 2% 3% 2022 2023 2024 Longer Run Change in Real GDP June Projections Sept Projections 3.8% 4.4%4.4%4.0% 0% 1% 2% 3% 4% 5% 2022 2023 2024 Longer Run Unemployment Rate June Projections Sept Projections 4.5% 3.1% 2.3% 0% 2% 4% 6% 2022 2023 2024 Core PCE Inflation June Projections Sept Projections 4.4%4.6% 3.9% 2.5% 0% 1% 2% 3% 4% 5% 2022 2023 2024 Longer Run Federal Funds Rate June Projections Sept Projections Current Cash and Investment Summary The following is a summary of the City’s cash and investments based on market value, as of September 30, 2022, compared to the prior quarter. Investment Entity September 30, 2022 June 30, 2022 Percent of Total** City Held Cash & Investments $45,840,882.40 $58,900,007.26 21% LAIF Held Investments $69,136,285.63 $69,043,739.64 32% PFMAM Managed Investments*$98,233,427.05 $99,744,420.25 46% TOTAL $213,424,862.84 $227,761,093.93***100% *Figures shown exclude accrued interest. **Details may not add up to total due to rounding. ***Differs from last quarters report due to removal of Trustee Account. Current Cash and Investment Summar y 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 r ather 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 p rojects can reduce the portfolio substantially in the q uarter 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. 6/30/22 Permitted by Policy U.S. Treasury 57,032,574.70 58.1%0.5%100% Federal Agency 23,374,483.35 23.8%5.5%100% Municipal Obligations 2,049,818.20 2.1%-1.5%30% Negotiable CDs 1,013,104.07 1.0%-69.8%30% Corporate Notes 13,469,117.23 13.7%-1.6%30% Asset-Backed Securities 1,220,273.57 1.2%-27.7%15% Securities Sub -Total 98,159,371.12 Money Market Fund 74,055.93 0.1%49.60%20% Accrued Interest 288,323.69 Securities Total 98,521,750.74 100.0% PFMAM Managed 9/30/2022 6/30/2022 Average Maturity (Years)2.17 2.07 Effective Duration1 1.97 1.91 Average Market Yield 4.16%2.88% 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 Total Rate of Return 3 Months 1 Year 3 Years Since Inception City of SLO -1.51%-5.12%-0.39%0.92% 0–5 Treasury Index -1.70%-5.33%-0.62%0.72% Variance 0.19%0.21%0.23%0.20% 1Effective duration is the approximate percentage change in price for each 1% change in interest rates. The picture can't be displayed. Investment Objectives The investment o bjectives o f t he City o f S an Luis Obispo ar e first, to provide safety o f p rincipal to ensure the preservation o f capital i n t he overall portfolio; second, to provide sufficient liquidity to meet all operating requirements; and third, t o ear n a commensurate rate of r eturn consistent with the constraints i mposed b y the safety and l iquidity o bjectives. T he City follows the practice of pooling cash and investments for all funds under its d irect contr ol. Funds held b y out side fiscal agents und er provisions o f b ond i ndentures ar e maintained s eparately. Interest ear ned on p ooled cash and i nvestments i s al located q uarterly to the various Quarterly Investment Report f unds b ased o n the respective fund’s average quarterly cash b alance. Interest earned from cash and investments w ith f iscal ag ents i s credited d irectly to the related accounts. It is common for g overnments to p ool t he cash and i nvestments of v ari ous funds to i mpr ove i nvestment p er formance. B y p ooling fund s, t he C ity can benefit from economies of scale, diversification, liquidity, and ease of administration. The City uses the services of an investment advisor, PFM Asset M anagement, to manag e a portion o f t he City’s p ortfolio. T he City’s strategy is to retain approximately 25% of the portfolio to manage its day-to- day cash flow needs, while PFMAM’s focus is on longer-term investment management. In addition, t he City has r etained d irect control o f s everal investments that had been acquired b efore the City b egan to use investment ad visors. All i nvestments ar e held b y the City i n a safekeeping account with Bank o f N ew York M ellon, ex cept f or i nvestments held b y trustees r elated to b ond f inancings, which ar e held b y ei ther US Bank o r Bank of N ew York M ellon. 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 the 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 sub-industry definitions, and sub- industry rankings as provided by Sustainalytics. 1. Market Value includes accrued interest as of September 30, 2022. Source: Sustainalytics. Please see important disclosures at the end of this presentation. ESG Performance SummaryQ3 2022 ESG Rated Portfolio 23/30 issuers with a MV of $98.4 million1 Green shades are ESG-rated sectors $39,200,940 (40%) 58% 2% 24% 14% 1% 1% Sector Allocation U.S. Treasury Municipal Federal Agency & MBS Corporate Notes Certificates of Deposit ABS 0 20 40 60 80 100 Management Exposur e ESGRiskRating 0% 52%45% 3%0%0% 47%50% 3%0% Sustainalytics’ characterizations of ESG performance Source: Sustainalytics. Data as of September 30, 2022, and June 30, 2022 , as indicated. Please see important disclosures at the end of this presentation. ESG Quarter - Over -Quarter Summary Comparison ESG Risk Rating 21.0 Negligible Low Medium High Severe 21.3 9/30/22 6/30/22 Exposure Management Low Medium High Weak Average Strong 41.9 42.0 52.651.9 •On average, the portfolio maintained medium ESG risk as of September 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, once again moving further into the strong range. Higher management scores generally reduce ESG risk 29.0 21.0 20.6 24.6 16.6 14.9 24.7 18.8 17.3 14.80 10 20 30 40 ESG Risk Rating by Industry Portfolio holdings and Sustainalytics data as of September 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 = 21.0 Universe Average ESG Risk Rating by Industry 3 5 3 1 1 1 2 4 1 21 Industry Distribution (# of Issuers) 3%60%11%7% 2% 1% 3%8% 1% 3% (Allocation % of Market Value ) Source: Sustainalytics and the Investment Policy Statement as of September 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 Q3 Largest Decreases in ESG Risk Rating Bank of New York Mellon Corp Bank of America Corporation Mastercard Incorporated ↓0.5 ↓0.3 ↓0.3 21.0 26.8 17.0 Largest Increases in ESG Risk Rating Walt Disney Co Intel Corp Adobe Systems Inc 14.9 17.3 12.7 ↑0.7 ↑0.5 ↑0.2 Exposure Management Exposure Management 0.0 ↑0.7 Exposure Management 0.0 ↑0.7 Exposure Management ↑3.0 ↑4.6 Exposure Management 0.0 ↓1.2 Exposure Management 0.0 ↓0.6 ↓0.3 ↑0.7 Holdings as of September 30, 2022 –Sorted By ESG Risk Rating Source: Sustainalytics. Holdings as of September 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 September 30, 2022 to June 30, 2022 . Issuers with “-” under ESG contributions means data not available. Issuer % Weight Subindustry Subindustry Percentile ESG Risk Rating 9/30/22 QoQ Change in ESG Rating Contributions E S G CarMax Inc.0.6%Automotive Retail 12 12.0 --65%35% The Home Depot Inc 0.8% Home Improvement Retail 16 12.5 -29%41%30% Adobe Systems Inc 0.6% Enterprise and Infrastructure Software 3 12.7 +0.2 17%44%39% Target Corp 0.7%Department Stores 7 14.5 (0.2)16%50%34% Walt Disney Co 0.5%Movies and Entertainment 19 14.9 +0.7 -50%50% Deere & Co 0.7%Agricultural Machinery 8 16.6 -19%41%40% Mastercard Incorporated 0.6%Data Processing 18 17.0 (0.3)4%45%51% Intel Corp 0.6% Semiconductor Design and Manufacturing 5 17.3 +0.5 28%32%40% Federal National Mortgage Association 13.2%Thrifts and Mortgages 12 18.3 --59%41% Federal Home Loan Bank System 2.5%Consumer Finance 10 18.8 --53%47% Bank of New York Mellon Corp 0.9% Asset Management and Custody Services 12 21.0 (0.5)6%41%53% Bristol-Myers Squibb Company 0.3%Biotechnology 6 22.7 (0.1)-68%32% Federal Home Loan Mortgage Corp 7.3%Thrifts and Mortgages 26 23.2 --57%43% Barclays PLC 1.0%Diversified Banks 32 24.3 -7%32%61% Holdings as of September 30, 2022 –Sorted By ESG Risk Rating Source: Sustainalytics. Holdings as of September 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 September 30, 2022 to June 30, 2022 . Issuers with “-” under ESG contributions means data not available. Issuer % Weight Subindustry Subindustry Percentile ESG Risk Rating 9/30/22 QoQ Change in ESG Rating Contributions E S G Walmart Inc.2.7%Food Retail 38 24.6 -17%56%27% Pfizer Inc 1.1%Pharmaceuticals 6 25.2 (0.1)11%53%35% Federal Farm Credit Banks Consolidated Systemwide Bonds 0.8%Consumer Finance 47 25.7 ---- Bank of America Corporation 1.5%Diversified Banks 40 26.8 (0.3)5%42%53% Toyota Motor Corp 0.9%Automobiles 53 28.9 -25%38%36% Honda Motor Co Ltd 0.4%Automobiles 54 29.0 -28%43%29% JPMorgan Chase & Co.1.1%Diversified Banks 49 29.0 +0.1 3%44%52% Amazon.com Inc 1.1%Online and Direct Marketing Retail 93 30.3 -23%43%33% Nissan Motor Co Ltd 0.0%Automobiles 82 31.7 -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) Carmax Auto Owner Trust Automobiles Manufacturing Honda Auto Receivables Automobiles Manufacturing Nissan Auto Receivables Automobiles Manufacturing Toyota Motor Corp Automobiles Manufacturing Barclays PLC Banks Mastercard Inc Consumer Finance Bank of America Co Diversified Banks JP Morgan Chase & Co Diversified Banks Los Angeles Community College District Education San Diego Community College District Education University of California Education The Walt Disney Corporation Entertainment Content The Bank of New York Mellon Corporation Financial Services California Earthquake Authority Financing & Development State of California General Government State of Maryland General Government Issuer Sector (BICS) FFCB Government Agencies FHLB Government Agencies FHLMC Government Agencies FNMA Government Agencies Deere & Company Machinery Manufacturing Target Corp Mass Merchants 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 U.S. 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 C ouncil Erica A. Stewart Mayor Carlyn Christianson Council Member Jan Marx Council Member Andy P ease Council Member Michelle Shor esman 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 September 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 20.6 24.3 20.1 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 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 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.