Update:
Principal Claritas is now Principal Asset Management Ltda. Learn more about our operations in Brazil.
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
2010s
2020s
As of December 31, 2024, 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 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 | ||||||||||
Brazil operations | ||||||||||
Principal Dynamic Growth | ||||||||||
Principal Edge | ||||||||||
Principal Equities | ||||||||||
Principal Finisterre | ||||||||||
Principal Fixed Income | ||||||||||
Principal Morley | ||||||||||
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. |
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 | Brazil operations | 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 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.
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.
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
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.
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 |
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 5-Star rating (2024)2 for European Core strategy and European Office strategy
GRESB 4-Star rating (2024)
U.S. Core Strategy (9th consecutive year) and U.S. Green Property strategy
European Core strategy2, 4th consecutive year
GRESB Green Star rating (2024)2 for 14 U.S. and Europe strategies
ENERGY STAR Partner of the Year 2016-2024,
Sustained Excellence 2018-20243
Aligned collaboration between investment management and the enterprise:
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 has a Sustainability Task Force which is made up of members appointed by the CEO. 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.
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.
The Engagement Working Group is empowered to analyze investment teams’ sustainability-related engagement positions and offer insights to Principal AM and Principal senior leadership, and to facilitate reporting efforts across jurisdictions. It provides advice and consultation to Investment professionals to promote best practices in issuer engagement activities across investment teams and jurisdictions; in this capacity the Sustainable Engagement Working Group is a resource for investment teams and a forum for consultation.
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.
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.
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.
1 Awarded to Principal Asset Management (a trade name of Principal Global Investors, LLC), Financial Reporting Council UK Stewardship Code, 2021.
2 2024 Global Real Estate Sustainability Benchmark (GRESB) assessments representing data from January 1, 2023 to December 31, 2023. 5-star rating reflects top 20% worldwide performance; 4-star rating reflects top 40% worldwide performance. Green Star rating is awarded to entities with scores higher than 15 out of 30 on the Management and 35 out of 70 on Performance components. For information on the GRESB Green Star Rating please visit: https://www.gresb.com/nl-en/faq/what-is-a-green-star/.
For information on the methodology used for the GRESB 4-star rating please visit: https://www.gresb.com/nl-en/resources/2024-real-estate-scoring-document/.
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.