Pimco CEO Douglas Hodge has said environmental, social and governance (ESG) investing "simply makes good business sense" and can help investors navigate the themes that will dominate the investment landscape.
Pimco, the second largest bond fund manager in the world, is owned by German insurance group Allianz.
Giving a keynote address at the Principles for Responsible Investment's annual conference in London, Hodge said ESG was sometimes previously viewed as a strategy for "do-gooders" or "investors who were prepared to compromise or relax fiduciary duty in order to achieve social objectives."
But a number of factors, such as climate change and the growing and ageing global population, which was pushing up demand for resources, meant that ESG was increasingly material and, as a result, he said Pimco had "embraced" it.
Hodge pointed out that Allianz was trying to improve industry standards for dealing with climate-related risk, as the insurance industry suffered "ever increasing losses" over the past 35 years as a result of "forces of nature", such as extreme temperatures, droughts and tropical storms.
"ESG risks are real and can cause severe losses of capital," he added. "ESG investing makes good business sense. ESG investing is smart investing."
Hodge added that Pimco's thesis is to invest in companies that "are principled in how they manage their business", "care about the communities they operate in" and "behave responsibly", because these companies generate higher returns and "tend to be good at making business decisions."