Parnassus Funds Review

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    Fund Complex: Parnassus Funds

    Management Company: Parnassus Investments

    Funds Affected: (1) Parnassus Core Equity Fund, (2) Parnassus Endeavor Fund, (3) Parnassus Fund, (4) Parnassus Mid-Cap Fund, (5) Parnassus Fixed Income Fund, (6) Parnassus Asia Fund,

    Sustainable Investing Strategy: ESG Integration, Exclusions, Impact Investing, Shareholder Engagement, Proxy Voting

    Summary:

    (1) (2) (3) (4) (5) (6) The adviser conducts fundamental research to determine a company’s financial health and its business prospects, and also takes environmental, social and governance factors into account in making investment decisions. The funds seek to invest in companies with positive performance on Environmental, Social and Governance (ESG) criteria. The ESG factors the adviser evaluates include:

    • Corporate governance and business ethics
    • Employee benefits and corporate culture
    • Stakeholder relations
    • Product
    • Customers and supply chain
    • Environmental impact

     

    According to the adviser, no company is perfect in all these areas but the adviser makes value judgments in deciding which companies best meet the criteria.

    The funds will not invest in companies that derive significant revenues from the manufacture of alcohol or tobacco products or from direct involvement with gambling. The funds do not invest in companies with significant revenues derived from the manufacture of weapons or the generation of electricity from nuclear power.

    The funds will not invest in companies that derive significant revenues from direct ties to Sudan.

    The Adviser will make exceptions for companies providing humanitarian services in Sudan and will also not exclude companies that have received Office of Foreign Assets Control exceptions from the U.S. Department of the Treasury.

    (3) The Parnassus Fund and the Parnassus Endeavor Fund avoid investing in companies engaged in the extraction, exploration, production, manufacturing or refining of fossil fuels; each fund may invest in companies that use fossil fuel-based energy to power their operations or for other purposes.

    (5) (6) With regard to the Parnassus Asia Fund, the adviser will take into consideration factors specific to the local markets in which the Asia Fund invests when making these value judgments. With regard to the Parnassus Fixed Income Fund, the adviser will take into consideration factors specific to fixed income investments when making these value judgments. The Asia Fund and the Fixed Income Fund may invest in securities that are appropriate based on their specific criteria, but that may not be appropriate for the U.S. equity funds.

    Part of the adviser’s responsible investment philosophy means investing back into the community. Up to 2% of the Parnassus Funds’ assets may be invested with community development financial institutions (CDFIs) which offer credit, capital, and financial services to individuals and organizations engaged in work that benefits low-income communities.

    The adviser is cognizant of investing shareholder dollars profitably and responsibly. When considering an investment in a CDFI, the adviser looks at how much that institution has impacted a community as well as how conscientious they are when choosing to finance individuals and organizations.

    The adviser also takes into account ethical business practices and shareholders’ interests when voting shares on corporate resolutions. Public companies and shareholder groups issue corporate resolutions to their shareholders for approval through what is known as a proxy ballot. The issues can range from executive compensation to environmental policy.