Municipal fixed-income markets are an ideal space for identifying securities with impact. The asset class at its core is designed for public good and is ripe with inefficiency creating opportunity. We’ve made these kinds of investments in our portfolios over the years. However, we’re now seeing investors’ interest growing to the extent that they want to experience the impact associated with these investments. And, our team’s own longstanding interest in ESG has led us to a few realizations: 1. The ESG investing space for municipal securities is still in the early life cycle phase, and we believe our extensive research expertise can help move the debate forward. 2. The extent to which an investor wants to focus on sustainability as a dimension of their investing can vary—and we need to help facilitate that. 3. There is not yet an obvious recognized benchmark or standardized ways to report sustainability considerations for municipal debt securities. We expect the industry to evolve to meet some of these emerging demands. In order to proactively contribute in this area, over the past year we’ve researched and constructed a framework to help assess whether positive environmental and/or social impacts exist in each municipal security and, if so, to what extent (low positive, medium positive, or high positive). A four-pillar approach to identifying impact with municipal fixed-income investments WFAM ESG impact framework 1 2 3 4 Use of Issuer ESG Underserved Vended proceeds impact population data analysis analysis analysis analysis Why do we believe in this approach? It can allow us to: • Select securities offering the highest potential positive impact • Understand the dynamic between potential returns, credit risk, and impact levels • Customize around impact interests, meaning we can hone our participation across sectors that we feel align with green or social bond principles; in the muni space, this includes sectors such as water/sewer, health care, public power, education, and project finance with environmental and social impacts 9 2020