In March 2018, Putnam repositioned two existing mutual funds into the new Putnam Sustainable Leaders and Putnam Sustainable Future funds. Combined assets are approximately $4.5 billion as of March 31, 2020, making Putnam one of the 10 largest managers of dedicated sustainable equity mutual fund assets in the United States.* Both portfolios seek long-term capital appreciation. All investing involves risk, and the sustainable investing strategy limits the types and the number of companies available to the funds; this may cause them to underperform other funds that can choose from a broader variety of opportunities. Putnam Sustainable Leaders Fund pursues its goal by investing mainly in common stocks of U.S. companies of any size, with a focus on companies that we believe exhibit a commitment to leadership in sustainable business practices. Putnam Sustainable Future Fund pursues its goal by investing mainly in common stocks of U.S. companies of any size, with a focus on companies whose products and services we believe provide solutions that directly contribute to sustainable social, environmental, and economic development.
*This universe encompasses all mutual funds, including index funds but not ETFs, that satisfy Morningstar’s “Sustainable Investment – Overall” indicator, which are defined as funds that explicitly indicate any kind of sustainability, impact, or ESG strategy in their prospectus or offering documents.
Sustainable investing offers a range of different approaches and products.
In Putnam’s case, our integrated research process focuses on the value that sustainability analysis can add to fundamental research. The integrated approach of Putnam Sustainable Leaders Fund combines analysis of the growing body of ESG data, relevant sustainability issues, and deep fundamental analysis in its search for companies that are beyond “ESG compliance,” demonstrating leadership in relevant sustainability issues. Putnam Sustainable Future Fund extends this integration even further by seeking innovative, solutions-oriented companies whose products and services produce positive environmental, social, or economic development impact.
*Tracking error, also known as active risk, measures the difference between a portfolio’s return and that of a benchmark or index
Both portfolios rely on Putnam’s well-established fundamental research strength to identify companies with attractive sustainability, fundamental, and valuation characteristics. We aim to utilize ESG data within the relevant context of each company and industry, and to incorporate more qualitative research in areas where new issues are emerging, or data is not yet standardized. Throughout the research process, our goal is to identify companies with excellent investment potential and excellent sustainability performance, which results in portfolios with meaningful active weights by industry and sector. We do not use exclusionary screens for the Putnam Sustainable Leaders or Putnam Sustainable Future portfolios; rather, we focus on what deserves to be included in our holdings.