Bringing you live news and features since 2006 

ESG EM bonds can offer above benchmark returns says PIMCO


In response to the growing interest from investors towards ESG, PIMCO has recently expanded its range of ESG funds to include the PIMCO GIS Emerging Markets Bond ESG Fund.  

“Combining an ESG focus with an active approach in emerging markets creates an appealing solution for investors seeking yield but willing to maintain higher ESG quality,” says Yacov Arnopolin (pictured), executive vice president, PIMCO.

The fund invests in a broad range of dollar-denominated bonds issued by emerging market sovereign and quasi-sovereign entities with tactical allocations in local currency instruments. It uses PIMCO’s three pillar ESG screening process which consists of distinct exclusion, evaluation and engagement components to influence positive change. It is managed by Arnopolin, Javier Romo, Senior Vice President, and Pramol Dhawan and managing director and global head of the emerging markets portfolio management team.

Arnopolin explains that they have de-emphasised issuers with poor PIMCO ESG scores such as those that are involved in fossil fuel exploration and production. 
“Instead, we would look for issuers with comparable risk-return profiles but better PIMCO ESG scores and from environmentally friendly industries.” 
“An example of an issuer to avoid is an African mining company with a low ESG score according to PIMCO research, whereas an example of company we would hold is a well-run private bank from the same country,” he says.
Arnopolin believes that investing for both financial returns and positive impact does not have to be mutually exclusive. “At PIMCO, we don’t believe ESG investing has to be an either/or paradigm. We think investors can have both, and in an emerging markets context, we believe investors can generate above-benchmark returns while structurally allocating to higher ESG quality issuers.”
He concedes that measuring ESG factors is not simple, especially in the emerging market corporate space where the availability and quality of ESG information is, on average, lower than in the developed world. “That said, our experienced team of 60 plus in-house credit analysts has access to a wide range of resources and contact with each issuer’s management team to make a robust assessment of ESG factors.”
In the emerging market sovereign space, the firm has incorporated material ESG factors into its internal PIMCO credit rating for many years. In addition, it has built stand-alone sovereign ESG scores to help support ESG portfolio construction, particularly relating to emerging market exposures.
“We see a growing interest from investors towards ESG investing and specifically in emerging markets ESG, which combines an asset class that has attractive valuations relative to developed market alternatives but at the same time is known for its idiosyncratic – and often ESG related – set of risks,” he adds.

Latest News

REX Shares has announced a strategic reorganisation that integrates its REX Shares, MicroSectors, and T-REX products, as well as REX..
Allspring Global Investments writes that as it builds an investment platform for the future, it has filed for exemptive relief..
LSEG Lipper writes that ETF promoters in Europe enjoyed estimated net inflows (+EUR25.1 billion) for May 2024...
The European Fund and Asset Management Association (EFAMA) has published its 2024 industry Fact Book, which includes a foreword by..

Related Articles

Marcus Wayerer, Franklin Templeton
Franklin Templeton says that emerging markets are navigating a tricky environment at the moment, due to factors such as the...
Matt Barry, Touchstone Investments
Back in 2022, Cincinnati, Ohio-based Touchstone Investments launched its first four ETFs, having previously been predominantly a mutual fund company....
CN Tower, Toronto
The winners were announced in the second ETF Express Canadian awards at the event held at The Quay in Toronto,...
Darren Jordan, Komainu
Custody specialist, Komainu, was launched in 2018 as a joint venture between Nomura, digital-asset investment manager, CoinShares and blockchain business,...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by