Description
PARNASSUS DIGEST
NOVEMBER 2014
Parnassus Endeavor Fund Insight
The Parnassus Endeavor Fund (PARWX) – one of the ï¬rst thematic
Environmental, Social, and Governance (ESG) funds in the U.S.
– turns 10 in 2015. Portfolio Manager Jerome L. Dodson and CoFounder of the Great Place to Work Institute Milton Moskowitz
together proposed that companies with good workplaces could
potentially outperform over time. This is what originally inspired
the Fund’s launch.
In May 2014, a fossil fuel free screen was added to the strategy. The Parnassus Endeavor Fund is an actively managed Fund with the objective of capital appreciation. An investor who made a $10,000 investment at inception of the Fund, on April 29, 2005, would have seen that appreciate to $28,021 over the last 9 years, ending September 30, 2014. The Fund’s average annual return since inception, through September 30, 2014 was 11.56%, as compared to an average annual return of 8.07% for the S&P 500 Index. Environmental, Social, and Governance (ESG) Evaluation All the companies in the Parnassus Funds are evaluated on a broad set of ESG factors.
We look at environmental, workplace, community, product, customer, and governance issues that are important to responsible investors. The Funds will not invest in companies that derive signiï¬cant revenues from the manufacture of alcohol, tobacco or weapons, or have signiï¬cant involvement in gambling, nuclear power, or Sudan. The companies included in the Parnassus Endeavor Fund are additionally screened for good workplaces, and their businesses must not be signiï¬cantly involved in fossil fuels. Impact of Going Fossil Free: Reduced Carbon Intensity The Fund’s “fossil free” designation means that it avoids investing in companies engaged in the extraction, exploration, production, manufacturing, or reï¬ning of fossil fuels.
Partly due to this screen, the Endeavor Fund has a dramatically lower carbon intensity than the S&P 500. Carbon Intensity 280 250 200 150 Companies with good workplaces can differ in philosophy, beneï¬ts, and other practice areas. The workplace may be your local Whole Foods store, where the beneï¬ts include a “gainsharing” bonus, or a conflict-free diamond mine, where employees living on site are provided with virtually everything they need. In total, we calculate that the companies with good workplaces in the Fund represent approximately 2.4 million jobs, which include a wide variety of positions and work environments. “22 of the 35 companies in the Endeavor Fund have been recognized on the most recent versions of “Best” lists by independent third-parties, such as Fortune Magazine, Working Mother, Diversity Inc., Human Rights Campaign, Ethisphere and Newsweek.” The portfolio companies in the Parnassus Endeavor Fund have received positive accolades from independent third-parties.
22 of the 35 companies in the Endeavor Fund have been recognized on the most recent versions of “Best” lists by independent third-parties, such as Fortune Magazine, Working Mother, Diversity Inc., Human Rights Campaign, Ethisphere and Newsweek. The Endeavor Fund has six companies from the Fortune 100 Best Companies to Work For list (2014); six from the DiversityInc Top 50 Companies for Diversity list (2014); nine from the Working Mother 100 Best Companies list (2014); four from the Global 100 List (2014); ï¬ve from the World’s Most Ethical Companies (2014); and eight from the top 100 of the Newsweek Green Rankings (2014). While we make our own determination about the appropriateness of an investment for the Endeavor Fund, we appreciate this positive third-party recognition. 119 100 0 PARWX 50 S&P 500 Index Tons CO2e / $mn revenue 300 Focus on the Workplace The Endeavor Fund was an innovation created by portfolio manager and founder of our ï¬rm, Jerome L. Dodson, and Milton Moskowitz, Co-Founder of the Great Place to Work Institute under the premise that companies with good workplaces could potentially outperform their peers over time.
This focus on good workplaces remains an important part of the investment philosophy today. PARWX S&P 500 Source: According to Trucost, a third-party ï¬rm specializing in natural capital measurement, portfolio carbon for the Parnassus Endeavor Fund, as of 6/30/2014, was 119 tons of carbon dioxide equivalent per million dollars in revenue, as compared to 280 for the S&P 500. This measurement incorporates the carbon impacts of the company’s operations, its fuel use, and the emissions from the ï¬rst tier in its supply chain. When a company does not report its own emissions, Trucost estimates them based on their knowledge of the industry and the company’s business activities.
Their accounting is based on the Greenhouse Gas Protocol, which is the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions.1 Workplace Attributes of Selected Portfolio Holdings There is no such thing as a perfect company. However, companies can have positive impacts by providing good workplaces for their employees. Below are two examples of investments in the Parnassus Endeavor Fund. Like many in the Fund, these two companies report extensively on their corporate social responsibility, allowing investors to better understand and appreciate the companies. Novartis: Committed to a Living Wage Novartis has been recognized as one of the World’s Best Multinational Workplaces,2 and employs over 135,000 workers in 140 countries. Its improving employee diversity and global wellness initiatives are notable positives, as is its commitment to a living wage. .
A living wage commitment matters because it signiï¬cantly raises wages for workers, particularly in developing countries, where market-rate wages are much lower. Novartis established its living wage commitment to address the fact that ‘‘everyone who works has the right to just and favorable remuneration ensuring…an existence worthy of human dignity.’’3 Advocates of a living wage contend that minimum wages don’t do enough to assure basic needs, while adoption of living wage standards can contribute to stability and prosperity in communities and attract more skilled, productive, and loyal employees.4 The practice instills pride in corporate operations, as stated by a Novartis Manager in Pakistan: “No other companies are doing this locally. When talking to government ofï¬cials, I can proudly say that we pay several times above the minimum wage and that we are not just a proï¬t making business.” The Parnassus Endeavor Fund has done well over the years by investing in innovative companies that provide great workplaces for their employees. By no longer investing in companies engaged in the extraction, exploration, production, manufacturing or reï¬ning of fossil fuels, we aim to provide investors seeking to reduce their exposure to fossil fuels with a high quality, long term investment solution. Qualcomm: A Fortune “100 Best Company” for 15 Years Qualcomm employs 31,000 workers globally and has the distinction of having been on Fortune’s “100 Best Companies to Work For” every year since 2000.5 About the Author We thank you for your investment in the Parnassus Funds. Maria Kamin ESG Research Manager Besides noteworthy employee beneï¬ts like outdoor recreation centers and concerts, the company provides unique beneï¬ts, like partnering with a local YMCA to offer subsidized summer camp for the children of Qualcomm employees.
The company is also a good place to work as an intern, as internships are paid, and can include housing and relocation packages. The company’s focus on its employees has practical beneï¬ts like employee engagement and loyalty. In a competitive industry where highly-skilled human capital is a necessity, the company’s ï¬nancial strength, opportunities for career growth, and reputation are the top three reasons employees stay at Qualcomm, according to the company’s 2012 Social Responsibility Report. This loyalty is evidenced, at least in part, by the low 3.8% voluntary turnover rate.6 Parnassus Endeavor Fund Average Annual Total Returns (%) for periods ended September 30, 2014 One Year Parnassus Endeavor Fund 20.33 26.09 16.30 11.56 1.07 0.95 S&P 500 Index 19.72 22.94 15.67 8.07 NA NA Three Years Five Years Since Net Gross Inception Expense Expense on Ratio Ratio 4/29/05 Performance data quoted represents past performance and is not indicative of future results.
The Fund’s current performance may be lower or higher than the performance data quoted. A Fund’s investment return and principal value will fluctuate. Upon redemption, shares may be worth more or less than the original cost.
Returns shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The Standard & Poor’s 500 Composite Stock Price Index (also known as the S&P 500) is an unmanaged index of common stocks and it is not possible to invest directly in an index. Index ï¬gures do not take any expenses, fees or taxes into account, but mutual fund returns do. Maria Kamin ESG Research Manager Maria L. Kamin is the ESG Research Manager.
Prior to joining Parnassus Investments in 2010, she was the Research Product Manager and a Sustainability Analyst at MSCI, Inc.; formerly KLD Research & Analytics, Inc. In 2008, Boston College recognized Ms. Kamin as a Sustainability Fellow in the Leadership for Change program.
She received her bachelor's degree in political science from Tufts University, and a master's degree in Paciï¬c international affairs from the University of California, San Diego. As described in the Fund’s current prospectus dated May 1, 2014 (As Amended and Restated September 19, 2014), Parnassus Investments has contractually agreed to limit total operating expenses to 0.95% of net assets for the Fund. This agreement will not be terminated prior to May 1, 2015, and may be continued indeï¬nitely by the Adviser on a year to year basis. 1. http://www.ghgprotocol.org/ http://www.greatplacetowork.com/best-companies/worlds-best-multinationals/thelist 3 .http://www.novartis.com/corporate-responsibility/responsible-business-practices/ caring-for-our-people/living-wage.shtml 4. http://www.novartis.com/downloads/corporate-responsibility/responsible-businesspractices/living-wage.pdf 5. http://us.greatrated.com/qualcomm 6. https://www.qualcomm.com/media/documents/ï¬les/2013-qualcomm-sustainabilityreport.pdf 2. As of September 30, 2014, Novartis represented 2.2% of the Parnassus Endeavor Fund, 2.1% of the Parnassus Fund, and 2.3% of the Parnassus Core Equity Fund as a percentage of total net assets. As of September 30, 2014, Qualcomm represented 3.7% of the Parnassus Endeavor Fund, 3.5% of the Parnassus Fund, 3.4% of the Parnassus Core Equity Fund, and 3.4% of the Parnassus Asia Fund as a percentage of total net assets. The views expressed in this Parnassus Digest are subject to change at any time in response to changing circumstances in the markets and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or the Parnassus Funds. Any speciï¬c securities discussed may or may not be current or future holdings of the Funds. The Parnassus Funds are underwritten and distributed by Parnassus Funds Distributor, a subsidiary of Parnassus Investments and FINRA member. Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of the Funds and should carefully read the prospectus or summary prospectus, which contains this information.
A prospectus or summary prospectus can be obtained on the website, www.parnassus.com, or by calling (800) 999-3505. An investor may visit www.parnassus.com/parnassus-mutual-funds/#tab-performance to obtain performance data current to the most recent month-end. Parnassus Investments l 1 Market Street, Suite 1600 l San Francisco, CA 94105 l (800) 999-3505 l www.parnassus.com .
In May 2014, a fossil fuel free screen was added to the strategy. The Parnassus Endeavor Fund is an actively managed Fund with the objective of capital appreciation. An investor who made a $10,000 investment at inception of the Fund, on April 29, 2005, would have seen that appreciate to $28,021 over the last 9 years, ending September 30, 2014. The Fund’s average annual return since inception, through September 30, 2014 was 11.56%, as compared to an average annual return of 8.07% for the S&P 500 Index. Environmental, Social, and Governance (ESG) Evaluation All the companies in the Parnassus Funds are evaluated on a broad set of ESG factors.
We look at environmental, workplace, community, product, customer, and governance issues that are important to responsible investors. The Funds will not invest in companies that derive signiï¬cant revenues from the manufacture of alcohol, tobacco or weapons, or have signiï¬cant involvement in gambling, nuclear power, or Sudan. The companies included in the Parnassus Endeavor Fund are additionally screened for good workplaces, and their businesses must not be signiï¬cantly involved in fossil fuels. Impact of Going Fossil Free: Reduced Carbon Intensity The Fund’s “fossil free” designation means that it avoids investing in companies engaged in the extraction, exploration, production, manufacturing, or reï¬ning of fossil fuels.
Partly due to this screen, the Endeavor Fund has a dramatically lower carbon intensity than the S&P 500. Carbon Intensity 280 250 200 150 Companies with good workplaces can differ in philosophy, beneï¬ts, and other practice areas. The workplace may be your local Whole Foods store, where the beneï¬ts include a “gainsharing” bonus, or a conflict-free diamond mine, where employees living on site are provided with virtually everything they need. In total, we calculate that the companies with good workplaces in the Fund represent approximately 2.4 million jobs, which include a wide variety of positions and work environments. “22 of the 35 companies in the Endeavor Fund have been recognized on the most recent versions of “Best” lists by independent third-parties, such as Fortune Magazine, Working Mother, Diversity Inc., Human Rights Campaign, Ethisphere and Newsweek.” The portfolio companies in the Parnassus Endeavor Fund have received positive accolades from independent third-parties.
22 of the 35 companies in the Endeavor Fund have been recognized on the most recent versions of “Best” lists by independent third-parties, such as Fortune Magazine, Working Mother, Diversity Inc., Human Rights Campaign, Ethisphere and Newsweek. The Endeavor Fund has six companies from the Fortune 100 Best Companies to Work For list (2014); six from the DiversityInc Top 50 Companies for Diversity list (2014); nine from the Working Mother 100 Best Companies list (2014); four from the Global 100 List (2014); ï¬ve from the World’s Most Ethical Companies (2014); and eight from the top 100 of the Newsweek Green Rankings (2014). While we make our own determination about the appropriateness of an investment for the Endeavor Fund, we appreciate this positive third-party recognition. 119 100 0 PARWX 50 S&P 500 Index Tons CO2e / $mn revenue 300 Focus on the Workplace The Endeavor Fund was an innovation created by portfolio manager and founder of our ï¬rm, Jerome L. Dodson, and Milton Moskowitz, Co-Founder of the Great Place to Work Institute under the premise that companies with good workplaces could potentially outperform their peers over time.
This focus on good workplaces remains an important part of the investment philosophy today. PARWX S&P 500 Source: According to Trucost, a third-party ï¬rm specializing in natural capital measurement, portfolio carbon for the Parnassus Endeavor Fund, as of 6/30/2014, was 119 tons of carbon dioxide equivalent per million dollars in revenue, as compared to 280 for the S&P 500. This measurement incorporates the carbon impacts of the company’s operations, its fuel use, and the emissions from the ï¬rst tier in its supply chain. When a company does not report its own emissions, Trucost estimates them based on their knowledge of the industry and the company’s business activities.
Their accounting is based on the Greenhouse Gas Protocol, which is the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions.1 Workplace Attributes of Selected Portfolio Holdings There is no such thing as a perfect company. However, companies can have positive impacts by providing good workplaces for their employees. Below are two examples of investments in the Parnassus Endeavor Fund. Like many in the Fund, these two companies report extensively on their corporate social responsibility, allowing investors to better understand and appreciate the companies. Novartis: Committed to a Living Wage Novartis has been recognized as one of the World’s Best Multinational Workplaces,2 and employs over 135,000 workers in 140 countries. Its improving employee diversity and global wellness initiatives are notable positives, as is its commitment to a living wage. .
A living wage commitment matters because it signiï¬cantly raises wages for workers, particularly in developing countries, where market-rate wages are much lower. Novartis established its living wage commitment to address the fact that ‘‘everyone who works has the right to just and favorable remuneration ensuring…an existence worthy of human dignity.’’3 Advocates of a living wage contend that minimum wages don’t do enough to assure basic needs, while adoption of living wage standards can contribute to stability and prosperity in communities and attract more skilled, productive, and loyal employees.4 The practice instills pride in corporate operations, as stated by a Novartis Manager in Pakistan: “No other companies are doing this locally. When talking to government ofï¬cials, I can proudly say that we pay several times above the minimum wage and that we are not just a proï¬t making business.” The Parnassus Endeavor Fund has done well over the years by investing in innovative companies that provide great workplaces for their employees. By no longer investing in companies engaged in the extraction, exploration, production, manufacturing or reï¬ning of fossil fuels, we aim to provide investors seeking to reduce their exposure to fossil fuels with a high quality, long term investment solution. Qualcomm: A Fortune “100 Best Company” for 15 Years Qualcomm employs 31,000 workers globally and has the distinction of having been on Fortune’s “100 Best Companies to Work For” every year since 2000.5 About the Author We thank you for your investment in the Parnassus Funds. Maria Kamin ESG Research Manager Besides noteworthy employee beneï¬ts like outdoor recreation centers and concerts, the company provides unique beneï¬ts, like partnering with a local YMCA to offer subsidized summer camp for the children of Qualcomm employees.
The company is also a good place to work as an intern, as internships are paid, and can include housing and relocation packages. The company’s focus on its employees has practical beneï¬ts like employee engagement and loyalty. In a competitive industry where highly-skilled human capital is a necessity, the company’s ï¬nancial strength, opportunities for career growth, and reputation are the top three reasons employees stay at Qualcomm, according to the company’s 2012 Social Responsibility Report. This loyalty is evidenced, at least in part, by the low 3.8% voluntary turnover rate.6 Parnassus Endeavor Fund Average Annual Total Returns (%) for periods ended September 30, 2014 One Year Parnassus Endeavor Fund 20.33 26.09 16.30 11.56 1.07 0.95 S&P 500 Index 19.72 22.94 15.67 8.07 NA NA Three Years Five Years Since Net Gross Inception Expense Expense on Ratio Ratio 4/29/05 Performance data quoted represents past performance and is not indicative of future results.
The Fund’s current performance may be lower or higher than the performance data quoted. A Fund’s investment return and principal value will fluctuate. Upon redemption, shares may be worth more or less than the original cost.
Returns shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The Standard & Poor’s 500 Composite Stock Price Index (also known as the S&P 500) is an unmanaged index of common stocks and it is not possible to invest directly in an index. Index ï¬gures do not take any expenses, fees or taxes into account, but mutual fund returns do. Maria Kamin ESG Research Manager Maria L. Kamin is the ESG Research Manager.
Prior to joining Parnassus Investments in 2010, she was the Research Product Manager and a Sustainability Analyst at MSCI, Inc.; formerly KLD Research & Analytics, Inc. In 2008, Boston College recognized Ms. Kamin as a Sustainability Fellow in the Leadership for Change program.
She received her bachelor's degree in political science from Tufts University, and a master's degree in Paciï¬c international affairs from the University of California, San Diego. As described in the Fund’s current prospectus dated May 1, 2014 (As Amended and Restated September 19, 2014), Parnassus Investments has contractually agreed to limit total operating expenses to 0.95% of net assets for the Fund. This agreement will not be terminated prior to May 1, 2015, and may be continued indeï¬nitely by the Adviser on a year to year basis. 1. http://www.ghgprotocol.org/ http://www.greatplacetowork.com/best-companies/worlds-best-multinationals/thelist 3 .http://www.novartis.com/corporate-responsibility/responsible-business-practices/ caring-for-our-people/living-wage.shtml 4. http://www.novartis.com/downloads/corporate-responsibility/responsible-businesspractices/living-wage.pdf 5. http://us.greatrated.com/qualcomm 6. https://www.qualcomm.com/media/documents/ï¬les/2013-qualcomm-sustainabilityreport.pdf 2. As of September 30, 2014, Novartis represented 2.2% of the Parnassus Endeavor Fund, 2.1% of the Parnassus Fund, and 2.3% of the Parnassus Core Equity Fund as a percentage of total net assets. As of September 30, 2014, Qualcomm represented 3.7% of the Parnassus Endeavor Fund, 3.5% of the Parnassus Fund, 3.4% of the Parnassus Core Equity Fund, and 3.4% of the Parnassus Asia Fund as a percentage of total net assets. The views expressed in this Parnassus Digest are subject to change at any time in response to changing circumstances in the markets and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or the Parnassus Funds. Any speciï¬c securities discussed may or may not be current or future holdings of the Funds. The Parnassus Funds are underwritten and distributed by Parnassus Funds Distributor, a subsidiary of Parnassus Investments and FINRA member. Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of the Funds and should carefully read the prospectus or summary prospectus, which contains this information.
A prospectus or summary prospectus can be obtained on the website, www.parnassus.com, or by calling (800) 999-3505. An investor may visit www.parnassus.com/parnassus-mutual-funds/#tab-performance to obtain performance data current to the most recent month-end. Parnassus Investments l 1 Market Street, Suite 1600 l San Francisco, CA 94105 l (800) 999-3505 l www.parnassus.com .
