Fund Complex: PIMCO Funds

    Management Company: Pacific Investment Management Company LLC (PIMCO)

    Funds Affected: PIMCO Low Duration Fund ESG and PIMCO Total Return Fund

    Sustainable Investing Strategy: ESG Integration, Exclusions, Issuer Engagement


    Effective 6 January 2017 the funds adopted a set of exclusionary practices, an ESG integration strategy and issuer engagement approach to improve ESG practices.  The funds will not invest in the securities of any issuer determined to be engaged principally in the manufacture of alcoholic beverages, tobacco products or military equipment, the operation of gambling casinos, the production of coal, or in the production or trade of pornographic materials. In addition, the funds will not invest in the securities of any issuer determined to be engaged principally in the provision of healthcare services or the manufacture of pharmaceuticals, unless the issuer derives 100% of its gross revenues from products or services designed to protect and improve the quality of human life, as determined on the basis of available information.  To the extent possible on the basis of available information, an issuer will be deemed to be principally engaged in an activity if it derives more than 10% of its gross revenues from such activities. In addition, the funds will not invest directly in securities of issuers that are engaged in certain business activities in or with the Republic of the Sudan.

    The funds may avoid investment in the securities of issuers whose business practices with respect to the environment, social responsibility, and governance (ESG) are not to PIMCO’s satisfaction. In determining the efficacy of an issuer’s ESG practices, PIMCO will use its own proprietary assessments of material ESG issues and may also reference standards as set forth by recognized global organizations such as entities sponsored by the United Nations.

    PIMCO may engage proactively with issuers to encourage them to improve their ESG practices. PIMCO’s activities in this respect may include, but are not limited to, direct dialogue with company management, such as through in-person meetings, phone calls, electronic communications, and letters. Through these engagement activities, PIMCO seeks to identify opportunities for a company to improve its ESG practices, and will endeavor to work collaboratively with company management to establish concrete objectives and to develop a plan for meeting these objectives. The funds may invest in securities of issuers whose ESG practices are currently suboptimal, with the expectation that these practices may improve over time either as a result of PIMCO’s engagement efforts or through the company’s own initiatives. It may also exclude those issuers that are not receptive to PIMCO’s engagement efforts, as determined in PIMCO’s sole discretion.