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Commitment

Partnering with Principal Asset Management enables global investors to align their sustainability goals with customized investment solutions tailored to their values and preferences.

At Principal Asset Management:

  • Acting in clients’ best interests comes first and foremost. Our approach to sustainable investing is always driven by that priority.

  • We recognize that client needs and expectations vary across segments and geographies and that we must be consultative and offer choice.

  • By collaborating with our clients in personal and customized ways, we seek to better understand what types of engagements and investments best support their values and goals.

Principal Asset Management sustainable investing integration evolution

1990s

  • Began managing custom screened, socially responsible mandates for some institutional clients

2010s

  • Became a signatory to the Principles for Responsible Investing (PRI)
  • Became a signatory to the Financial Reporting Council UK Stewardship Code

2020s

  • Began offering sustainable investing integration capabilities
  • Began producing internal ESG ratings
  • Published sustainable investing guiding policies
  • Formed Principal Asset Management Sustainable Investment Council
  • Formed Principal Asset Management Sustainable Investing Oversight Committee

Products and integration

Creating sustainable investment options and solutions that precisely address individual investor needs requires a commitment to innovation. Our differentiated global investment capabilities help us respond to client demands and meet investors' objectives.

  • As of December 31, 2023, we have more than 100 actively managed strategies globally that have integrated principles of sustainable investing across asset classes, ranging from Foundational incorporation to more Enhanced, Thematic, and Impact strategies.

  • All investment teams have access to robust analytics to screen and measure sustainability-related factors, which complement their sustainable investing processes.

  • We are actively involved in initiatives that support improved stewardship across asset classes, including launching new funds and converting funds to meet Sustainable Finance Disclosure Regulations in Europe.

  • In addition to aligning at an enterprise level with Sustainable Development Goals (SDGs) introduced by the United Nations, we endeavor to align product offerings with SDGs where possible and where consistent with the specific team’s strategy.

Investment team sustainable investing capabilities

Investment Group ESG Integrated Solutions Global Equity U.S. Equity Regional Equity Global Fixed Income U.S. Fixed Income Regional Fixed Income Real Estate Asset Allocation Alternatives
Principal Aligned
Principal Alternative Credit
Principal Asset Allocation
Principal Claritas
Principal Dynamic Growth
Principal Edge
Principal Equities
Principal Finisterre
Principal Fixed Income
Principal Morley
Principal Origin
Principal Real Estate
Post Advisory Group
Spectrum Asset Management

The table below highlights the different approaches that each investment team takes to sustainable investing to best complement their investment expertise.

Asset class Investment team Our approach
Alternative credit Principal Alternative Credit Our sustainable investing approach incorporates four foundational pillars of analysis embedded throughout the investment process: 1) Sustainability of the borrower’s business model, 2) Sustainability of the cash flows to support the investment, 3) Sustainability of capital formation, and 4) Sustainability of our role in the conversation. By analyzing how traditional ESG factors inform each of the four pillars of sustainability, we believe that we will be able to appropriately identify key risk considerations and generate attractive risk-adjusted returns for clients while being mindful of the role we play as capital provider in enhancing corporate sustainability.
Asset allocation Principal Asset Allocation Our sustainable investing process focuses on measurement, activation, and management of related factors at the asset class and strategy level. We generally prefer that our sub-advisors be signatories to the Pillars of Responsible Investing (PRI). This ensures that we are we engaging with investment partners who share our belief that ESG issues may impact the performance of investment portfolios. Further, we prefer that each sub-advisor submit an ESG policy, which details their individual philosophy and ESG methodology.
Equity Principal Aligned Our process involves frequent discussions with former employees, customers, suppliers, etc. to fully understand the health of the stakeholder ecosystem. We generally have small-to-zero weight in industries known for heavy environmental costs as they tend to be capital intensive, commoditized businesses without a competitive advantage.
Equity Principal Dynamic Growth Our approach to ESG considerations is informed by our active avoidance of unresolved or anticipated major controversies from a risk management perspective, which has naturally led to strategies with low fossil fuel involvement.
Equity Principal Edge Our proprietary qualitative industry ranking approach evaluates ESG factors and focuses on diversity, carbon emissions, and pay equity within the context of each sector, recognizing leaders and laggards.
Equity Principal Equities Our proprietary ESG ratings framework incorporates both risk considerations and change catalysts associated with ESG-related issues.
Equity Principal Origin Our focus on the quality and sustainability of financial returns, which is central to our investment process, results in consistently avoiding companies with larger carbon footprints.
Fixed income Principal Finisterre Our ESG-integrated quantitative process is used to detect opportunities and exclusions to enhance and improve a portfolio’s ESG footprint.
Fixed income Principal Fixed Income Integrating ESG considerations into our process is a natural extension of what we’ve always done. Incorporating ESG research into our Fundamentals, Technicals, Valuations (FTV) framework helps provide guidance for decisions within a portfolio.
Fixed income Post Advisory Group We consider various ESG factors during the analysis and due diligence of each issuer, which is encapsulated through our proprietary Value Scoring Model tool.
Fixed income Spectrum Asset Management Tiered-risk approach measures the severity of ESG issues, which is part of the qualitative assessment in our proprietary credit analysis. We weight ESG risks and opportunities, along with other qualitative and quantitative credit metrics.
Equity, fixed income, alternative Principal Claritas ESG metrics are evaluated qualitatively during the analysis process, then if applicable may be quantitatively applied to reflect a higher discount rate or explanation of potential liability to be reflected in the company’s valuation.
Real estate Principal Real Estate We believe integration of ESG into our investment management process helps reduce risk, improve a property’s competitive stature, and increase tenant attraction and retention by providing a foundation to deliver positive financial and ESG outcomes. As fiduciaries for our investors, we understand, quantify, and act upon ESG through our sustainable investing platform, the Pillars of Responsible Property Investing.

Sustainable investing continuum

Sustainable investing offers the potential to enhance security analysis by providing a holistic view of the environmental, social, and governance (ESG) factors driving risk and return. The sustainable investing continuum displayed below is defined by Principal Asset Management and encompasses all types of investing apart from non-ESG investing.

Screening

The exclusion or inclusion of certain sectors, companies or practices based on specific ESG criteria.

ESG Integration:

Foundational

An investment strategy in which Environmental, Social, and/or Governance (ESG) characteristics are considered, alongside other non-ESG characteristics, when making investment decisions with the goal of achieving risk and return objectives.

ESG Integration:

Enhanced Features

An investment strategy that integrates Environmental, Social, and/or Governance (ESG) characteristics into the investment process with the goal of achieving risk and return objectives while committing to the promotion of specific ESG criteria using enhanced product features such as, for example, specific sector exclusions, security exclusions, or carbon risk management frameworks.

Thematic

An investment strategy focused on themes or assets specifically related to sustainability (e.g., clean energy, green technology, or sustainable agriculture), with the goal of achieving risk and return objectives.

Impact

An investment strategy with targeted investments (e.g., community investing) aimed at addressing social or environmental challenges. These targeted investments are intended to generate measurable environmental or social impact while aligning to the goal of achieving risk and return objectives.

Strategy alignment with SDGs

Introduced by the United Nations, the Sustainable Development Goals (SDGs) are intended as a blueprint to achieve a better and more sustainable future for all. They address the global challenges society faces, including those related to poverty, inequality, climate change, environmental degradation, peace, and justice. At Principal Asset Management, we endeavor to align special initiatives and product offerings with the SDGs, where possible, and where consistent with the specific investment strategy.

  • Goal 2: Zero Hunger

    Goal 2: Zero Hunger

    Global Sustainable Food Strategy

  • Goal 3: Global Health and Wellbeing

    Goal 3: Global Health and Wellbeing

    Muni Impact Strategy
    Corporate Sustainability Bond
    Pillars of Responsible Property Investing initiative

  • Goal 4: Quality Education

    Goal 4: Quality Education

    Muni Impact Strategy

  • Goal 6: Clean Water and Sanitation

    Goal 6: Clean Water and Sanitation

    Global Sustainable Listed Infrastructure Strategy
    Muni Impact Strategy
    Pillars of Responsible Property Investing initiative

  • Goal 7: Affordable and Clean Energy

    Goal 7: Affordable and Clean Energy

    Global Sustainable Listed Infrastructure Strategy
    Corporate Sustainability Bond
    Pillars of Responsible Property Investing initiative

  • Goal 8: Decent Work and Economic Growth

    Goal 8: Decent Work and Economic Growth

    Global Sustainable Listed Infrastructure Strategy
    Pillars of Responsible Property Investing initiative

  • Goal 9: Industry, Innovation, and Infrastructure

    Goal 9: Industry, Innovation, and Infrastructure

    Global Sustainable Listed Infrastructure Strategy
    Pillars of Responsible Property Investing initiative
    Corporate Sustainability Bond

  • Goal 11: Sustainable Cities and Communities

    Goal 11: Sustainable Cities and Communities

    Global Sustainable Listed Infrastructure Strategy
    Pillars of Responsible Property Investing initiative
    Corporate Sustainability Bond

  • Goal 12: Responsible Consumption and Production

    Goal 12: Responsible Consumption and Production

    Pillars of Responsible Property Investing initiative

  • Goal 13: Climate Action

    Goal 13: Climate Action

    Global Sustainable Listed Infrastructure Strategy
    Pillars of Responsible Property Investing initiative

  • Goal 15: Life on Land

    Goal 15: Life on Land

    Pillars of Responsible Property Investing initiative
    Claritas Private Equity Timber Strategy

  • Goal 17: Partnerships for the goals

    Goal 17: Partnerships for the Goals

    Commitment of Principal and Principal Asset Management as signatories/participants of organizations committed to promoting sustainability values

Stewardship and engagement

We empower our investment teams to adopt and develop specific protocols that align with their asset classes, strategies, and approaches to stewardship and engagement

Engagement with corporates and participation in industry and sector collaborative engagements are core responsibilities for our investment professionals

    • Stewardship activities are a part of each investment team’s separate philosophy and process.
    • We use our equity shareholder advantage to create direct engagement opportunities. For fixed income and real estate, engagement revolves around direct communication with issuers.
    • To further enhance our research process and help facilitate direct engagement with corporates, we augment our internal processes with the use of numerous third-party providers and broker-dealers.
    • We have a dedicated committee responsible for developing and monitoring our proxy voting policy across vote themes, while also
      providing oversight of all proxy voting related matters. This includes the services of our third-party proxy research and administration provider, Institutional Shareholder Services (ISS).
    • To ensure the sustainability risks are appropriately considered, we review all prospectuses and transaction documents with underwriters, and if necessary, our peers. We actively negotiate covenants and pricing to reflect those considerations.
  • 2023 Principal Equities shareholder meeting summary

    Category Number
    Votable meetings 4,839
    Meetings voted 4,806
    Proxy contests voted 10
    Meetings with against management votes 2,470
    Meetings with against ISS votes 435

    Our proxy voting record is indicative of the independence of our process

Proxy voting

We have a dedicated committee responsible for developing and monitoring our proxy voting policy across all vote themes, as well as providing oversight of all matters related to proxy voting, including the services of our third-party proxy research and administration provider, Institutional Shareholder Services (ISS).

A client may authorize Asset Management to vote proxies and may obtain a summary report relating to their account by contacting their relationship manager. A client may also obtain a copy of our complete proxy voting policies and procedures upon request.

For further information, including a Corporate Liaison wishing to engage on a vote, please contact us.

Proxy voting results

Affiliations with organizations focused on sustainability issues
Organization Principal Entity Affiliation Since
United States Green Building Council Principal Asset Management (Real Estate) 2007
ENERGY STAR Partner Principal Asset Management (Real Estate) 2009
Principles for Responsible Investment (PRI) Principal Asset Management 2010
CDP Principal Financial Group 2011
Better Building Alliance Principal Asset Management (Real Estate) 2014
Global Real Estate Sustainability Benchmark (GRESB) Principal Asset Management (Real Estate) 2014
CEO Action for Diversity & Inclusion Principal Financial Group 2020
Sustainable Development Goals (SDGs) Principal Financial Group 2020
Investor Alliance for Human Rights Principal Asset Management 2021
The Council of Institutional Investors Principal Asset Management 2021
The International Corporate Governance Network Principal Asset Management 2021
United Nations Global Compact Principal Financial Group 2021
CFA Institute DEI Code (USA & Canada) Principal Financial Group 2023
Signatories and recognition

Signatory to the Financial Reporting Council UK Stewardship Code (2022)1

Joined the United Nations Global Compact (January 2021).

Signatory to the Principles for Responsible Investment since 2010.

GRESB 4-Star rating (2023)
U.S. Core strategy, 8th consecutive year
European Core strategy2, 4th consecutive year
European Office strategy, 2nd consecutive year

In order to receive a ranking, the Firm paid GRESB an application fee to be evaluated and use the ranking.

ENERGY STAR Partner of the Year 2016-2024,
Sustained Excellence 2018-20243

Governance and Oversight

Aligned collaboration between investment management and the enterprise:

Principal Financial Group Board

The Nominating and Governance Committee of the Principal Financial Group Board of Directors oversees our corporate environmental and sustainability commitment. The Committee monitors risks and mitigation related to our environmental, sustainability, and corporate governance (ESG) responsibilities.

Principal Financial Group Sustainability Task Force

Principal Financial Group has a Sustainability Task Force which is made up of members appointed by Chairman, President, and CEO Dan Houston. The members are leaders across the organization and report quarterly to the Principal Board of Directors. The role of the Sustainability Task Force is to ensure that material issues are integrated into and help guide our business decisions, drive our comprehensive sustainability strategy, and continually engage with stakeholders. This keeps us aligned with internal goals and third-party standards, including those of the U.N. Global Compact, which we joined at the participant level in January 2021, as well as other business groups such as the Business Roundtable and the CEO Action for Diversity and inclusion.

Principal Asset Management Sustainable Investing Oversight Committee

The Sustainable Investing Oversight Committee classifies, reviews, approves, and assures implementation of products and strategies Principal Asset Management actively markets in accordance with appropriate sustainable investing definitions. It also reviews alignment of product classifications and capabilities on a periodic basis to assure alignment remains appropriate. Additionally, the Committee reviews global policy accord recommendations and regulatory/industry policy submissions and identifies critical risks affecting sustainability support within the firm. The Committee meets at least quarterly.

Principal Asset Management Sustainable Investment Council

The objective of the Sustainable Investment Council is to be the connective hub of sustainable investing information in the firm; establish consistency across investment teams; share best practices and provide support to all investment teams; assist investment teams in formulating strategy and reporting; sharpen our sustainable investing stories at the firm and strategy level; and serve as the liaison between Principal Asset Management and the broader Principal organization. The Council meets quarterly.

Investment Teams’ Working Groups

Our investment teams also have dedicated sustainable investing working groups which comprise cross-functional representation from portfolio managers, traders, and analysts, and work closely with the Principal Asset Management Sustainable Investing Leadership Team to share ideas for ESG integration and evaluate how related issues can be incorporated into our investment processes most effectively.

Principal Asset Management sustainable investing leadership team

Our sustainable investing leadership team helps ensure our investment professionals have the information and resources needed to create and maintain investment products and solutions for clients.

  • Chris Reddy

    Chris Reddy

    Executive Managing Director

    Principal Asset Management

  • Chris Reddy

    Jeff Vorwerk, CIMA®

    Managing Director

    Sustainable Investing & Investment Team Governance

  • Chris Reddy

    Daniela Spassova, CFA®

    Senior Director

    Sustainable Investing

  • Chris Reddy

    Syd Del Cid

    Senior Sustainable Investing Analyst

    Research

  • Chris Reddy

    Ryan Fitzgerald

    Senior Sustainable Investing Analyst

    Stewardship & Engagement

  • Chris Reddy

    Ross Jones

    Senior Sustainable Investing Analyst
    Stewardship & Engagement

1 Awarded to Principal Asset Management (a trade name of Principal Global Investors, LLC), Financial Reporting Council UK Stewardship Code, 2021. 

2016-2023 Global Real Estate Sustainability Benchmark (GRESB) assessments for Principal Real Estate’s U.S. Core strategy representing data from 31 December 2015 to 31 December 2022; 2020–2023 GRESB assessments for Principal Real Estate’s European Core strategy representing data from 31 December 2019 to 31 December 2022; 2022-2023 GRESB assessments for Principal Real Estate’s European Office strategy representing data from 31 December 2021 to 31 December 2022. 4-star rating reflects top 40% worldwide performance.

For information on the methodology used for the GRESB 4-star rating please visit: https://www.gresb.com/wp- content/uploads/2017/07/GRESB-RE-Scoring-Methodology.pdf.

3 Energy Star, 2024 Energy Star Partner of the Year, awarded to Principal Real Estate Investors. Each year, the EPA honors organizations that have made outstanding contributions to protecting the environment through energy efficiency. March 2024, U.S. Environmental Protection Agency.

ESG criteria may present additional advantages or risks and does not protect against market risks or volatility. You should not make any investment assumptions based solely on the information contained herein. There is no assurance that any ESG component in our investing strategy will be successful.

Principal Real Estate is a trade name of Principal Real Estate Investors, LLC, an affiliate of Principal Global Investors.