Investing for impact | Q&A with Stephanie Henderson


  • Portfolio manager and analyst Stephanie Henderson is part of Putnam's sustainable investing team that manages Putnam Sustainable Leaders Fund and Putnam Sustainable Future Fund.
  • The funds employ an environmental, social, and governance (ESG) investment approach that is integrated with fundamental research.
  • Stephanie brings seven years of analyst experience — and a personal passion for sustainable investing practices — to the table.

“Investors of all types are looking for ways to enact change. What better way than to allocate your money to something that makes a difference?”

What is your educational background?

I majored in political science and minored in African Studies at Middlebury College. Within my political science major, I focused a lot on comparative politics, trying to identify various contributors to “successful” democracies and institutions. I ended up writing my senior thesis on different HIV/AIDS prevention programs across sub-Saharan Africa, highlighting what differentiated the levels of success of those programs. That was my first real independent research project, where I was able to follow my own curiosity and do my own analysis, and it ended up being a great experience for the role I have today.

Why did you pursue a career in the investment industry?

I almost joined the Peace Corps after graduation, but realized pretty far along in the process that it wouldn’t be a good fit for me. At that point, I started thinking less about the label of what I wanted “to be” when I grew up, and more about my skills, strengths, and motivations.

I took interviews that played to these strengths and interests, and got my foot in the door at Fidelity. The associate team there included a good mix of individuals: Some had finance backgrounds, and others had no finance or accounting experience, but the goal was for all of us to bring unique judgment and perspective to the research process. At the end of the day, that kind of independent thought is what we want in investing.

It didn’t take long for me to realize that what I had loved so much about majoring in political science and writing my thesis was the same thing I was doing in my day job. I loved the pace, the intellectual curiosity the job demanded, and most of all, I loved that I was learning something new every day.

What led you to Putnam?

A truly unique and exciting opportunity! Putnam approached me about launching a new sustainable investing team and working with Katherine Collins. I was very happy in my role at the time, but felt like this was my dream job being handed to me. ESG investing aligns with my skill sets, my interests, and the values I champion. I was really impressed by Putnam's drive to enter this area and thrilled about the prospect of working with Katherine — a true thought leader in this space.

Why is ESG investing so topical, in your view?

Several reasons. One is that millennials, who are becoming more influential in the markets, care about these issues. Investors of all types are looking for ways to enact change. What better way than to allocate your money to something that makes a difference?

Another is the analytical challenge of evaluating intangibles, which now make up about 85% of the market value of S&P 500 companies. Thoughtful ESG analysis helps investors assess the meaningful, intangible value of any business, such as culture or reputation.

Investors are also increasingly focused on trust and connection. After 2008, we saw a drop in confidence in financial institutions. Investors are looking for reasons to trust the professionals who manage their assets and the processes that they use. And, investors care about what they are invested in: They are thinking much more about longer-term sustainable growth and profitability, and ESG issues are important parts of that framework.

Finally, many investors are recognizing that thoughtful ESG approaches can be additive to alpha* and help with risk mitigation. Like any type of investing, there are no shortcuts to generating those benefits, but the outdated idea that you have to choose between profits and environmental or social benefit is falling by the wayside.

What impact is the sustainable team having at Putnam?

All of our sustainable investing efforts build on Putnam's core strength: deep, fundamental research. For the broader organization, focusing on relevant sustainability issues and building ESG fluency throughout the firm enhances our fundamental insight. It's about asking deeper questions and having more tools to analyze businesses, which should lead to opportunities for alpha creation and risk mitigation.

“All of our sustainable investing efforts build on Putnam's core strength: deep, fundamental research.”

Because of this integrated approach, our Leaders Fund and Future Fund are able to put sustainability at the core of the investment process, rather than adding a separate screening step before or after the fundamental research.

In addition to the investment benefits, there's a real market opportunity here. More institutional investors are asking for products that address these issues. Sustainable investing and assets under ESG mandates are among the fastest growing parts of the business. We think we are in a sweet spot: We have the tools to do this well at the firm, we believe this is a core component of good investing, and the evidence increasingly shows that strong financial performance and strong sustainability performance can go hand in hand.

Can you give a quick snapshot of the funds you work on?

In the Equities division, we've converted roughly $5 billion to sustainability-focused mandates with the Putnam Sustainable Leaders and Putnam Sustainable Future funds. These are fairly concentrated portfolios, and the bar for any company to get into these funds is high: We are looking for companies with excellent fundamentals, great sustainability characteristics, and reasonable valuation. In Putnam Sustainable Leaders Fund, we are looking for companies that show a dedicated commitment to sustainable practices, or how they operate their business. In Putnam Sustainable Future Fund, we are looking for solutions-oriented companies that are addressing global sustainability challenges through the product or service that they provide. Understanding the company-specific context for our investments — both for traditional fundamentals and for sustainability issues — is key to our investment process.

Ms. Henderson is a Portfolio Manager and an Analyst in the Equity Research group, specializing in sustainable investing. She is an assistant portfolio manager of Putnam Sustainable Future Fund and Putnam Sustainable Leaders Fund.

For more specific information about out different sustainability funds, check out our full page describing how we invest.

* Alpha is a measure of performance on a risk-adjusted basis. Alpha takes the volatility of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha.

Consider these risks for these funds before investing: The value of investments in the fund's portfolio may fall or fail to rise over extended periods of time for a variety of reasons, including general economic, political, or financial market conditions, changing investment sentiment and market conditions, government actions, geopolitical events, or changes, and factors related to a specific issuer, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings. Growth stocks may be more susceptible to earnings disap­pointments, technological obsolescence, falling prices and profits, and the market may not favor growth-style investing. Investments in small and/or midsize companies increase the risk of greater price fluctuations. International investing involves currency, economic, and political risks. Emerging-market securities carry illiquidity and volatility risks. The fund’s sustainable investment strategy limits the types and number of investment opportunities available to the fund and, as a result, the fund may underperform other funds that do not have a sustainable focus. The fund’s environmental, social, and/or corporate governance (ESG) investment strategy may result in the fund investing in securities or industry sectors that underperform the market as a whole or underperform other funds screened for ESG standards. In evaluating an investment opportunity, we may make investment decisions based on information and data that is incomplete or inaccurate. In addition, an Impact Company’s products or services may change over time. As a result of these possibilities, the fund may temporarily hold securities that are inconsistent with the fund’s sustainable investment criteria. You can lose money by investing in the fund.

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