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The New Sustainable Finance Principles

Launched in September 2020, the CFO Principles for Integrated SDG Investments and Finance are designed to help create a market for corporate SDG (Sustainable Development Goal) investments.

Last December, months before travel restrictions and social distancing became the necessary norms, PIMCO joined CFOs from across the globe in Milan for the UN Global Compact’s Sustainable Development Goal (SDGs) Investment Forum to catalyze corporate financing for the SDGs.

As a co-chair of the CFO Taskforce for the SDGs, Scott Mather helped kick-start the initiative with a call to action:

“We will need investors and issuers to work together to broaden the market beyond green bonds to continue this effort and support the achievement of the Sustainable Development Goals.”

Nine months later, we are honored to co-launch the CFO Principles for Integrated SDG Investments and Finance to better align corporate financing and SDG investing. These principles seek to foster a market for corporate investments aligned with the 17 SDGs ranging from SDG 2–Zero Hunger; SDG 5–Gender Equality; and SDG 13–Climate Action.

September’s launch marks the achievement of one of the three objectives of the CFO Taskforce’s initiative:

  1. Create a set of guiding principles (launched September 2020)
    1. Principle 1 – SDG impact thesis and measurement
    2. Principle 2 – Integrated SDG strategy and investments
    3. Principle 3 – Integrated corporate SDG finance
    4. Principle 4 – Integrated SDG communication and reporting
  2. Pioneer financial innovation to drive value
  3. Share outputs with stakeholders

This launch coincides with the 2020 UN General Assembly and Climate Week NYC, and as the devastating costs of climate change become clearer, PIMCO recognizes that climate change will likely have a profound impact on the global economy, financial markets, and bond issuers. As such, climate was one focal point of PIMCO’s recent annual Secular Forum; we discussed the global energy transition and climate risks to our financial system.

While the explosive growth in green bond markets is encouraging, we believe the opportunity set for impactful bond investments is even larger, that’s why we support the CFO Taskforce’s aim to create a wider market for SDG investments. And for those specifically looking to invest in climate solutions, it’s important to understand the growing climate bond market includes not just labeled green bonds, but also unlabeled green bonds, and the bonds of climate leaders:

  • Green bonds are debt securities issued explicitly for environmental or climate-related projects.
  • Unlabeled green bonds are debt securities of issuers materially exposed to climate solutions, like a solar company or a passenger rail transportation company, rather than an explicit green project.
  • Bonds of climate leaders, as we define them, are debt securities of issuers we deem to be at the forefront of the net zero carbon transition. These issuers have demonstrated commitment to mitigating carbon emissions and their broader environmental footprint, in sectors that may involve water, plastic, air pollution, or biodiversity.

As active investors, our goal is not just to find opportunities, but to create them for our clients. We engage with issuers bond by bond as they come to market, and our participation in groups such as the CFO Taskforce for the SDGs helps influence industry standards and drive innovation.

To learn more about how our credit research team looks to find the likely “winners” of the transition to an SDG-aligned and net zero carbon economy, please see PIMCO’s ESG webpage.

Scott Mather is CIO U.S. Core Strategies and responsible for ESG strategies at PIMCO. Gavin Power is PIMCO’s chief of sustainable development and international affairs. Both are regular contributors to the PIMCO Blog.

The Author

Scott A. Mather

CIO U.S. Core Strategies

Gavin Power

Chief of Sustainable Development and International Affairs

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