HomeMy WebLinkAbout02-27-2025 IOC Agenda Packet
Investment Oversight Committee
AGENDA
Thursday, February 27, 2025, 3:00 p.m.
Council Hearing Room, 990 Palm Street, San Luis Obispo
The Investment Oversight Commission holds in-person meetings. Zoom participation will not be
supported. Attendees of City Council or Advisory Body meetings are eligible to receive one hour of
complimentary parking; restrictions apply, visit Parking for Public Meetings for more details.
INSTRUCTIONS FOR PUBLIC COMMENT:
Public Comment prior to the meeting (must be received 3 hours in advance of the meeting):
Mail - Delivered by the U.S. Postal Service. Address letters to the City Clerk's Office at 990
Palm Street, San Luis Obispo, California, 93401.
Email - Submit Public Comments via email to advisorybodies@slocity.org. In the body of your
email, please include the date of the meeting and the item number (if applicable). Emails will not
be read aloud during the meeting.
Voicemail - Call (805) 781-7164 and leave a voicemail. Please state and spell your name, the
agenda item number you are calling about, and leave your comment. Verbal comments must be
limited to 3 minutes. Voicemails will not be played during the meeting.
*All correspondence will be archived and distributed to members, however, submissions received
after the deadline may not be processed until the following day.
Public Comment during the meeting:
Meetings are held in-person. To provide public comment during the meeting, you must be
present at the meeting location.
Electronic Visual Aid Presentation. To conform with the City's Network Access and Use Policy,
Chapter 1.3.8 of the Council Policies & Procedures Manual, members of the public who desire
to utilize electronic visual aids to supplement their oral presentation must provide display-ready
material to the City Clerk by 12:00 p.m. on the day of the meeting. Contact the City Clerk's
Office at cityclerk@slocity.org or (805) 781-7114.
Pages
1.CALL TO ORDER
Chair Emily Jackson will call the Regular Meeting of the Investment Oversight
Committee to order.
2.PUBLIC COMMENT FOR ITEMS NOT ON THE AGENDA
The public is encouraged to submit comments on any subject within the
jurisdiction of the Investment Oversight Committee that does not appear on this
agenda. Although the Committee will not take action on items presented during
the Public Comment Period, the Chair may direct staff to place an item on a
future agenda for discussion.
3.CONSENT
Matters appearing on the Consent Calendar are expected to be non-
controversial and will be acted upon at one time. A member of the public may
request the Revenue Enhancement Oversight Commission to pull an item for
discussion. The public may comment on any and all items on the Consent
Agenda within the three-minute time limit.
3.a CONSIDERATION OF MINUTES - NOVEMBER 21, 2024
INVESTMENT OVERSIGHT COMMITTEE MINUTES
5
Recommendation:
To approve the Investment Oversight Committee Minutes of November
21, 2024.
4.BUSINESS ITEMS
4.a PRESENTATION OF THE QUARTERLY INVESTMENT REPORT ON
PORTFOLIO PERFORMANCE & ECONOMIC OUTLOOK
7
Recommendation:
Receive and confirm investment policy compliance.
5.COMMENT AND DISCUSSION
5.a STAFF UPDATES AND AGENDA FORECAST
Chair Jackson will provide a brief agenda forecast and updates.
6.ADJOURNMENT
The next Regular Meeting of the Investment Oversight Committee is scheduled
for May 22, 2025 at 3:00 p.m. in the Council Hearing Room at City Hall, 990
Palm Street, San Luis Obispo.
LISTENING ASSISTIVE DEVICES are available -- see the Clerk
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 City Clerk’s Office at (805) 781-7114 at least
48 hours before the meeting, if possible. Telecommunications Device for the
Deaf (805) 781-7410.
Agenda related writings or documents provided to the Investment Oversight
Committee are available for public inspection on the City’s website, under the
Public Meeting Agendas web page: https://www.slocity.org/government/mayor-
and-city-council/agendas-and-minutes. Meeting video recordings can be found
on the City’s website:
http://opengov.slocity.org/WebLink/Browse.aspx?id=61037&dbid=0&repo=CityCl
erk
Page 4 of 30
1
Investment Oversight Committee Minutes
November 21, 2024, 3:00 p.m.
Conference Room 6 at City Hall, 990 Palm Street, San Luis Obispo
Investment Oversight
Committee Members
Present:
Member Anni Wang, Chair Emily Jackson, Principal Budget
Analyst Riley Kuhn, Committee Member Jan Marx
Investment Oversight
Committee Members
Absent:
Member Debbie Malicoat, Interim City Manager Whitney
McDonald
City Staff Present: Policy & Programs Manager Natalie Harnett, Administrative
Assistant Michelle Karpovich
_____________________________________________________________________
1. CALL TO ORDER
A Regular Meeting of the San Luis Obispo Investment Oversight Committee was
called to order on November 21, 2024 at 3:00 p.m. in Conference Room #6 at
City Hall, 990 Palm Street, San Luis Obispo, by Chair Jackson.
2. PUBLIC COMMENT FOR ITEMS NOT ON THE AGENDA
Public Comment:
None
--End of Public Comment--
3. CONSENT
3.a CONSIDERATION OF MINUTES - AUGUST 15, 2024 INVESTMENT
OVERSIGHT COMMITTEE MINUTES
Motion By Committee Member Jan Marx
Second By Member Wang
To approve the Investment Oversight Committee Minutes of August 15,
2024.
Ayes (4): Member Wang, Chair Jackson, Principal Budget Analyst Riley
Kuhn, and Committee Member Jan Marx
Page 5 of 30
2
Absent (2): Member Malicoat, and Interim City Manager Whitney
McDonald
CARRIED (4 to 0)
4. BUSINESS ITEMS
4.a PRESENTATION OF THE QUARTERLY INVESTMENT REPORT ON
PORTFOLIO PERFORMANCE & ECONOMIC OUTLOOK
Justin Resuello with PFM Asset Management LLC, provided an update via
PowerPoint presentation and responded to Committee inquiries.
Public Comment:
None
Motion By Member Wang
Second By Committee Member Jan Marx
Recommendation:
Receive and confirm investment policy compliance.
Ayes (4): Member Wang, Chair Jackson, Principal Budget Analyst Riley
Kuhn, and Committee Member Jan Marx
Absent (2): Member Malicoat, and Interim City Manager Whitney
McDonald
CARRIED (4 to 0)
5. COMMENT AND DISCUSSION
5.a STAFF UPDATES AND AGENDA FORECAST
Chair Jackson will provide a brief agenda forecast and u pdates.
As of February 28th 2025, the Investment Oversight Committee will
meet every fourth Thursday of the quarter.
6. ADJOURNMENT
The meeting was adjourned at 3:38 p.m. The next Regular Meeting of the
Investment Oversight Committee is scheduled for February 27, 2025 at 3:00 p.m.
in the Council Hearing Room at City Hall, 990 Palm Street, San Luis Obispo.
_________________________
APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/2025
Page 6 of 30
Quarterly Investment Report
AS OF December 31, 2024
Page 7 of 30
This report presents the City’s investment portfolio for
the quarter ending December 31,2024.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.
Page 8 of 30
Market Considerations
U.S. economic conditions were
characterized by:
•Inflation and labor markets in line
with Fed expectations despite
slower recent progress
•Strong economic growth
prospects remaining intact, aided
by a resilient consumer
•Changes to fiscal policy
potentially impacting growth and
inflation trajectory
The Fed cut the federal funds target
rate by an additional 50 basis points
(bps) during the fourth quarter to
4.25% -4.50%.
The yield curve disinversion
continued and was flatter at the front
end and positively sloped beyond 1-
year. Yield spreads remained near
historically tight levels across most
sectors aided by robust demand and
strength in the economy
Source: Bloomberg Financial L.P. and ICE BofA Indices. ABS indices are 0-5 year, based on weighted
average life. As of December 31, 2024.
4.31%
4.24%
4.38%
4.48%4.57%
4.78%
3.00%
3.50%
4.00%
4.50%
5.00%
Yi
e
l
d
Maturity
U.S. Treasury Yield Curve
December 31, 2024
September 30, 2024
3mo 2yr 5yr 7yr 10yr 20yr 30 yr
-0.77%
-0.13%
0.61%
-0.47%
-0.25%
-1.0%
-0.5%
0.0%
0.5%
1.0%
U.
S
.
T
r
e
a
s
u
r
y
Ag
e
n
c
y
AB
S
Co
r
p
A
-
A
A
A
Co
r
p
B
B
B
Fourth Quarter 2024 Returns
Page 9 of 30
What we are watching…
Fiscal policies discussed on the
campaign trial are expected to boost
growth, however actual policy
implementation and timing are
uncertain and subject to change.
Layoffs remain near historically low
levels; however, the pace of hiring has
slowed considerably. The Fed has
acknowledged labor market conditions
have loosened, and a further cooling
of labor conditions is not necessary to
achieve its dual mandate of maximum
employment and stable prices.
The Fed has acknowledged higher
inflation expectations going into 2025.
Further rate cuts will depend on
inflation moving closer to its 2% target.
Proposed fiscal policies may put
pressure on wages and goods costs.
The Fed continued its easing cycle
with a total of 100 basis points (bps)
of rate cuts in 2024. The FOMC’s
December median “dot plot” projection
suggests another 50 bps in cuts by the
end of 2025, which is significantly less
than previously implied, in large part
due to uncertainty surrounding
implications of potential fiscal policy
changes.
Source: Federal Reserve, latest economic projections as of December 2024.
2.5%
2.1%2.0%1.9%1.8%
0%
1%
2%
3%
4%
2024 2025 2026 2027 Longer
Run
Change in Real GDP
Sept Projections Dec Projections
4.2%4.3%4.3%4.3%4.2%
0%
1%
2%
3%
4%
5%
6%
2024 2025 2026 2027 Longer
Run
Unemployment Rate
Sept Projections Dec Projections
2.4%2.5%
2.1%2.0%2.0%
0%
1%
2%
3%
4%
2024 2025 2026 2027 Longer
Run
PCE Inflation
Sept Projections Dec Projections
4.4%3.9%3.4%3.1%3.0%
0%
1%
2%
3%
4%
5%
6%
2024 2025 2026 2027 Longer
Run
Federal Funds Rate
Sept Projections Dec Projections
Page 10 of 30
Current Cash and Investment Summary
The following is a summary of the City’s cash
and investments based on market value, as of
December 31, 2024, compared to the prior
quarter.
Investment Entity December 31, 2024 Percent of Total**September 30, 2024
City Held Cash & Investments $38,572,051.90 15.8%$12,096,882.69
JPMorgan Money Market Account $50,000,000.00 20.4%$50,000,000.00
LAIF Held Investments $48,080,610.62 19.7%$47,517,108.13
PFMAM Managed Investments*$107,859,211.60 44.1%$108,130,204.16
TOTAL**$244,511,874.12 100%$217,744,194.98
*Figures shown exclude accrued interest. **Details may not add up to total due to rounding.
Page 11 of 30
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
Page 12 of 30
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. 9/30/24
Permitted by
Policy
U.S. Treasury 67,095,406 61.9%0.4%100%
Federal Agency 11,524,263 10.6%-8.1%100%
Municipal Obligations 450,008 0.4%0.7%30%
Negotiable CDs 1,019,420 0.9%-0.7%30%
Corporate Notes 19,058,854 17.6%-1.2%30%
Asset-Backed
Securities 8,371,346 7.7%10.2%15%
Securities Sub-Total 107,519,298 -0.2%
Money Market Fund 339,914 0.3%-16.3%20%
Accrued Interest 540,008 0.5%
Securities Total 108,399,220 100.0%0.2%
Page 13 of 30
PFMAM Managed 12/31/2024 9/30/2024
Average Maturity
(Years)2.44 2.48
Effective Duration1 2.04 2.10
Average Market Yield 4.45%3.91%
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 -0.25%4.09%1.64%1.68%
0-5 Treasury
Index -0.37%3.82%1.39%1.47%
Variance +0.12% +0.26% +0.25% +0.21%
1Effective duration is the approximate percentage change in price for each 1% change in interest rates.
Page 14 of 30
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.
Page 15 of 30
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.
Page 16 of 30
Market Value includes accrued interest as of December 31, 2024. Average ESG Risk Rating is weighted by market
value. Please see important disclosures at the end of this presentation.
* U.S. Treasury and municipal obligations are not included in the analysis.
ESG Risk Composition Overview
The ESG Risk Rating measures
economic value at risk based on
ESG factors.
A company’s ESG Risk Rating is
comprised of a quantitative score
and a risk category. The score
indicates unmanaged ESG risk.
Risk categories are absolute and
comparable across industries.
Lower scores represent less
unmanaged risk. Ratings are
scored on a scale of 1-100 and are
assigned to one of the following
ESG risk categories:
•Negligible Risk (overall score
of 0-9.99 points)
•Low Risk (10-19.99 points)
•Medium Risk (20-29.99 points)
•High Risk (30-39.99 points)
•Severe Risk (40 and higher
points)
31/34 of portfolio issuers are rated with a total rated market value of $40.3 million (37%)
Negligible Low Medium High Severe
Portfolio Average
ESG Risk Rating
19.1
Allocation by ESG Risk Rating
Low
23%
Medium
13%
High
1%
Not Rated
63%
Page 17 of 30
Industry Diversification
Portfolio holdings and Sustainalytics data as of December 31, 2024. Average ESG Risk Rating represents the
market value-weighted average ESG risk rating for each industry.
26.6
18.4 19.1
20.8
23.3
18.7
15.1 15.6 14.8
0%
20%
40%
60%
0
10
20
30
Po
r
t
f
o
l
i
o
W
e
i
g
h
t
(
%
)
ES
G
R
i
s
k
R
a
t
i
n
g
Industry Exposure and Weighted Average Risk Score
Page 18 of 30
S&P Credit Rating Distribution
ESG Risk Rating Key
Negligible Low Medium High Severe
0-9.99 10-19.99 20-29.99 30-39.99 40-100
Portfolio holdings and Sustainalytics data as of December 31, 2024. If a security is not rated by S&P, the
equivalent Moody’s rating is used. NR stands for ‘no rating’ and implies that the issuer is not rated by S&P or
Moody’s but is rated by Fitch.
$0 $5 $10 $15 $20
BBB
A
AA
AAA
Market Value Allocation (Millions $)
Credit Rating Grouped by ESG Risk Rating Category
22.0
16.1
20.6
15.6
0
10
20
30
AAA AA A BBB
Average ESG Risk Rating by S&P Credit Rating
Page 19 of 30
Holdings as of December 31, 2024
Sorted By ESG Risk Rating
Source: Sustainalytics. Holdings as of December 31, 2024.
Issuer % Weight Subindustry Subindustry
Percentile
ESG Risk
Rating
12/31/2024
Coöperatieve Rabobank UA 1.0%Diversified Banks 4 12.3
The Home Depot, Inc.0.9%Home Improvement
Retail 19 12.6
Federal National Mortgage
Association 6.2%Thrifts and Mortgages 7 12.7
Adobe, Inc.0.6%Enterprise and
Infrastructure Software 4 14.1
Microsoft Corp.1.5%Enterprise and
Infrastructure Software 5 14.2
Intel Corp.0.5%Semiconductor Design
and Manufacturing 6 15.6
Novartis AG 1.4%Pharmaceuticals 2 15.6
Mastercard, Inc.1.0%Data Processing 17 16.1
Deere & Co.0.7%Agricultural Machinery 7 16.3
Federal Home Loan
Mortgage Corp.2.5%Thrifts and Mortgages 14 16.7
Fifth Third Bancorp 0.7%Regional Banks 11 16.9
American Express Co.1.3%Consumer Finance 15 18.3
BlackRock Finance, Inc.1.2%Asset Management and
Custody Services 9 18.4
Target Corp.0.7%Department Stores 20 18.6
Federal Home Loan Bank
System 2.0%Consumer Finance 17 18.9
Kubota Corp.0.2%Agricultural Machinery 44 19.5
The Bank of New York
Mellon Corp.0.9%Asset Management and
Custody Services 12 19.9
PepsiCo, Inc.0.5%Packaged Foods 4 20.8
Bristol Myers Squibb Co.0.3%Biotechnology 7 21.2
Citigroup, Inc.1.7%Diversified Banks 30 21.9
Page 20 of 30
Holdings as of December 31, 2024
Sorted By ESG Risk Rating
Source: Sustainalytics. Holdings as of December 31, 2024.
(continued)
Issuer % Weight Subindustry Subindustry
Percentile
ESG Risk
Rating
12/31/2024
State Street Corp.0.5%Asset Management and
Custody Services 17 22.1
Eli Lilly & Co.0.7%Pharmaceuticals 11 23.6
The PNC Financial Services
Group, Inc.0.7%Regional Banks 31 23.7
Bank of America Corp.2.9%Diversified Banks 38 24.4
Hyundai Motor Co., Ltd.1.0%Automobiles 29 24.6
Nissan Motor Co., Ltd.0.2%Automobiles 42 26.0
Honda Motor Co., Ltd.1.5%Automobiles 50 26.7
General Motors Co.0.1%Automobiles 55 27.0
JPMorgan Chase & Co.2.3%Diversified Banks 54 27.3
Toyota Motor Corp.1.0%Automobiles 64 28.3
PACCAR, Inc.0.7%Heavy Machinery and
Trucks 58 31.4
Page 21 of 30
Socially Responsible Investment Policy
In addition to the ESG
criteria, the City’s Socially
Responsible Investment
(SRI) Policy restricts 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)
Adobe Inc Software & Services
American Express Credit Account Credit Card ABS
Bank of America Auto Trust Automobile ABS
Bank of America Co Diversified Banks
BlackRock Funding Inc Financial Services
Bristol-Myers Squibb Co Pharmaceuticals
Chase Issuance Trust Credit Card ABS
Citibank Credit Card Issuance Trust Credit Card ABS
Citigroup Inc Banks
Cooperatieve Rabobank U.A.Banks
Deere & Company Machinery Manufacturing
Eli Lilly & Co Pharmaceuticals
FHLB Government Agencies
FHLMC Government Agencies
Fifth Third Auto Trust Automobile ABS
FNMA Government Agencies
GM Financial Automobile ABS
Home Depot Inc Retail - Consumer Discretionary
Honda Auto Receivables Automobile ABS
Issuer Sector (BICS)
Hyundai Auto Receivables Automobile ABS
Intel Corporation Semiconductors
JP Morgan Chase & Co Diversified Banks
Kubota Credit Owner Trust Other ABS
Mastercard Inc Consumer Finance
Microsoft Corp Software & Services
New Jersey Turnpike Authority Transportation
Nissan Auto Receivables Automobile ABS
Novartis Capital Corp Pharmaceuticals
Paccar Financial Corp Transportation & Logistics
Pepsico Inc Food & Beverage
PNC Financial Services Group Banks
State Street Corp Financial Services
Target Corp Mass Merchants
The Bank of New York Mellon Corporation Financial Services
Toyota Motor Corp Automobile ABS
U.S. Treasury Sovereigns
University of California Education
Source: Bloomberg. BICs is an industry classification system developed and utilized by Bloomberg that classifies securities based on
business, economic function, and other characteristics.Page 22 of 30
Distribution List
City Council
Erica A. Stewart
Mayor
Andy Pease
Vice Mayor
Jan Marx
Council Member
Emily Francis
Council Member
Michelle Shoresman
Council Member
Investment Oversight
Committee
Jan Marx
Council Liaison
Anni Wang
Public Member
Whitney McDonald
Interim City Manager
Emily Jackson
Director of Finance
Debbie Malicoat
Deputy Director of Finance/City
Controller
Riley Kuhn
Principal Financial Analyst—Budget
Independent Auditor
Badawi & Associates
PFM Asset
Management
Monique Spyke
Managing Director
Justin Resuello
Institutional Sales & Relationship
Manager
Page 23 of 30
Appendix
•Additional ESG Information
•ESG Themes Information
Page 24 of 30
0 10 20 30 40
Federal Agency & MBS
Certificates of Deposit
Corporate Notes
ABS
ESG Risk Rating
ESG Risk Rating Range and Average by Sector
Source: Sustainalytics. Data as of December 31, 2024. 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.
Sector Analysis
23.5
20.2
12.3
14.8
Page 25 of 30
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
Page 26 of 30
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 /
c 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
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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
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Disclosures
This report contains information developed by Sustainalytics. Such information and data are proprietary of Sustainalytics
and/or its third-party suppliers (Third Party Data) and are provided for informational purposes only. The use of the data does
not constitute an endorsement of any product or project, nor investment advice and are not warranted to be complete, timely,
accurate or suitable for a particular purpose. The use of their data is subject to their conditions. For more information vis it
http://www.sustainalytics.com/legal-disclaimer.
Although PFM Asset Management’s information providers, including without limitation, Sustainalytics, Inc. and its affiliates
(the “ESG Parties”), obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees
the originality, accurate and/or completeness of any data herein. None of the ESG Parties make any express or implied
warranties of any kind, and the ESG Parties hereby expressly disclaim all warranties of merchantability and fitness for a
particular purpose, with respect to any data herein. None of the ESG Parties shall have any liability for any errors or
omissions in connect with any data herein. Further, without limiting any of the foregoing, in no event shall any of the ESG
Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost pr ofits)
even if notified of the possibility of such damages.
There is a risk that the issuers selected to support client sustainable objectives may not perform as expected in addressing
sustainability considerations or such performance may change over time, which could cause a client account to temporarily
hold securities that are not in alignment with the account’s sustainable objectives. Further, there is a risk that informatio n used
to evaluate ESG criteria may not be readily available, complete or accurate, which could negatively impact an account’s
ability to apply its sustainable objectives. In managing client's sustainability objectives, PFM Asset Management may rely on
analysis and ratings provided by third parties in determining whether an issuer meets an account’s sustainability objectives. A
client’s perception may differ from PFM Asset Management’s or a third party’s on how to judge an issuer’s adherence to
client's guidelines.
PFM Asset Management serves clients in the public sector and is a division of U.S. Bancorp Asset Management, Inc., which
is the legal entity providing investment advisory services. U.S. Bancorp Asset Management, Inc. is a registered investment
adviser, a direct subsidiary of U.S. Bank N.A. and an indirect subsidiary of U.S. Bancorp. U.S. Bank N.A. is not responsible
for and does not guarantee the products, services, or performance of U.S. Bancorp Asset Management, Inc.
For more information regarding PFMAM’s services or entities, please visit www.pfmam.com.
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Disclosures (cont.)
The views expressed within this material constitute the perspective and judgment of U.S. Bancorp Asset Management, Inc. at
the time of distribution and are subject to change. Any forecast, projection, or prediction of the market, the economy,
economic trends, and equity or fixed-income markets are based upon current opinion as of the date of issue and are also
subject to change. Opinions and data presented are not necessarily indicative of future events or expected performance.
Information contained herein is based on data obtained from recognized statistical services, issuer reports or
communications, or other sources, believed to be reliable. No representation is made as to its accuracy or completeness.
PFM Asset Management serves clients in the public sector and is a division of U.S. Bancorp Asset Management, Inc., which
is the legal entity providing investment advisory services. U.S. Bancorp Asset Management, Inc. is a registered investment
adviser, a direct subsidiary of U.S. Bank N.A. and an indirect subsidiary of U.S. Bancorp. U.S. Bank N.A. is not responsible
for and does not guarantee the products, services, or performance of U.S. Bancorp Asset Management, Inc.
NOT FDIC INSURED : NO BANK GUARANTEE : MAY LOSE VALUE
For Institutional Investor or Investment Professional Use Only – This material is not for inspection by, distribution to, or
quotation to the general public.
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