ESG Integration in our investment group

ESG integration within equities

To lead Putnam's ESG efforts, in May 2017, Putnam appointed Katherine Collins, CFA, MTS, to the newly created role of Head of Sustainable Investing. Katherine, serves as Portfolio Manager of Putnam Sustainable Leaders strategy and Putnam Sustainable Future strategy, working jointly with Portfolio Manager Stephanie Dobson on both strategies. A recognized thought leader, Ms. Collins leads Putnam's sustainable research, investing, and collaboration. The team now includes seven team members in roles including portfolio management, research, and operations.

We consider it important that the sustainable investing team is part of the core equity team, not separate from it.

Equity ESG research is guided by our internally developed "materiality map," which was inspired and guided by the materiality mapping of the Sustainable Accounting Standards Board (SASB). We also utilize data from several third-party resources, including MSCI and Sustainalytics, as part of our broader research process. Our belief in the power of context-specific analysis can be seen in the map below, which shows that we have different and complementary frameworks for various sectors and issues in equity research. We believe that this kind of forward-looking and customized research focus is a key determinant of long-term investment results.

The Equity materiality map provides a research framework specific to each sector

Putnam's ESG corporate research philosophy combines fundamental analysis with relevant ESG insight, understanding that application of ESG factors vary by industry. In the same way our fundamental analysis is forward looking, our evaluation of relevant ESG considerations must also be forward looking. This has applications in sector and issuer selection, as well as portfolio construction. ESG considerations help build a more nuanced assessment of an issuer's credit portfolio, which can potentially limit ratings volatility, and more importantly, tail risk in credit portfolios.

Examples of a company selected for the Sustainable Fund portfolios: Ball Corp

Ball Corp provides metal packaging for a variety of end uses including beverages, foods, household products, and aerospace and other technologies. As metal packaging is better for the environment than plastics and glass, the company's core offering aligns well with sustainability initiatives for customers and consumers. Management is in the early stages of commercializing the sustainability angle of their value proposition and has been having substantive conversations with clients about their own sustainability goals, all of which have begun to contribute to accelerated revenue growth. As of 3/31/20, Ball Corp. represented 2.24% of Putnam Sustainable Future Fund and 1.53% of Putnam Sustainable Leaders Fund.

You can read about our investment thesis for other companies in our Sustainability and impact report.

Also, learn more at our
Sustainable investing page.