At Putnam, sustainable investing is our approach to identifying investments whose performance can benefit from a firm's strategic sustainability focus. We believe that our tailored and forward-looking sustainability research has the potential to mitigate risks and to generate strong risk-adjusted returns, and to be a key contributor to long-term investment results.
By researching on a company-specific basis, our team can:
- Gain greater insights about opportunities and risks for all companies
- Identify sustainability leadership that could benefit long-term performance
- Discover innovations that offer sustainable solutions
“Putnam's active management approach asks, where does sustainability excellence improve a company's business prospects?”
Katherine Collins, CFA, MTS Head of Sustainable Investing
Putnam’s equity materiality map | Focus on what matters
- The investment relevance, or materiality, of specific ESG issues varies by sector, geography, asset class, and company context.
- Putnam's internally developed materiality map, inspired by the work of the Sustainability Accounting Standards Board (SASB), illustrates how relevance of ESG issues can vary across sectors.
- Our Sustainable Equity team extends this analysis to identify sustainability leadership in financially relevant areas.
We invite you to gather more information about what ESG investing means, our sustainable portfolios and holdings, and our team.
Frequently Asked Questions | Sustainable Investing
What is the definition of sustainable investing?
At Putnam, sustainable investing aims to identify companies whose long-term business prospects are enhanced by a focus on sustainability. We believe that companies with leading strategies to manage business-relevant sustainability issues have the chance to improve growth and returns and mitigate long-term risks, and that companies providing solutions to key sustainability challenges have the chance to create businesses with strong growth and returns.
What is the outlook for sustainable investing?
The outlook for sustainable investments seems positive after rapid expansion over more than a decade, driven by growing investor demand. In the U.S., assets in sustainable stock and bond funds were $313 billion as of June 30, 2023. More than 650 funds are available to investors. Globally, assets in sustainable funds were over $2.8 trillion as of June 30, 2023. (Source: Morningstar, Global Sustainable Fund Flows: Q2 2023 in Review)
What do sustainable and ESG investing have in common?
There are important connections between sustainability and ESG. At Putnam, ESG integration is the incorporation of business-relevant environmental, social, and governance analysis into our research processes. Our sustainable equity products aim to go “beyond ESG,” by identifying companies whose fundamental prospects are enhanced by demonstrating leadership or providing solutions to key sustainability issues. In all cases, our goal is to enhance understanding and to improve investment decision-making. Learn more in Investing in companies improving our world.
Investment relevance
Our ESG and sustainable equity research is guided by our internally developed materiality map, which shows the degree of relevance of ESG issues across industry sectors.
We believe that certain ESG issues are relevant and material to long-term business fundamentals, and for that reason, important to all investors. Investment-relevant issues vary by sector, geography, asset class, and company context. Therefore, fundamental research that is tailored to different settings has potential to add meaningful value.
Given this philosophy, our ongoing ESG and sustainability research is guided by our internally developed materiality map, which is inspired by the work of the Sustainable Accounting Standards Board (SASB).
The materiality map shows that in equity research we focus on context-relevant issues for different types of businesses. We believe that this kind of tailored and forward-looking research focus has the potential to mitigate risk and to generate alpha, and be a key contributor to long-term investment results.
| Consumer | Health Care | Financials | Tech (hardware) | Comm and Tech (software) | Industrials | Materials and Energy | Utilities | Real Estate | ||
|---|---|---|---|---|---|---|---|---|---|---|
Governance |
Board structure and composition | |||||||||
| Management incentives, ownership, and comp alignment | ||||||||||
| Systemic risk management and leadership | ||||||||||
| Corporate purpose, culture, and strategic alignment | ||||||||||
Social |
Diversity, equity, and inclusion | |||||||||
| Employee well-being and development | ||||||||||
| Product impact and customer well-being | ||||||||||
| Supply and distribution network management | ||||||||||
| Privacy, data security, and data use | ||||||||||
| Marketing and selling practices | ||||||||||
| Pricing philosophy and access | ||||||||||
Environmental |
Climate change mitigation and adaptation | |||||||||
| Physical climate change risk | ||||||||||
| Greenhouse gas (GHG) emissions | ||||||||||
| Energy intensity and renewable energy use | ||||||||||
| Materials sourcing, intensity, and lifecycle management | ||||||||||
| Water intensity and stress | ||||||||||
| Biodiversity and ecosystems impact |
As of 12/31/23. For illustrative purposes only.
Source: Putnam Investments, adapted from SASB Materiality Map.
Seeking corporate leaders in relevant areas
Our investment thesis is that companies exhibiting leadership in the sustainability issues that are financially material to their businesses also often demonstrate potential for strong long-term financial performance.
In our research process, we seek to identify corporate leadership by considering four key dimensions:
Materiality:
Companies with focus that is informed by thoughtful analysis of materiality and long-term business relevance
Creativity and proactivity:
Companies whose actions go beyond compliance or box-checking activity to demonstrate heightened commitment and potential benefit
Transparency:
Companies with goals that are specific, and produce candid and consistent reports of progress
Effectiveness:
Companies showing benefits that are meaningful both within the firm and beyond its corporate borders