Seeking sustainability excellence that can drive outperformance
Our sustainable investing approach aims to identify the connections between companies and the world’s sustainability challenges. We develop a set of forward-looking themes by focusing on investment-relevant issues.
Idea map | Forward-looking themes
Our forward-looking investment themes are grounded in fundamental research and show how companies are connected to global sustainability priorities. We outline three overarching thematic categories, which continue to evolve as our research unlocks new ideas.

Materiality map | Investment relevance
We make our research investment-relevant by focusing on financially material environmental, social, and governance ESG issues. Inspired by the work of the Sustainable Accounting Standards Board (SASB), we have developed a tool — the Materiality Map — to structure our research priorities.
Our sustainability research focuses on three overarching categories
Putnam’s Sustainable Investing team organizes its research to identify the connections between companies we can invest in and the world’s evolving sustainability challenges.
Thriving
People™
Thriving
Planet™
Thriving
Public™
Delivery
of care
Preventative care
and wellness
Decarbonization
Sustainable agriculture
Circular
economy
Access and opportunity
Security and
privacy
Human health and well-being
Healthy individuals are a foundation of a healthy society. Human health includes elements of preventive care, chronic disease treatment, and mental health support. Companies that support human health include conventional healthcare products and service providers as well as those that focus on holistic wellness through nutrition and fitness.
Theme | Chronic disease
Chronic diseases are a significant challenge for individuals and the broader healthcare system. Nearly half of all Americans suffer from at least one chronic disease, and this number is growing. Chronic diseases also account for almost 90% of total healthcare spending and an even larger proportion of public insurance (Medicare and Medicaid) spending. Chronic diseases are responsible for 70% of all deaths in the United States, concentrated in the top five diseases: heart disease, cancer, stroke, chronic obstructive pulmonary disease (COPD), and diabetes.
Diabetes is particularly costly in the United States — both financially and in terms of its toll on human well-being. More than 34 million Americans are currently living with diabetes, and another 88 million are believed to have pre-diabetes.2 The average individual with diabetes incurs out-of-pocket healthcare expenses of nearly $2,000 per year,3 and the American Diabetes Association estimates that Americans with diabetes have 2.3x greater healthcare costs than others, leading to an estimated $237 billion in annual direct medical costs.
Theme | Mental health
Mental illness is prevalent, costly, and undertreated in the United States. It has become an even greater concern for individuals and businesses since the onset of the Covid-19 pandemic. Nearly one in five American adults lives with mental illness, and studies have shown that the prevalence of anxiety and depression, the two most common mental illnesses, increased meaningfully throughout 2020.5,6 Despite these large numbers, mental illnesses are chronically undertreated, with only 43% of affected individuals receiving treatment.7 Several barriers, including inadequate healthcare coverage, high out-of-pocket costs, a shortage of providers (especially in rural areas), and lingering stigma contribute to this low treatment rate.



New medicines and digital tools target mental health
In recent years, there have been several developments for treating mental health. These innovations — which come after decades of slower-paced advances — include novel drugs and digital offerings.
Stock example |
Dexcom helps individuals control their diabetes through continuous glucose monitoring systems (CGMs). CGMs are discreet devices that individuals with both Type I and Type II diabetes can wear under clothing to continuously monitor blood sugar levels. The CGMs send alerts when blood sugar levels are too high or too low, often to a smartphone or other device. The continuous nature of this monitoring leads to better blood sugar control, which in turn leads to better patient outcomes, including lower rates of heart attacks. Additionally, eliminating the need for fingerstick pricks makes CGMs a much more comfortable and convenient solution. Dexcom’s CGM use is clinically proven to lower A1C and reduce hyper- and hypoglycemia for diabetics.
- We believe Dexcom offers strong growth potential as adoption of CGMs increases among both Type I and Type II diabetics, and as reimbursement coverage expands for CGMs, especially for Type II.
- Dexcom is also developing new products like its upcoming G7, which will be smaller and have more interoperability and data-sharing capabilities.
- As Dexcom continues to innovate and penetration of CGMs grows, we expect the company could continue to grow its revenues at a rapid clip.
See holdings: Putnam Sustainable Future Fund. It was not held in Putnam Sustainable Leaders Fund.
Stock example |
Telemedicine is one way to help increase treatment for mental illness, and Teladoc is the leading telemedicine provider in the United States, with its quickly growing behavioral health business: BetterHelp. Teladoc’s behavioral health services offer members direct online access to licensed psychologists, clinical social workers, and marriage and family therapists and can help provide lower cost and easier-to-access treatment for individuals suffering from mental illness. A survey conducted by the company suggested that 40% of its behavioral health users would not have sought treatment if Teladoc were not available to them. A separate report from Boston Medical Center found that no-show rates for the psychiatry department dropped from historical levels of approximately 45% to 15% with the adoption of telehealth during the Covid-19 pandemic.
- We believe that Teladoc could continue to grow rapidly, as adoption increases for telemedicine, and especially for mental health treatment via telemedicine.
- The company has also recently achieved positive EBITDA (earnings before interest, taxes, depreciation, and amortization) and free cash flow, and we expect these metrics to continue to improve in the years to come.
See holdings: Putnam Sustainable Future Fund. It was not held in Putnam Sustainable Leaders Fund.
Equity and access
Healthy systems and societies are the connection between the health of individuals and the health of the planet. At this connective layer, we consider two major sets of topics and the companies that address them: First, access to information and opportunity, security and data privacy; and, second, efficiency and effectiveness across all types of operations and systems.
Theme | Security and data privacy
With increasing global connectivity and more consumer and business data moving to the cloud, security and data privacy are vital. Businesses must maintain the integrity of their data in an efficient way that also ensures high levels of security. Individuals face increasing privacy and security risks as well and often have to compromise privacy for optimized services and access to information.
Theme | Access and opportunity
Access to information, education, economic opportunity, and financial inclusion are vital ingredients for both individual and collective progress, with a positive impact that compounds over time. For example, several studies show that access to education for girls in developing countries leads to a multitude of societal benefits, such as increased lifetime earnings, lower childhood marriage rates, lower childhood mortality rates for offspring, and potentially even higher GDP. Similarly, many studies have shown that improving economic empowerment and inclusivity for women promotes economic stability and growth. It also improves children’s nutrition and health as women are more likely to invest a higher proportion of their earnings in their families and communities.14 Corporate leadership and solutions in this area include businesses and products that improve access to information and education and technology and financial platforms that support small businesses and entrepreneurs.


Stock example |
Crowdstrike is a cloud native security software company that protects endpoints (such as laptops, smart phones, and servers) that sit outside of a company’s firewall. This is an increasing challenge as more employees move to remote work settings. Crowdstrike’s products detect incoming threats to devices, and its cloud-based platform allows companies to better adapt to and predict the quickly changing nature of incoming threats.
- The company has been growing revenues at greater than 80% for the fiscal year ended January 2021.
- We believe Crowdstrike’s better technological offering and new product innovation in areas like protecting cloud workloads has potential to lead to ongoing and durable growth over the long term.
See holdings: Putnam Sustainable Future Fund. It was not held in Putnam Sustainable Leaders Fund.
Stock example |
Etsy is a global marketplace for unique and creative goods, connecting millions of buyers and sellers across the globe. Among Etsy’s 4.1 million active sellers, 81% are women and 65% started their Etsy shops as a way to supplement income. In 2020 alone, Etsy sellers created 2.6 million jobs and generated nearly $4 billion in income to U.S. households. Etsy has invested meaningfully in improving the buying experience. It has significantly improved search functionality and increased the prevalence of free shipping. The company has also invested in improving the sellers’ experience and earning potential. Initiatives include improved allocation of marketing dollars as well as tools to track orders, manage inventory, and accept payments across the globe. These investments helped make Etsy a convenient platform for both sellers and buyers, especially during the Covid-19 pandemic as more shoppers shifted to buying online yet still wanted to support small businesses.
- We believe that these product investments and growing brand awareness can lead to continued growth in gross merchandise value (GMV), and thus, revenues and profits, for Etsy.
- Etsy’s capital-light business also generates very strong free cash flow, which, we believe, should support future investments in growth and shareholder returns.
See holdings: Putnam Sustainable Future Fund and Putnam Sustainable Leaders Fund.
Efficiency and effectiveness
Healthy systems and societies are the connection between the health of individuals and the health of the planet. At this connective layer, we consider two major sets of topics and the companies that address them: First, access to information and opportunity, security and data privacy; and, second, efficiency and effectiveness across all types of operations and systems.
Theme | Efficiency and effectiveness
For many systems, the greatest and quickest improvements can be made by reducing waste and improving effectiveness. For example, approximately 40% of food is wasted between production and consumption.9 Up to 50% of water used outdoors is lost due to inefficient irrigation systems, and approximately 60% of electricity is lost in conversion and transmission. 10, 11 Beyond these physical systems, we all have experienced painful inefficiencies in personal and professional processes that squander time and energy and often increase security or privacy risks. Leadership and solutions within this category include companies that lower the cost of healthcare services, improve resource use within manufacturing processes, or save time and improve security for data management and information flows.


Company diversity and social justice
Company diversity is a step toward equity and equity is a step toward inclusion, which is important to company success.
Stock example |
DocuSign is a technology company that offers the world’s leading eSignature solution as a core part of its broader platform for automating agreement processes. Even prior to the Covid-19 pandemic and the evolving needs of a growing number of remote workers, DocuSign’s far more efficient and convenient e-signature solution was driving outsized growth. In addition to saving time and money, DocuSign’s products also help businesses meaningfully reduce their environmental impact. Also, DocuSign’s increased investments in privacy and security over the past few years have helped it address new use cases in highly regulated industries.
- DocuSign’s efficiency, security, and environmental solutions have driven increased customer adoption, especially for business customers.
- These solutions have also driven consistent 35% to 40% growth (higher in recent quarters) and strong free cash flow generation.
- We believe DocuSign’s growth could be sustainable, as consumers and businesses continue to adopt more efficient e-signature and document generation technology.
See holdings: Putnam Sustainable Future Fund and Putnam Sustainable Leaders Fund.
Environmental health
A healthy planet supports all human activity. The effects of climate change — extreme weather events, temperature change, and ocean and soil degradation — are becoming more visible and more acute. As a result, many companies are building climate resiliency into their business models while others are focused on creating solutions to mitigate climate change and its impacts.
Theme | Sustainable agriculture
Roughly 24% of global greenhouse gas emissions come from the agriculture, forestry, and land use sectors of the economy.19 More sustainable farming practices like crop rotation, reducing or eliminating tillage, and reducing the use of chemical pesticides can help improve the environmental impact of farms and drive higher profits for farmers. As the global population grows, there is a need to employ increasingly efficient and sustainable farming practices to meet growing demand with limited supply. Additionally, consumers increasingly are willing to pay a premium for sustainably sourced ingredients.
Theme | Decarbonization—Renewable energy
Shifting to renewable energy sources is one important way to reduce greenhouse gas emissions, which are the key contributor to climate change. Costs for renewable energy — especially solar and wind — have fallen dramatically, which has driven adoption by both utility-scale operators and individual homeowners. In 2020, renewable energy made up 20% of U.S. utility-scale electricity generation. The levelized cost of energy (LCOE) for utility-scale solar and onshore wind has now fallen to less than $35 per MWh, which is below that of competing power sources like coal, natural gas peaking capacity, and nuclear power.
Utilities are increasingly adopting renewable energy for both economic and regulatory reasons. Individual homeowners are also increasingly employing residential or distributed solar (solar roof panels). The costs in many geographies are now competitive with homeowners’ existing utility bills, and homeowners want cleaner energy powering their homes. Improving battery technology can increase the resiliency and reliability of a residential solar system versus relying solely on the power grid.
The International Energy Agency (IEA) estimates that renewable electricity generation grew by nearly 5% in 2020 despite global energy demand falling by 5%. The IEA also estimates that total global renewable power capacity will expand by 50% between 2019 and 2024, led by solar PV (Photovoltaic) growth, and that distributed (residential) solar PV will more than double over that same time frame.
Theme | Circular economy
The term “circular economy” refers to an economic model that emphasizes cycles of reuse, recycling, and reduction versus a linear model of extraction, consumption, and disposal. For example, single-use plastics have a negative impact on our planet, especially our oceans, and contribute to an inefficient “take-make-waste” system. The use of plastics has increased 20-fold over the past 50 years, and recycling rates for plastic are low. Less than 10% of plastics in the U.S are recycled, and over 18% of all inbound materials to landfills are plastics. Increasingly, consumers are recognizing the harm of too much single-use plastic and are looking for alternative solutions. In a recent McKinsey survey, 55% of U.S.-based respondents were extremely or very concerned about the environmental impact of product packaging. Companies are also increasingly committing to reducing their waste and carbon footprints, and many jurisdictions are placing bans on certain types of single-use plastics.
One solution to this problem is increased use of aluminum, which is infinitely recyclable. Aluminum is a homogeneous material, so recycled cans can be sorted easily and have higher economic value than plastics This leads to higher recycling rates for aluminum: 75% of all the aluminum ever produced is still in use today.




Solutions to antibiotic resistance
As the focus on natural ingredients intensifies, so has concern about antibiotic use in food production.
Stock example |
Sunrun is the largest U.S. residential solar installer. The company leases and sells rooftop solar systems and, increasingly, battery storage systems to residential customers. It is the market leader, and over the past few years it has consolidated its market share by driving its capital costs down and buying its top competitor, Vivint Solar.
- Sunrun holds a leading market position in rooftop solar and is also benefiting from growing adoption of battery solutions.
- We expect that continued growth in residential solar demand could lead to strong growth in installation volumes and cash flow for the company.
See holdings: Putnam Sustainable Future Fund. It was not held in Putnam Sustainable Leaders Fund.
Stock example |
Ball is the leader in aluminum can manufacturing. The company has benefited from accelerating demand for its products, and we expect continued growth, especially in new and specialty products such as cans for water and alcoholic beverages. Ball also recently launched an aluminum cup business that could take market share from plastic cups.
- Increasingly, Ball is becoming a leader in advocacy for recycling infrastructure and for moving toward a circular economy for aluminum.
- We expect the company to continue to see positive volume growth and margin benefits due to the favorable supply/demand dynamic in its markets.
See holdings: Putnam Sustainable Future Fund and Putnam Sustainable Leaders Fund.
Mapping Putnam investment categories to the UN SDGs
The United Nations Sustainable Development Goals (listed in the far left columns of the tables below) serve as a guide to the world's most important sustainability priorities. Here we show the connections between our investment themes and the SDG framework. As more companies link their own operating activities to the SDG framework, we expect this type of analysis to extend and deepen over time.
- https://www.cdc.gov/chronicdisease/about/costs/index.htm
- https://khn.org/news/cost-of-diabetes-drugs-often-overlooked-but-it-shouldnt-be/
- https://www.dexcom.com/
- https://www.nimh.nih.gov/health/statistics/mental-illness.shtml
- https://www.samhsa.gov/data/report/2017-nsduh-annual-national-report
- https://www.nimh.nih.gov/health/statistics/mental-illness.shtml
- https://www.bmc.org/healthcity/policy-and-industry/telepsychiatry-ACO-costs-engagement
- https://www.usda.gov/foodwaste/faqs
- https://www.epa.gov/watersense/statistics-and-facts
- https://www.eia.gov/todayinenergy/detail.php?id=44436
- Global Partnership for Education, 2016. And Tabreek Somani, Journal of Educational Research & Practice, 2017, Vol 7, Issue 1, pgs 125-139
- IMF: Pursuing Women’s Economic Empowerment, 5/31/2018
- http://www.oecd.org/dac/gender-development/investinginwomenandgirls.htm
- Etsy 2020 integrated report
- https://www.eia.gov/todayinenergy/detail.php?id=46676#
- https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf
- https://www.iea.org/reports/global-energy-review-2020/renewables
- https://www.iea.org/reports/renewables-2019
- https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data
- https://www.epa.gov/facts-and-figures-about-materials-waste-and-recycling/plastics-material-specific-data
- https://www.mckinsey.com/industries/paper-forest-products-and-packaging/our-insights/sustainability-in-packaging-inside-the-minds-of-us-consumers
- https://ballcorp.gcs-web.com/
Investing with a focus on ESG-impact companies may cause the fund to forego otherwise attractive investment opportunities or may increase or decrease the fund's exposure to certain types of companies and, therefore, to possibly underperform funds that do not invest with a similar focus.