In this section, we provide analysis of several key issues that have relevance for our portfolios and our investors. We have deliberately chosen to include a set of topics that illustrates the range of analysis underway in the field. Some areas have fairly complete underlying data and well-established metrics, while others involve questions and information that are still at an earlier stage of development. As researchers and active investors, our team views this varied landscape as being full of opportunity.
Both of our sustainable investing portfolios seek long-term capital appreciation. Putnam Sustainable Leaders Fund pursues its goal by investing in companies that we believe exhibit a commitment to leadership in sustainable business practices. Putnam Sustainable Future Fund pursues its goal by investing in companies whose products and services we believe provide solutions that directly contribute to sustainable social, environmental, and economic development.
What this means is that both funds aim to own stocks in companies with a demonstrated commitment to sustainability in areas that are relevant and material to their own business and setting. For this type of company, improvements in sustainability and impact often are directly linked to improvements in long-term business fundamentals, and deeply interconnected with the company’s financial success. These links have been substantiated in several academic studies, such as “Corporate Sustainability: First Evidence on Materiality.”5 As always, it is important to note that despite the evidence in these studies, companies with favorable sustainability performance are not guaranteed to outperform other companies with less favorable sustainability performance.
In this section, we compare several important measures of our portfolios’ ESG and sustainability characteristics, noting why we’ve chosen these measures, what they show with respect to our portfolios, how we use each metric, and where we aim to focus future research and attention. Please reference our shareholder reports and regular performance updates on the portfolios for details on the financial characteristics and performance of the portfolios, in order to compile a more complete view of the funds.