ESG integration in our investment group

Philosophy

Common sense. Investment relevant. Forward-looking.

We aim to consider ESG issues with a common sense, investment-relevant, forward-looking focus. Our philosophical belief is that certain environmental, social, and governance issues are relevant and material to long-term business fundamentals, and thus important to all investors. Relevant issues vary by sector, geography, asset class, and company context. Therefore, fundamental research tailored to different settings has the potential to add meaningful value. In all areas of the research process, our goal is to identify the connections between relevant ESG issues and long-term business fundamentals. ESG investing is a rapidly emerging field, and applications vary across different asset classes. Not every portfolio manager, strategy, or fund has the same approach, and specific considerations of ESG elements will vary. For some funds, ESG analysis is less important than for others, whether as a matter of investment approach, the asset class, or limitations on data. But what unites us as an investing team is a growing view that thoughtful ESG research can serve as a meaningful platform to pursue strong returns and seek to control risk. We explain our approach in our ESG policy.

"Thoughtful ESG analysis is part of thoughtful investing."

- Katherine Collins, Head of Sustainable Investing at Putnam

Putnam works to be a leader in implementing ESG best practices in our corporate policies and upholding them in our daily business operations. We aim to earn the respect of our employees, business partners, and customers within the investment industry.

Engagement, research, and collaboration are integral to our process

We recognize that the focus on sustainability is increasing across all aspects of finance and investing, and that each part of our community has an opportunity to contribute. Putnam is helping to advance the field through engagement, research, and collaboration.

For Putnam, as a long-term fundamental investor, engagement with corporate management is a critical part of our fundamental research process. For reference, Putnam's research team held over 2,000 meetings with company management in 2019. We are in regular dialogue with companies about strategy and execution, and where applicable, relevant ESG issues. In addition to our ongoing research process, we have increased our direct outreach to CEO's of companies in which we invest. In 2020, we sent letters to over 100 CEOs, acknowledging efforts to date, and encouraging future progress on key sustainability issues specific to each company.

In the important area of proxy voting, both Putnam and the Putnam Funds' independent trustees are committed to exercising voting rights in the best interests of shareholders and clients. The independent Trustees of The Putnam Funds, through the Trustees' Board Policy and Nominating Committee and with the assistance of a member of the Trustees' independent administrative staff, the Director of Proxy Voting and Corporate Governance, exercise control over the Funds' proxy voting. The Trustees of The Putnam Funds are committed to promoting strong corporate governance practices and encouraging corporate actions that enhance shareholder value through the judicious voting of the Funds' proxies. The Putnam Funds have had detailed proxy voting guidelines in place for many years. Each year, the Board Policy and Nominating Committee of the Board of Trustees reviews the proxy voting guidelines and considers whether any changes are appropriate, recommending any changes to the proxy voting guidelines to the Trustees for approval.

Proxy voting is also an important part of Putnam’s activities on behalf of institutional clients. An internal team at Putnam oversees the proxy voting process for Putnam's institutional clients, in close collaboration with portfolio managers and analysts. Putnam believes that the voting of proxies can be an important tool for institutional investors to promote best practices in corporate governance, and votes all proxies in the best interests of its clients as investors, pursuant to a separate set of detailed proxy guidelines that Putnam’s internal Proxy Committee reviews and updates annually.

United Nations Principles for Responsible Investing (UN PRI):

Putnam has been a signatory to the UN PRI since 2011.

Sustainability Accounting Standards Board (SASB):

Putnam joined SASB as an alliance member in 2018, and is part of the Investor Advisory Group.

ESG Group of Boston's Association of Institutional Investors:

Putnam is chairing the ESG working group for this association.

CDP (formerly the Carbon Disclosure Project):

Putnam joined the CDP as an investor signatory in 2020.

We participate in many field-building events, contributing the perspective of active managers in sustainable investing. In 2019, we were speakers at events hosted by the CFA Institute, the CFA Society, Harvard, Kellogg, and MIT.