Webcast | Measuring the impact of sustainable investing | June 10, 2020

Active Sustainability

Sustainable Future Fund (Class Y)  (PMVYX)

Investing in growing companies solving sustainability challenges

Q1 2020 | Sustainable Future Fund Q&A

  • The fund had a difficult quarter in terms of absolute performance, but outperformed its benchmark in extremely challenging conditions.
  • Beyond its obvious and deeply concerning effects on patients and caregivers, there is a growing focus on the broader social impact of the COVID-19 pandemic.
  • We are reassessing high-quality businesses whose long-term prospects remain strong and whose valuations have become more attractive.

In an extremely challenging quarter, how did the fund fare?

Katherine: It was a very difficult period, both in terms of human suffering and the sizeable drawdowns in equity markets as a result of the COVID-19 pandemic. Like all segments of the global financial markets, the fund had a difficult quarter in terms of absolute performance. However, the fund outperformed its benchmarks, which we believe was due to our focus on high-quality, well-managed companies that exhibit excellent sustainability performance.

What are some key sustainability issues in the current environment?

Katherine: In terms of environmental issues, we believe the short-term impact is mixed. For elements like air pollution and greenhouse gas emissions, we are seeing declines due to lower transportation and manufacturing volumes. For recycling and reusable products, we are seeing some setbacks as the safety of some single-use products is important in the context of the pandemic. We are assessing these shifts to determine what behaviors will be temporary, and what might become more permanent in a “new normal” environment.

As with any crisis, the COVID-19 pandemic has important implications for the social component of ESG. Beyond its obvious and deeply concerning effects on patients and caregivers, there is a growing focus on the broader social impacts. Essential issues include priorities that are embedded in government aid programs, treatment of contract workers, support for individuals whose work cannot be done remotely, impact on mental health and other aspects of well-being, and access to care. Some of these issues will need to be addressed by corporations across all types of industries.

What investment opportunities may result from the crisis?

Stephanie: Opportunities include investing in solutions that can help alleviate pressures and problems brought on by the COVID-19 pandemic and the stay-at-home measures being implemented worldwide. Examples include critical event management firms and technology companies that provide medical services remotely.

We are also reassessing high-quality businesses whose long-term prospects remain strong and whose valuations have become more attractive. In addition, there may be opportunities to invest in certain cyclical businesses whose valuations have been meaningfully compressed.

Could you describe the strategy of Putnam Sustainable Future Fund?

Katherine: Our emphasis for this fund is on solutions-oriented companies — those that offer innovative ways to address our greatest sustainability challenges. The stocks of these companies are typically, but not always, considered to be growth stocks, and often are mid-cap or small-cap in size. We seek to invest in products and services that result in positive environmental, economic, or social impact. By providing these solutions, the companies in the portfolio offer potential for strong financial growth and profitability, in our view. Again, we always seek a combination of three attributes: strong fundamental prospects, reasonable valuation, and positive impact.

What are some examples of positive impact that you seek from companies?

Katherine: From an environmental perspective, positive impact could mean improving water quality or reducing greenhouse gas emissions. Positive social impact could include improvements in health and well-being or better access to information and opportunity. We monitor these potential social or environmental benefits, as well as potential financial returns, as part of our investing discipline. Throughout our research process we take a tailored, company-specific approach, including first-hand interactions with management teams of companies and ongoing collaboration with our research analysts across Putnam’s investment organization.

Highlights

Objective

The fund seeks long-term capital appreciation.

Strategy and process

  • Impact companies: The fund invests in growth companies that directly demonstrate positive impact in social, environmental, or economic development.
  • Active strategy: The managers utilize bottom-up research to identify companies with attractive sustainability, fundamental, and valuation characteristics.
  • Veteran team: A dedicated sustainable investing team is backed by Putnam's equity research and quantitative/risk analysis groups.

Fund price

Yesterday’s close 52-week high 52-week low
Net asset value $21.10
-0.28% | $-0.06
$21.16
07/06/20
$13.62
03/23/20
(Optional)

Consistency of positive performance over five years

Performance represents 5-year returns in rolling quarter-end periods since inception.

Performance shown does not reflect the effects of any sales charges. Note that returns of 0.00% are counted as positive periods. For complete fund performance, please click on the performance tab.

26.06%

Best 5-year annualized return

(for period ending 03/31/14)


-5.20%

Worst 5-year annualized return

(for period ending 03/31/09)


9.35%

Average 5-year annualized return


Fund facts as of 06/30/20

Total net assets
$442.73M
Turnover (fiscal year end)
31%
Dividend frequency
Annually
Number of holdings
74
Fiscal year-end
April
CUSIP / Fund code
746802198 / 1856
Inception date
04/02/02
Category
Growth
Open to new investors
Ticker
PMVYX

Management team

Head of Sustainable Investing
Portfolio Manager

Literature


Company diversity and social justice
Company diversity is a step toward equity and equity is a step toward inclusion, which is important to company success.
Sustainability research: A week in the life of our team
Our research includes discussions with company managements, other researchers and investors, industry and subject experts, and non-profit organizations.
Sustainable value: Gender diversity on corporate boards
Diversity in companies — including gender diversity — can have a positive impact on company performance and strategic ability.

Performance

  • Total return (%) as of 06/30/20

  • Annual performance as of 06/30/20

Annualized Total return (%) as of 06/30/20

Annualized performance 1 yr. 3 yrs. 5 yrs. 10 yrs.
Before sales charge 18.82% 13.00% 9.85% 13.96%
After sales charge N/A N/A N/A N/A
Russell Midcap Growth Index 11.91%14.76%11.60%15.09%
Russell 3000V-Russell MidcapG Linked Benchmark 11.91%11.11%10.30%13.29%

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Returns before sales charge do not reflect the current maximum sales charges as indicated below. Had the sales charge been reflected, returns would be lower. Returns at public offering price (after sales charge) for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50% for equity funds and 4.00% and 3.25% for income funds (2.25% for class A of Putnam Floating Rate Income Fund, Short-Term Municipal Income, Short Duration Bond Fund, and Fixed Income Absolute Return Fund), respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter (except for Putnam Floating Rate Income Fund, Putnam Short Duration Bond Fund, Putnam Fixed Income Absolute Return Fund, and Putnam Short-Term Municipal Income Fund, which is 1% in the first year, declining to 0.5% in the second year, and is eliminated thereafter). Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Performance for class B, C, M, N, R, and Y shares prior to their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares (with the exception of Putnam Tax-Free High Yield Fund and Putnam AMT-Free Municipal Fund, which are based on the historical performance of class B shares). Performance for class A, C, R6, and Y shares of Putnam Mortgage Opportunities Fund before their inception is derived from the historical performance of class I shares, which have been adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares. Returns at public offering price (after sales charge) for class N shares reflect the current maximum initial sales charge of 1.50%. Class R5/R6 shares, available to qualified employee-benefit plans only, are sold without an initial sales charge and have no CDSC. Class Y shares are generally only available for corporate and institutional clients and have no initial sales charge. Performance for class R5/R6 shares before their inception are derived from the historical performance of class Y shares, which have not been adjusted for the lower expenses; had they, returns would have been higher. Class A shares of Putnam money market funds have no initial sales charge. For a portion of the period, some funds had expenses limitations or had been sold on a limited basis with limited assets and expenses, without which returns would be lower.

Performance snapshot

  Before sales charge After sales charge
1 mt. as of 06/30/20 4.65% -
YTD as of 07/07/20 15.74% -

Risk-adjusted performance as of 05/31/20

Alpha (3 yrs.) 2.10
Sharpe ratio (3 yrs.) 0.57
Treynor ratio (3 yrs.) 11.56
Information ratio (3 yrs.) 0.35

Volatility as of 05/31/20

Standard deviation (3 yrs.) 18.35%
Beta 0.91
R-squared 0.97

Capture ratio as of 05/31/20

Up-market (3 yrs.) 95.21
Down-market (3 yrs.) 88.14

Lipper rankings as of 05/31/20

Time period Rank/Funds in category Percentile ranking
1 yr. 281/548 52%
3 yrs. 338/495 69%
5 yrs. 322/420 77%
10 yrs. 211/299 71%
Lipper category: Multi-Cap Growth Funds

Morningstar Ratings as of 05/31/20

Time period Funds in category Morningstar Rating
Overall 1244
3 yrs. 1244
5 yrs. 1084
10 yrs. 814
Morningstar category: Large Growth

Distributions

Record/Ex dividend date 12/05/19
Payable date 12/09/19
Income $0.051
Extra income --
Short-term cap. gain $0.094
Long-term cap. gain $0.383

Lipper rankings are based on total return without sales charge relative to all share classes of funds with similar objectives as determined by Lipper. Past performance is not indicative of future results.

The Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The up-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen. The ratio is calculated by dividing the manager’s returns by the returns of the index during the up-market, and multiplying that factor by 100. The down-market capture ratio is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager’s returns by the returns of the index during the down-market and multiplying that factor by 100.


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Holdings

Adobe 3.27%
Danaher Corp 3.26%
Thermo Fisher Scientific 2.86%
Chipotle Mexican Grill 2.35%
Godaddy 2.34%
Mccormick Md 2.25%
Dynatrace 2.20%
First Republic Bank/Ca 2.12%
Everbridge 1.96%
Ball Corp 1.88%
Top 10 holdings, percent of portfolio 24.49%



Portfolio composition as of 05/31/20

Common stock 92.28%
Cash and net other assets 5.23%
Convertible preferred stock 2.49%

Equity statistics as of 05/31/20

Median market cap $12.96B
Weighted average market cap $43.72B
Price to book 4.69
Price to earnings 36.06

Fund characteristics will vary over time.

Due to rounding, percentages may not equal 100%.

Consider these risks before investing: The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Growth stocks may be more susceptible to earnings disappointments, technological obsolescence, falling prices and profits, and the market may not favor growth-style investing. Investments in small and midsize companies increase the risk of greater price fluctuations.  International investing involves currency, economic, and political risks. Emerging-market securities have illiquidity and volatility risks. The fund's sustainable and environmental, social, and/or corporate governance (ESG) investment strategy may cause the fund to forego otherwise attractive investment opportunities or may increase or decrease the fund’s exposure to certain types of companies and, therefore, to underperform funds that do not invest with a similar focus. From time to time, the fund may invest a significant portion of its assets in companies in one or more related industries or sectors, which would make the fund more vulnerable to adverse developments affecting those industries or sectors. In evaluating an investment opportunity, we may make investment decisions based on information and data that is incomplete or inaccurate. Due to changes in the products or services of the companies in which the fund invests, the fund may temporarily hold securities that are inconsistent with its sustainable investment criteria. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund.

Top industry sectors as of 05/31/20

Information technology 28.40%
Health care 23.56%
Industrials 10.75%
Consumer discretionary 10.32%
Financials 6.57%
Materials 6.20%
Consumer staples 5.94%
Cash and net other assets 5.23%
Utilities 1.63%
 
Other
1.40%
Communication services 1.40%

The unclassified sector (where applicable) includes exchange traded funds and other securities not able to be classified by sector.

Sectors will vary over time.


Expenses

Expense ratio

Class A Class B Class C Class R Class R6 Class Y
Total expense ratio 1.09% 1.84% 1.84% 1.34% 0.70% 0.84%
What you pay 1.09% 1.84% 1.84% 1.34% 0.70% 0.84%

Sales charge

 Breakpoint Class A Class B Class C Class R Class R6 Class Y
$0-$49,999 5.75% / 5.00% 0.00% / 4.00% 0.00% / 1.00% -- -- --
$50,000-$99,999 4.50% / 3.75% 0.00% / 4.00% 0.00% / 1.00% -- -- --
$100,000-$249,999 3.50% / 2.75% -- 0.00% / 1.00% -- -- --
$250,000-$499,999 2.50% / 2.00% -- 0.00% / 1.00% -- -- --
$500,000-$999,999 2.00% / 1.75% -- 0.00% / 1.00% -- -- --
$1M-$4M 0.00% / 1.00% -- -- -- -- --
$4M-$50M 0.00% / 0.50% -- -- -- -- --
$50M+ 0.00% / 0.25% -- -- -- -- --

CDSC

  Class A (sales for $1,000,000+) Class B Class C Class R Class R6 Class Y
0 to 9 mts. 1.00% 5.00% 1.00% -- -- --
9 to 12 mts. 1.00% 5.00% 1.00% -- -- --
2 yrs. 0.00% 4.00% 0.00% -- -- --
3 yrs. 0.00% 3.00% 0.00% -- -- --
4 yrs. 0.00% 3.00% 0.00% -- -- --
5 yrs. 0.00% 2.00% 0.00% -- -- --
6 yrs. 0.00% 1.00% 0.00% -- -- --
7+ yrs. 0.00% 0.00% 0.00% -- -- --

Trail commissions

  Class A Class B Class C Class R Class R6 Class Y
  0.25% 0.25% 1.00% 0.50% 0.00% 0.00%
  NA NA NA NA NA NA
  NA NA NA NA NA NA

For sales and trail commission information on purchases over $1 million and participant-directed qualified retirement plans, see a Putnam fund prospectus and the statement of additional information.

The Russell Midcap Growth Index is an unmanaged index of those companies in the Russell Midcap Index chosen for their growth orientation. The Russell 3000 Value Index is an unmanaged index of those companies in the broad-market Russell 3000 Index chosen for their value orientation. The Russell 3000 Value - Russell Midcap Growth Linked Benchmark represents performance of the Russell 3000 Value Index through March 20, 2018 and performance of the Russell Midcap Growth Index thereafter. You cannot invest directly in an index.

Consider these risks before investing: The value of investments in the fund’s portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political or financial market conditions, investor sentiment and market perceptions, government actions, geopolitical events or changes, and factors related to a specific issuer, geography, industry or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Growth stocks may be more susceptible to earnings disappointments, technological obsolescence, falling prices and profits, and the market may not favor growth-style investing. Investments in small and midsize companies increase the risk of greater price fluctuations.  International investing involves currency, economic, and political risks. Emerging-market securities have illiquidity and volatility risks. The fund's sustainable and environmental, social, and/or corporate governance (ESG) investment strategy may cause the fund to forego otherwise attractive investment opportunities or may increase or decrease the fund’s exposure to certain types of companies and, therefore, to underperform funds that do not invest with a similar focus. From time to time, the fund may invest a significant portion of its assets in companies in one or more related industries or sectors, which would make the fund more vulnerable to adverse developments affecting those industries or sectors. In evaluating an investment opportunity, we may make investment decisions based on information and data that is incomplete or inaccurate. Due to changes in the products or services of the companies in which the fund invests, the fund may temporarily hold securities that are inconsistent with its sustainable investment criteria. Our investment techniques, analyses, and judgments may not produce the outcome we intend. The investments we select for the fund may not perform as well as other securities that we do not select for the fund. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund.