We believe in not only managing our own operations in an environmentally sustainable manner, but in doing our part to finance the transition to a low-carbon economy.
In 2018, we formalized our approach to sustainable finance, forming a cross-functional Sustainable Finance Working Group, codifying our definition of sustainable finance, and beginning the work to more fully automate how we capture sustainable finance data.
Sustainable Finance Working Group
PNC's Sustainable Finance Working Group includes employees from business segments that are key to the success of PNC’s sustainable finance, green lending and environmental sustainability programs. The working group is responsible for defining PNC’s sustainable financing commitments and influencing strategies to ensure that we meet our sustainable finance goals.
The Sustainable Finance Working Group's first task was to address PNC's definition of sustainable finance. Our commitment to enabling our clients’ sustainable operations takes the form of providing financing and underwriting debt with an environmentally sustainable use of proceeds. Areas of focus include:
- Renewable energy
- Energy efficiency
- Green building
- Brownfield remediation
- Sustainable transportation
- Waste management and pollution control
- Water quality and conservation
- Air quality
Our sustainable finance commitment totaled more than $7 billion in 2018. This figure incorporates transactions from our public finance, capital markets, real estate, corporate banking, equipment finance, energy capital, consumer lending, community development banking and business banking lines of business. We also consider investments in our own facilities' green building and energy efficiency projects, as well as our charitable contributions that have an environmental sustainability component.
In 2019 and beyond, we will be exploring ways to transition from manual to automated sustainable finance data capture to ensure a greater degree of consistency and accuracy year-over-year.
Green Bonds
Underwriting bonds that finance environmentally beneficial projects is an important part of our sustainable finance program. This includes both traditional and “green” bonds, which are underwritten and issued under the best practice guidelines of the International Capital Markets Association's Green Bond Principles, to which PNC is a signatory.
Responsible Investing
As technology and science create new business and investment opportunities, they also create new responsibilities, which include considering our collective impact on future generations. By changing the dynamic between investors, businesses and the public, responsible investing can help ensure that today’s innovation is sustainable and our current decisions and actions position future generations for success.
We define responsible investing (RI) as an investment strategy that:
- Proactively supports certain values or causes
- Excludes or restricts portfolio exposures that may conflict with those values
- Defines a specific, targeted impact and allocates capital toward that objective
At PNC, we view RI as an implementation strategy, rather than an investment philosophy or a separate asset class. It is a lens we can use to implement a portfolio that aligns with an investor’s unique goals, intentions, values or mission.
Environmental, Social and Governance (ESG) Integration
ESG is a set of standards that investors can use to evaluate investments and determine whether a company’s operations are "responsible." Environmental criteria look at how a company performs as a steward of the natural environment. Social criteria examine how a company manages relationships with its employees, suppliers, customers and the communities where it operates. Governance deals with a company’s leadership, executive pay, audit and internal controls, and shareholder rights. We have developed several proprietary investment strategies that take ESG factors into consideration.
Our approach to responsible investing is:
- Focused on goals: Our process begins by understanding each client’s unique values and intentions.
- Flexible: We build portfolios tailored to each client’s particular investment needs, restrictions and values. We do not believe a one-size-fits-all approach is always necessary or appropriate in implementing an RI portfolio.
- Dependent on deep analysis: Robust quantitative analyses combined with strong qualitative research can generate meaningful insight that is not attainable by either method on its own, so we employ both to help derive optimal RI portfolio solutions for our clients.
- Dynamic: Markets evolve, and portfolios need to adjust accordingly to generate attractive returns.
- Long-term: While markets are ever-changing, we believe patient investors can capitalize on proven, long-term trends. Many of the thematic strategies we employ within portfolios may require taking a more secular view of the world, as demographic shifts and environmental trends can take considerable time to unfold.
- Value-oriented: We seek to identify investment opportunities that are undervalued and/or mispriced by the market. We use our rigorous, disciplined and repeatable investment process as a guide to help determine what relative value ultimately looks like.
Responsible Investing at PNC in 2018
In 2018, we had $2.42 billion in RI assets under management across PNC Capital Advisors (PCA); Hawthorn; Wealth Management; and Institutional Asset Management. This represents a 15% increase from 2017.
The Investment Advisor Research team this year approved the introduction of two mutual funds, two separately managed accounts, eight passive exchange-traded funds and an Impact Investing Private Equity offering. Also in 2018, PCA’s Municipal Fixed Income team developed a proprietary process for scoring tax-exempt bonds and their issuers for custom Environmental and Social Impact managed accounts.
Supporting financial advisors with responsible investing resources and training was a top priority in 2018. The Responsible Investing team assisted advisors and stakeholders across PNC’s footprint in a variety of ways, including providing portfolio or investment-level ESG analysis and recommendations, participating in educational market visits, and sharing industry trends and thought leadership.
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