Investor Perspective_Especially Secret Guidlines- Secret Revealed!

Are there mixed messages on investor needs around ESG Disclosure?  Do you feel like you can't get just one answer?

In this panel we share the "revelio" charm with you. We will talk about that fact that here isn't just one answer, because there isn't just one type of ESG investor.  We have assembled a panel of ESG portfolio managers and credit analysts to help differentiate the unique types of ESG investors and the varied information needs.

Transcription:

Mark Chapell (00:06):

Yes, Kim brought props for us. Are we going to hand these out to everybody?

Kim (00:22):

No. You have to ask a question. No, you actually have to come closer. I'm looking for the five friends I told they could have M and M if they came to the panel.

Mark Chapell (00:34):

Alright, well welcome everybody and thank you for joining us on day two of the California Bond Buyer Conference. Thank you to the Bond Buyer and thank all of you for your attendance today. We're going to talk about ESG disclosure. My name is Mark Capel. I work with Build America Mutual. I'm also serving as the 2023 Chairman of the National Federation of Municipal Analysts. This session will really try to cover the developing disclosure side of the growing ESG and green bond market from the ESG and green bond investor perspective. And there's obviously a number of different kinds of investors out there with different perspectives each with their own investment strategies. But all these investors have one thing in common and that is a demand for disclosure and better disclosure. So today these three investment professionals here will represent three different investor types in the ESG space and talk about their thoughts on the matter.

(01:32)

First to my left is Barbara Vanscoy impact investor perspective. Barbara's a Portfolio Manager with the Herron Foundation and a real pioneer in the community development impact investing space. To her left is Kim Nakahara. Kim is a Senior in Municipal Research Analyst with All Offspring and Portfolio Manager. And then David Blair is on my far left. He's an ESG focused investor perspective. David's a Portfolio Manager at Nuveen where he manages separate accounts, many with an ESG focus. So I'll start with a quick overview of what Green versus social bonds really mean and how they relate to ESG. But I want to quickly talk about some background for the audience on the state of California's green bond disclosure report, which was released earlier this year. The background here is the California Green Bond Market Development Committee was formed back in 2017 and 2018 following a number of seminars held at the Milken Institute.

(02:34)

Tim Schafer was actually a part of those early meetings and when Fiona MA took office in 2018, she along with the support of the Hewlett Foundation and Cal's Goldman School of Environmental Policy got together and created this what they call the Green Bond Market Development Committee. And that committee is composed of about 27 individuals, including academics, climate scientists, lawyers, engineers, and others who are interested in the space and that space. We all know what that looks like. It's 4 trillion plus or minus a trillion of deferred infrastructure investment needs. And so there's no shortage of transactions out there that will kind of meet that green Bond standard. And the only way, or at least the best way that the committee found to sort of distinguish green bonds was better disclosure. So the treasurer and the Green Bond market committee endeavored to put together a responsible issuer program.

(03:36)

And the goal was sort of a simplified version of disclosure that would sort of be something different from what ICMA or CBI or any of the other sort of international or global thought leaders are on green because it just wasn't issuer, I should say municipal issuer specific focused. And the goal was we want an investor written criteria that can be used and understood by municipal issuers. That was the key. And so subcommittee was formed in 2012. Raul led that effort. Barbara and Kim and myself also worked on that committee along with eight other mostly investors. And we came up with our best practices for disclosure. And look, the green bond disclosure, at least the demand for it, and I should say ESG disclosure in general is not going away. Investors are increasingly demanding for that, demanding that as depositors invest their money, particularly younger generations of investors are demanding that they understand not just the impact but the ongoing effects of their investments.

(04:53)

And also from a regulatory perspective, investors are selling green investments and they need to show that there's some sort of criteria backing up what they're claiming to be green bonds, whether it's an investment strategy or a green bond category. And they need to prove that there's some sort of disclosure supporting the determinations. So two quick definitions here. A green bond, we all know what a green bond is. It's an environmentally friendly project that's kind of earmarked for renewable energy, water, sewer system treatment improvements, clean energy, more efficient buildings and so on, which is basically everything that we do on a daily basis. Social bonds, those are a little bit more nebulous of a concept. They obviously focus on addressing social and humanitarian issues and challenges by financing projects that aim to improve quality of life, particularly for vulnerable populations and communities. And so while those are sort of their own distinct things, ESG is a more global concept. And by that I mean that ESG encompasses a much broader set of criteria, which includes not just the social, not just the green, but also governance issues, things like ethics and transparency. So again, ESG is a more comprehensive approach that considers a much wider range of sustainability and ethical considerations when making those investment decisions. So with that, let me kick it off and hand it to the experts here. We'll start, Barbara, what kind of investors are buying green and social bonds? And can you talk about what determines your disclosure and informational needs?

Barbara Vanscoy (06:37):

So what kind of investors? So I've been doing, just as a background, I've been doing this since 1995, so really have been on the forefront of this. And what kind of investors? All kinds of investors. High net worth. I worked for a foundation, but prior to that I was an owner of an asset management firm in which we managed on behalf of financial institutions, insurance companies, faith-based institutions and municipalities, state and city pension funds. So really it's across the board. And then I think what's problematic about ESG is because you're talking about pretty much the entire investing universe, everybody wants something different. And I think that's where we have the push and pull on disclosure of who needs what and what is enough.

Mark Chapell (07:40):

Thanks, Kim.

Kim (07:44):

Sorry. So for purposes of the panel, I wouldn't describe my firm strategy or our process as sort of pure integration, but we wanted to contrast different types of investors for people to help. To Barbara's point to help you understand why does it seem like we're always asking for different things? It's because we are all so different and there's not one standard. So I did interview an integration, a real one, an integration investor to kind of get some insight on how the process works. I wanted to talk a little bit about how ESG factors ultimately impact credit quality. And there is some amount of that in I think everybody's analysis. But in this case, integration, investors are really looking at environmental factors. There are various kinds of risks that have to be factored into the analysis. I think the most obvious ones are probably natural disaster risk.

(08:45)

And then on the social side, you're looking at education or transportation access, healthcare access. What are some existing healthcare conditions that can ultimately impact the sustainability of your community. And then on the governance side, you're really looking at policies and procedures like what is management doing? Has management identified challenges? And then is there a long-term plan? And I think because of the disclosure, many sort of where it is and the mixed messages that I think we sometimes send as a community, a lot of that information isn't included in the official statement. So it requires analysts to be a little bit more of detectives and looking for your climate change plan and your goals and what is your capital plan, how do the two fit together and how are those two ultimately going to get you to the sustainability that you want? So that's a little bit about the integration process and if you want to talk to a real integration investor, see me after I can arrange that.

David Blair (09:56):

At Nuveen, we manage some ESG strategies. So for Munis and outside of Munis, but particularly to Munis, the way that works versus integration is there's an explicit screen that we put in place to screen for leadership in sustainability and ESG. So the way that works at a high level is we by sector. So looking at healthcare, electric utilities, public power or water, sewer and so on and so forth, each of those sectors aligns typically with one or more sustainable development goals. So that's really the foundation of the analysis is using the sustainable development goals, which is pretty common if you look across to other investors how they approach it as well. And so you can align UNSDGs with particular sectors. And then from there we've developed a proprietary model that pulls information sources to measure issuers within those sectors against other issuers in that sector to essentially rank them for leadership.

(11:09)

So for example, if we're looking at the healthcare sector of hospitals, good health and wellbeing is a sustainable development goals goal. And you, if you delve into that more detail, you can find targets related to those goals. And we can measure pulling a lot of it's federal public information. And the reason we do that, whether it's Medicare for healthcare, EPA for water and sewer as well as many other public sources, it's a way to gain a wide source across all issuers. Because when you think about the thousands of issuers, there's a variety of disclosure approaches and some information's left out for some and it's not included. Therefore it's kind of hard to relying from our perspective too much on disclosure for ranking for leadership. So we've over many years developed this model that really pulls public information to be able to rate and score most of the issuers in the index.

(12:15)

So you're talking about thousands, and that gives us a robust approach to be able to, so we're not really constrained on what we're buying. We really want our strategy to look like a typical municipal strategy. So we're looking at all the risk factors you typically would think about interest rate risk, credit risk, where do we want to be positioned on the curve and so on and so forth. But then on top of that, you have this additional screen where we will seek to find the leaders in sustainability in their sectors. There's another component of that that's more thematic in nature. So we will invest in some thematic bonds. These are bonds where the use of proceeds are what define the eligibility. It might not be the issuer, but if they're issuing bonds for a new water plant for clean water that aligns with clean water and sanitation and we can end up buying that bond. And then we do rely more on the disclosure of the issuer in regard to that bond.

Barbara Vanscoy (13:21):

And with that, I just want to, this is probably because I've been doing this for so long, often in this space because we're ESG investors, I've been called not a real bond manager, probably more times than I care to remember over the last 20 plus years. And I think both Kim and David bring out that not only are we not squishy bond managers, but we are adding an extra layer of research and due diligence on our process that other managers aren't. So I really want to put out that we are in fact real bond managers and we look at all of the traditional credit fundamentals and portfolio fundamentals and we add in an extra layer of due diligence to make sure that the investments that we're buying meet the environmental, social and governance criteria that our investors expect.

Mark Chapell (14:32):

Thank you. So David, you hit on this a little bit, but so when you have a transaction in the market that has a third party verification and whether that's aligning with the UN or ICMA goals and standards, talk a little bit about how you use the data or the analysis that those reports provide.

David Blair (14:55):

Yeah, sure. So first we do our own independent analysis, but I find those reports helpful actually. They provide a good synopsis of the broader sustainability plan of the issuer typically. And actually they provide information that you don't find often in the issuer's own disclosure. So they bring some of the disclosure we need out through what they're doing and they do it in a very concise way so I can go right to it as opposed to kind of pouring through the OSS, trying to find it in different places if it exists. So I do like those reports. I think they're useful. They provide a good sense of, again, the broader plan. And then when you think about the green bond principles, for example, what's recommended is there's a four pronged framework to disclosure, which is one describing the use of proceeds, how that bond was selected, and to be designated on the management of those proceeds and then what the disclosure will look like. And issuers often who designate their bonds as green don't really explicitly do that. Some do, but many don't. And the verifier often will do that for them, and it's nice to see that. And then sometimes you'll see them also support the following, the disclosure after issuance and supplement it and provide even better disclosure. So we don't rely on it for deciding whether to buy it, but it does make the analysis easier for us often.

Kim (16:31):

Can I add on to what David is saying? I totally agree. I think that the third party verification reports provide so much helpful information, but it is just one piece of our analysis and we still have to do our own due diligence on every credit. So in and of itself, the third party verification is not enough. And that's why I think our community and our committee has been pushing so hard to get more disclosure directly into the, I like it in the body personally, the body of the official statement, but even in the appendix.

Barbara Vanscoy (17:04):

I agree. And for me also it's another just like a ratings report, it's another source of information. And also for me, I use it in terms of by decisions and how securities are priced. And it's not necessarily, if it has it, I will, but it's something that again goes into the decision making as to whether or not I select one security versus another.

Mark Chapell (17:40):

Thank you. It seems like a lot of the heavy lifting on disclosure seems to come at the beginning of a bond transaction and maybe goes through the life of the proceeds being spent. So with that in mind, if your analysis on a particular transaction or a series of transactions are not specific project related, what sources do you use for ongoing disclosure and how do you utilize that?

Barbara Vanscoy (18:15):

So if it's not project specific, then it's okay looking at the issuer. And for me it's how does the issuer behave? And it's also community development and community impact. Is this something that is supported by the community? So in terms of governance, I will look at whether or not it's a referendum to actually support the financing of something, especially if it's not project but more broad based, like main state actually does really a lot of their statewide financing. It won't be one specific thing, but it'll be education and broadband and things that the citizenry has supported and voted on. And also it's what is that issuer's role in the community and are they doing outreach? Are they doing education? A lot of what I do is housing. So how are they behaving in terms of making sure that there's equitable access to affordable housing? What kind of assistance, what kind of education for home ownership, things along those lines. So if it's not specific to a project financing, it's really you have to back up and then look more at the bigger picture and determine how it fits in with the rest of the portfolio.

Kim (19:59):

I would just add onto that to say there's a lot of issuers that are frequent issuers, you repeat to the market. And I think that, and now I am going to admit that everything I told you about integration investing is what I know. So putting my own hat on is what I like about this ESG space is it is still evolving and developing. I think there's flexibility for us to look at different factors and it's going to depend on what we think is important beyond the one project that someone funded with green bonds or social bonds. The more you can tell us on an ongoing basis about what you're doing, the easier it makes our jobs. So I always say there's a little bit of, please help us help you kind of ask in that about disclosure and sharing any data points that you can, it doesn't have to be about the specific project, but to Barbara's point, it can be other things that you're doing to support your goals or support your communities

David Blair (21:04):

Within our ESG strategy. So when you take the thematic bonds out, and we're just looking at the ranking, the issuers for leadership in ESG that is not dependent on the issuer's disclosure. As I mentioned, it's pulled from independent third party typically government data and a lot of it's federal data and it's very outcome based. So we're measuring based on outcomes relative to the sustainable development goals. So from that standpoint, it's not really dependent on issuer disclosure on an ongoing basis. And again, we did that intentionally, partly because of just the inconsistency and disclosure by issuers, and we really needed something robust that we could rely on in a consistent way. But having said that, that doesn't mean that issuer disclosure isn't very important and that we're not really looking at that closely and thinking about what that says about issuers who are disclosing a lot versus those who aren't disclosing enough.

(22:11)

So when it comes to, in our traditional strategies, we're looking at everyone else climate risk, that's becoming an increasingly important long-term risk and just other sustainability risks related to communities. And that is where we're looking to, that's really relying on the issuer trying to see what the plan is. I think a lot of issuers are just now starting to become more aware of that. And I think some aren't issuing disclosure related to that because they feel like they're not doing much. But I think even if you're developing a plan and you have a team that you're building, I think that's important to note that one, you recognize the risk of climate, and two, there is a plan being put in place even though it might be in early stages. That's good to know versus not putting anything out there. So from a broader risk standpoint, not really ESG specific. That's an important point I wanted to make.

Kim (23:08):

I just want to add onto something that David said at the end, right, because I was on the California Air Quality Boards website and they have this map of all these cities and counties that have already put together climate change plans. Everybody's already done all this amazing work, you should take some credit for it and tell us all the great things that you're already doing. And it's already in the public domain. So I mean we can find it, but again, it'd be easier if it were kind of summarized or at least you can point us to the right place to find the latest version or the latest goals that you have.

Barbara Vanscoy (23:46):

And I think it's important in terms of breaking down silos of information. A lot of, like Kim said, this information is out there and perhaps you as the treasurer or the finance department aren't aware, but if you could walk across the building and ask maybe your chief sustainability officer or there are other areas in which this information is out there, and I know we have, again, this, well, we can't disclose this in the OSS because bond council says this, or it's contrary to that, fine, put it someplace where it's accessible for investors because two things are going to happen. Either you're going to get a phone call from us and we're going to ask you and we're going to annoy you, or we're going to say, moving on, we're just going to go on to the next bomb that crosses our desk. So we are all evolving. We evolve in our process, you're evolving in your process, and it's a disclosure of information and conversations that need to be had.

Mark Chapell (24:56):

As we were working through that best practices for disclosure paper over the last couple of years, I can't tell you how many times we all sat and looked at each other and thought, thought, well, why isn't the engineer who's designing this updated treatment system for wastewater talking to the finance team? It's the information is there, it's just not getting shared because, well, that's what we're here to figure out is why isn't that being shared? So now we're getting down to some specific projects. Can each of you maybe share a specific project that you brought into your portfolio that you think folks out here might be interested in hearing about?

Barbara Vanscoy (25:42):

So when I came internally at Heron Foundation, and I've started manage, so I am an anomaly. I am one of the only portfolio managers that sits within a foundation that actually does market rate impact investing on behalf of the foundation. So when the first bond purchase that I made internally was the Cal Healthcare financing facilities, the no place like home program in California, which I very, very much like. And the reason why was because at the time we were working very closely in the Central Valley of California. So this program is for supportive housing and homelessness. And so it's specifically financed affordable housing projects in Fresno and helped to provide assistance to some of the nonprofit partners, housing partners that we were working with in the Central Valley. So for me, that's one of my first and favorite California issues that I own in my portfolio.

Kim (26:57):

So I'm going to take a slightly different approach, and rather than pick a specific QIP bond, I just wanted to talk a little bit about some of the sectors that we like and we think fit, align well with our strategy. So we have a sustainability strategy. It's obviously, therefore not just ES orgy, but a combination of the three. We tend to education, healthcare, housing, especially particularly affordable housing. We also like water and sewer. But then at the same time, we also recognize some of the risks in each of those sectors. We screen for risks. We also look at, we're very interested in what are the population that you're serving or whom is the population that you're serving, what kind of outcomes are you able to achieve? And just like I talked about, I know I told you that's all I know about integration, but there is a whole element of factoring in all of your planning and both your climate and your capital planning and marrying that two together. That factors into our analysis. So I know that was a little bit more general than Barbara gave, but I thought I would try a slightly different approach.

David Blair (28:15):

I'll mention a couple of projects just more from the standpoint of pointing out a little bit of the disclosure differences. We own a BART 2019 issuance. This was part of a series of issuances that were under an authorization, I think it was a three and a half billion dollars authorization in 2016 related to upgrading the whole system. And so these bonds in particular were issued to upgrade the actual rail, some of the tunnels control systems really from the standpoint of resiliency, trying to make the system more resilient to earthquakes. And then there's another component of that that aligns well with sustainable communities and clean transportation, which is the fact that this is low or maybe it's no carbon, a great alternative to what do you otherwise would have by driving, for example. And so we bought those bonds, but I think Barton, they're not the only one that has this kind of really robust disclosure, but I really like their disclosure.

(29:24)

They lay out very, very well the broader sustainability plan, their long-term plan, and it helps put the actual project into context. I think it builds confidence and credibility in what they're doing when they describe the bigger picture and where they're going. And then they also lay out very explicitly that framework for the green bond principles, which I had mentioned earlier. They specifically address use of proceeds why the project was selected for designation as green, how the proceeds will be managed, and disclosure afterward, they committed to disclosure after the issuance. This was also an issue that was certified under the climate bond initiative. So they had to certify on an ongoing basis that they maintained the ability to be certified going forward. So the disclosures really wonderful and it aligned well with the UNSDGs, but it also, the disclosure just builds a lot of confidence and just the quality of the alignment, I think, and of the issue.

(30:32)

That was one. And then there was another one, which I is the California Economic and Infrastructure and Economic Development Bank, which was issued this year. It was, I think a half a billion dollar issuance for a variety of clean water projects throughout the state. So they're just all over the state basically, if you're not familiar with this, they provide revolving loans, cheap financing to local agencies that would have a more difficult time getting access to the municipal market, particularly at good rates. And so they're really a way to fund local agencies for clean water and safe water, drinking water, and maintain compliance with the federal regulations along in those areas. So clearly that aligned well with clean water and sanitation. But what I liked about their disclosure though, they didn't go through the depth and it wasn't as, let's say, robust as BART. Many issuers aren't, some are, but I think what they did a good job of was actually laying out each of the individual projects in some detail and you could see what the proceeds were being used for in the benefits to the local area for clean water and sanitation.

Mark Chapell (31:53):

Thank you. So this is kind of where the rubber meets the road question on ESG investing, which is, hey, if there's, it's more work. So three are doing your full regular analysis, and then on top of that, trying to figure out through whatever disclosures available, whether or not this qualifies for ESG and how so why should issuers take the extra step, provide this enhanced disclosure if there's no pricing advantage. And I know you've all been asked that question more than once, so give us your spiel on why that disclosure is worth the effort.

Barbara Vanscoy (32:50):

For me. And again, I am a drop in the ocean of investors, but for me, it does make a difference in terms of, like I said, am I going to buy this issue? Am I going to go down the rabbit hole of research? Because again, it's not just, oh, I read the cover of the OSS and it says that it's third party verified and the rating agencies rated it this. Let's go ahead and buy this for me because we have a philosophy, it's called net contribution. I have to look at all the aspects I have to look at holistically of the issue. So it's the positives and the negatives. It's not just look at this shiny thing over here and ignore all of the toxic waste over there. So the more that you disclose, I don't have to go as far down in the rabbit hole and I am more likely to participate in that issue.

(33:58)

And then from the perspective that, again, I am unique in that at Heron we have full transparency. If you ask me what I own, no. Well, we have to wait 90 days because of whatever. We are very, very transparent as to our process, how we do things and why we do things. So think of me as an ambassador and a PR agent on behalf of your issuance. If I own it, I'm going to tell people why I own it, how great you are and everything else. So I don't know if that's an answer, but that's again, it's the difference between do I buy A or B?

Kim (34:47):

And I think the tax exempt market is still less or is still evolving. I like that adjective better. It's still evolving and the taxable market has evolved faster. So that's where you see the pricing advantage. And we totally know that this is not your only job. I mean, I was a banker and I used say, I know bonds are not the only thing that finance directors have to do. It's the only thing bankers have to do. But at the same time, what you really want in a bond sale is the broadest possible base of investors. And I think in a market like this one in particular, this is when you really want to be appealing to as many people as possible. And unfortunately what you kind of heard is that we all want something a little bit different, and we're all telling you we want more.

(35:45)

And so I apologize. I know that's a challenge, but I think it's also the reality of where our market is going. And I guess I would say the last thing is that I think you also want to do it because it's the right thing to do. I mean, why does everybody bust their tails to get their audited financial statements done within 120 days when the continuing disclosure agreement doesn't require you to get it done in for 270? I mean, you all do it because it's a good thing to do and it shows strong management. And I think that's true here too, is to the extent that you can begin to share more information with us and help us, I think it shows that you are thinking ahead and you're a leader in this space.

David Blair (36:32):

Yeah, I agree with all that. And I've talked with a couple issuers who said that even though they don't see a pricing advantage, it still is a signal to their constituents that they're following through on the master plan. So there's a master plan about how you're going to build resiliency in your infrastructure, in your fixed assets, and this is part of financing that, and so designating it as green or if it's social, what have you, but there's a value in that clearly to issuers. That's what I'm hearing from my perspective. I kind of think about, if I'm an issuer, what's regulation going to look like down the road? And so building the good practices now just I think mitigates the risk that you're kind of off balance and scrambling to respond to required disclosures down the road, which seem like they might be coming from what I'm hearing.

(37:37)

And then I'd say with thematic bonds, green and social bonds, at the end of the day, it does matter. When I look at a bond, there's a lot of other things that play into deciding about one bond versus another. There's a lot of things outside the green and social nature of it. It's whether it fits the risk profile of what I'm trying to buy for the portfolio. Again, duration, interest rate risk, credit risk and so on. But for two similar bonds that are green, and I look at them for the thematic aspect of it, and one has really good, they both align with the UNSDGs, but one has much better disclosure that's going to decide it for me so that it can matter on the margins right now. But I just think it's going to become more important. And I think the final thing is when you're talking about disclosure, not so much at the bond level, but regarding your broader plan for sustainability and mitigating climate risk and things like that, I think that's just going to become more important.

(38:44)

And investors are waking up more and more to the risks. It's mostly a long-term risk, but that seems to really be more and more of a focus as we go through every year where we're seeing the effects, the growing effects of climate change. And if you study climate change at all, they talk about tipping points and things like that. We could go through years where you get a big step up in terms of the perception of the risk, and then suddenly people are going to really want more disclosure. So I think kind of thinking ahead and building those practices in now I think is a good practice.

Kim (39:22):

Can I just add onto something that David said? I think, and I mean I'm not a lawyer and I'm not your lawyer, but I tend to think we don't build appendix. We don't start appendix A from scratch every time there's a appendix A that you work with and then you update it. So one of the things I've always been thinking about is it doesn't have to be perfect, but if you start now and you add information incrementally, then to David's point, you're going to be ready and not scrambling when a change is pushed upon you. I just want to kind put that little idea out there that it can be slow and incremental and you just build on it over time.

Mark Chapell (40:13):

Yeah, thank you. So let's kind of finish up with talking a little bit about the green bond disclosure paper we think was a useful first step and maybe a good, as you were talking about a good foundation to kind of build on going forward. So what kind of tools can we, as investors and analysts, help the issuer community to take on? Or what kind of tools can we create for them so that they can begin to establish a regime of disclosure?

Barbara Vanscoy (40:49):

Again, I'm definitely not a lawyer and bond counsel or anything above. And again, and this is not from the perspective of if you could just make it make my job easier than I could go home at three o'clock instead of whenever. But again, if we can't disclose things in the ,OSS if you wouldn't make us hunt through really, really labyrinths of websites, if we could have maybe a section in Emma or something else, I do have to say that, and this is again, as somebody who just uses the information, a lot of what Bond link has been able to do in their issuer portals in which they have the information for me has been very, very helpful because like David and Kim, I use so many different sources of information. If I can just be able to go here for this and then do all of my other stuff, it would allow me to move at a faster pace, look at more bonds, and build more robust stories. So I would just love it if we could have an Emma edition or an Emma Augmentation or something that is not necessarily Emma, but is an ESG Emma equivalent. That would be my wishlist.

Kim (42:30):

I think, well, my wishlist, yeah, okay. We won't go down that rabbit hole, but I think a lot of really, the bigger issuers have more resources, they have more staff. And I know it's much harder as you get to be a medium-size or smaller issuer, but I would encourage you to think about a sustainability landing page. I mean, you already have some cities and other agencies already have it. It's just about putting it in one place and making it easy to find. I'm going to borrow something that one of our fellow committee members set on a webinar. It is not in an analyst nature to take anything at face value. So we have to keep digging. And then it becomes a question of how much time do we have? When you have 10 deals this week, how much time do I have to devote to digging for this particular issuers climate change plans?

(43:27)

So the more that you can make it easy for us, I think the better. Can I just say one thing about one, I want to put one more nugget or one more idea out there for your consideration is we talked about this a lot in the committee is we see a lot of deals that are lead certified and lead is such a rigorous process and there's so much information that goes into the application. If you could just give us a little bit of what's in the application, then I think that would help us. You already know how many kilowatt hours of power you're going to save or how many million gallons of water you're going to save, or you can make it, I know bond counsel will want you to make it estimated projected. You can put a disclaimer on it, but just to give us some order of magnitude I think is really helpful.

David Blair (44:11):

Yeah, that's a great idea. I think things that are important to me is just ease of access and being able to have access to a broader array of information. And often I see issuers who are really good about that, they'll just put a link in the OSS to see our broader, the master plan for sustainability here on this website, more detail around to the extent you have it on the benefits of some of these thematic bonds, like green bonds, what are the improvements in air quality or whatever the nature of that might be, water quality or conservation that's expected. It doesn't have to be a promise, but it's just basically this is what we expect. And if you can't put it in the OSS, again, maybe a link and the lead is just, that's a great example where there's a lot more data that we just can't see.

Mark Chapell (45:05):

Great. Thank you. Well, let's go ahead and open it up for Q and A. Rob.

Rob (45:15):

Great panel. What I heard from you is that while there's the ESG label, this is just credit fundamental background risks. No one ever thought about downstream ville, and then we're all like, oh my God, we need to talk about families. So it's all, I think a great differentiation. Thematic, and this is just all fundamental credit research long in the corporate world, there have been many, many performance based loans. You achieve certain metrics, your interest rate goes down, fail to achieve the objective, your interest rate goes up very hard to sell to our clients. But would you buy step coupon bonds link to specific?

Barbara Vanscoy (46:09):

No, because again, being in on the philanthropy side, on the foundation side, we go through these darlings and social impact bonds and it puts it out there and it confuses non-traditional investment professionals that social impact bonds are like other bonds, and they're very, very much not. And also from a lot of the experience that I've seen, the way that they're structured, they really don't benefit the intended beneficiary as much as the structuring agent. So for me, it's pretty much a no-go. But again, I am a different investor.

Kim (47:10):

I guess for us. I'm not sure we have a natural fit for that. And then I would say then I think your point about it is fundamental credit analysis, and then I think it becomes about whether we like it as a not specific green investment, but that's probably a little bit out ahead in front of my firm and I'm not making any decisions. I'm just.

David Blair (47:35):

Yeah, I'm not really sure because what we're offering to our clients is, in our ESG Muni strategies is something that's supposed to perform similar to a traditional Muni investment, but with the added ESG benefits, which we don't propose that this is going to outperform the traditional strategies, it just won't perform worse. It should be similar. But for clients who want to get the traditional performance, but that aligns with their values and sustainability, that's who this product would really, they'd be attracted by that. My concern with that type of investment is whether it would, if the issuer does hit these goals and their rate comes down, what does that do for the price of the bond and the performance of the bond? I'm just not sure I am familiar with those strategies, but within the Muni market, the number of buyers who demand that more and thus have a better performing bond if it hits those targets, I'm just not sure about that. I guess we'd have to be more analysis around that.

Mark Chapell (48:46):

Thank you. Any other questions we have time for? Probably one more. Well, let me ask, I'm curious from each of you, are you hearing anything from maybe the MSRB or SEC about forthcoming regimes for disclosure?

Kim (49:11):

I have not heard anything. I do know it's happening on the corporate side and Munis are never going to, we're a smaller market, we're never going to lead that, right? It's going to play out in the corporate market and then there are elements that will get applied to our market. I think that's pretty consistent with how it's been over time.

David Blair (49:32):

That's sort of what I was saying earlier is that you have to think that some of that's going to filter over to our side from the corporate side, but I haven't heard anything yet about that.

Mark Chapell (49:42):

Alright, great. Well, please join me in thanking our panelists.