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.
No assurance can be given that the investment objective will be achieved or that an investor will receive a return of all or part of their initial investment. Actual results could be materially different from the stated goals. Investors should carefully consider the risks involved before deciding to invest. As with any investment, there is a potential for profit as well as the possibility of loss.
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 | Treatments for chronic conditions
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. The average individual with diabetes incurs out-of-pocket healthcare expenses of nearly $2,000 per year, 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 | Non-Invasive Therapies
Cancer is the second most common cause of death in the U.S., behind heart disease. The American Cancer Society projects 1.9 million new cancer cases in 2022 and over 600,000 cancer deaths in the U.S. Encouragingly, from 2001 to 2020, cancer death rates dropped 27%. In addition to emerging targeted therapies, one of the driving factors behind this reduction in cancer mortality has been improved cancer screenings. Cancer screening aims to detect cancer at earlier stages, where treatment may be more effective. Despite well-established screening guidelines for more common and treatable cancers like breast, cervical, lung, and colorectal, screening adherence remains low. Recent data from the CDC found that of those recommended for lung cancer screening, only one in eight individuals had been screened in the past year. This is despite lung cancer being the leading cause of cancer-related death.



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.
As of 3/31/23, Dexcom was 3.07% of Putnam Sustainable Future. It was not held in Putnam Sustainable Leaders.
Stock example |
Death from colorectal cancer (CRC) is among the most preventable cancer deaths given its relatively slower progression and availability of effective treatment. However, it remains the second leading cause of cancer deaths in the U.S., behind lung cancer, with approximately 150,000 new cases and 50,000 deaths annually given suboptimal screening rates. If caught early, the 5-year survival rate for individuals with localized stage CRC is over 90%. However, if identified at a later stage once the cancer has spread to distant parts of the body, the 5-year survival rate decreases to just 15%. According to the American Cancer Society, approximately 45% of Americans between the ages of 45 to 85 who are at average risk for colorectal cancer, or over 40 million individuals, are not up to date with screening. Exact Sciences has developed Cologuard, a noninvasive screening test that can detect biomarkers associated with colorectal cancer and pre-cancer from a stool sample. Unlike a traditional colonoscopy that requires significant preparation and an in-office exam, the Cologuard collection kit can be used entirely at home then shipped to a lab. This added level of convenience could continue to improve screening rates and help prevent avoidable cancer deaths.
- The convenience and accuracy of Cologuard has led to growing adoption. As of 2021, more than 7.5 million individuals had used Cologuard since its FDA approval in 2014.
- The company is currently developing a version with improved accuracy referred to as Cologuard 2.0 and is also exploring a blood-based cancer screen for early detection of a variety of cancer types. This is driving greater than 20% revenue growth.
- We believe EXAS could continue to rapidly grow its Cologuard test volumes. It is the first and only FDA-approved noninvasive stool-based DNA screening for colorectal cancer, and a large portion of individuals remain unscreened.
As of 3/31/23, Exact Sciences was 1.42% of Putnam Sustainable Future. It was not held in Putnam Sustainable Leaders.
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 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, healthcare, education, economic opportunity, and financial inclusion are vital ingredients for both individual and collective progress, with a positive impact that compounds over time. Access to affordable healthcare is a particularly challenging and important issue in the U.S. From 1970 to 2021, total healthcare spending per person increased from an average of $1,951 to $12,914 in 2021 dollars and total healthcare spending as a percentage of U.S. GDP increased from 6.9% to 18.3% In addition, out-of-pocket expenses per capita have more than doubled since 1970.
Over the past decade, the percentage of covered workers enrolled in a high deductible health plan (HDHP) has risen steadily. Given higher out-of-pocket expenses, HDHPs come with the risk that enrollees may forego necessary healthcare services such as routine checkups. In response to these concerns, federal legislation has enabled individuals with HDHPs to access tax-efficient vehicles known as health savings accounts, or HSAs, to better save for future healthcare expenses. Corporate leadership and solutions in this area include businesses and products that improve access to healthcare, information, education, technology, and financial platforms.


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.
As of 3/31/23, Crowdstrike was 2.06% of Putnam Sustainable Future. It was not held in Putnam Sustainable Leaders.
Stock example |
HealthEquity is a technology-driven healthcare provider that aims to make healthcare more affordable and accessible. HealthEquity offers a digital platform for employee benefits, including tax-advantaged HSAs, commuter benefits, and dependent care. By using these services, consumers can save money on out-of-pocket healthcare expenses and take control of their overall health and wellness spending. The company also provides tools and resources to help consumers make informed decisions about their healthcare, such as quality and cost information for medical procedures, which ultimately can reduce healthcare costs for their end consumers, potentially making healthcare more affordable for everyone.
We believe that the company should continue to benefit from strong growth in HSAs, as employers increasingly look to transition to high deductible healthcare plans within the U.S.
Additionally, the company's acquisition of WageWorks offers a more differentiated and comprehensive benefits platform relative to standalone HSA providers that helps customers make informed and tax-efficient financial decisions.
We believe the company can continue to grow accounts and assets under management, leading to durable earnings growth.
As of 3/31/23, HealthEquity was 1.53% of Putnam Sustainable Future. It was not held in Putnam Sustainable Leaders.
Efficiency and effectiveness – Business processes
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. 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. 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 |
Adobe is a software company that helps enable businesses and individuals to design and deliver creative digital experiences. Adobe's products help improve document productivity by providing more efficient ways to collaborate on and edit documents. The company's Creative Cloud products also help students, individuals, small-business owners, and others unlock creativity and easily create images, designs, and media content. Experience Cloud products help businesses create customer-facing content and gather data and insights to inform marketing and other workflows.
- Adobe's secure and efficient document productivity solutions have driven increased customer adoption and opportunities to cross-sell other creative and digital marketing solutions.
- Adobe's products and dominant market position create value and efficiency for customers, which gives the company opportunity to increase prices over time.
- Adobe has consistently grown revenues in the high teens and generates strong free cash flow. We believe Adobe's consistent growth is sustainable as companies continue to digitize their businesses and more workflows and consumption moves online.
As of 3/31/23, Adobe was 2.12% of Putnam Sustainable Future and 2.03% of Putnam Sustainable Leaders.
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. 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 | Circular economy
The circular economy offers potential to improve planetary health and to dramatically improve the natural resource intensity of the global economy. Human production and consumption have already exceeded Earth's capacity to provide and replenish natural resources in key areas, due in large part to linear "take, make, waste" approaches to production, consumption, and disposal. These linear approaches are linked to high levels of emissions, waste, and other environmental challenges, as well as increasing business risks and uncertainties.
In contrast, circular economy approaches focus on effective design; extended product life spans through reuse, repair, and recycling; and more benign decomposition. These circular approaches have direct links to new products, practices, and business models, offering possibility in some settings for enhanced growth, reduced risk, and improved financial returns. Investors have the opportunity to identify successful business innovations in this area, with potential for strong growth, attractive returns, and environmental benefits. Understanding the fundamental operating context for specific companies, products, and production processes improves this analysis.
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.




Solutions to antibiotic resistance
As the focus on natural ingredients intensifies, so has concern about antibiotic use in food production.
Stock example |
Chipotle is a fast-casual restaurant chain with a deep commitment to "food with integrity" and sustainable farming practices. Chipotle was the first national restaurant brand to commit to using only responsibly raised meat, and it serves more organic ingredients than any other fast-food chain. The company has numerous programs to increase its use of sustainable products and invest in farmers who employ sustainable farming practices, especially through long-term contracts with these farmers. These practices ensure access to the high-quality ingredients that are key to the fresh food that Chipotle serves.
- We believe Chipotle has a loyal customer base and a compelling value proposition that can continue to fuel strong same-store sales growth and margin expansion for years to come.
- The company also has plenty of potential to open new locations across the country, driving sustained long-term growth.
As of 3/31/23, Chipotle was 3.46% of Putnam Sustainable Future and 1.68% of Putnam Sustainable Leaders.
Stock example |
Levi Strauss focuses on durability and long-term appeal, as opposed to "fast fashion" approaches. The company has become more active in resale and repair, including its SecondHand resale marketplace. Levi's also has made significant investments in improving materials and resource intensity for its products, contributing to improved profitability and better environmental impact. For example, the company's cottonized hemp material requires less water and fewer pesticides, making the finished products about 20% less water intensive. These newer offerings also have potential to engage customers and create new revenue streams.
We believe the company's products are durable and on trend, backed by a long history of innovation and sustainability investments.
The company is making progress on changing from wholesale to direct channel sales, which have higher gross margins. It is also improving margins as it moves away from its most unprofitable retail partners and toward healthier partners.
We believe that the resilience of the Levi's brand and the margin expansion opportunity can continue to drive earnings and cash flow growth.
As of 3/31/23, Levi Strauss was 1.90% of Putnam Sustainable Future and 0.76% of Putnam Leaders.
Stock example |
SolarEdge is a leading provider of solar inverters, power optimizers and monitoring systems for residential and commercial solar installations. The company has a strong focus on technological innovation, which has enabled them to develop cutting-edge products that offer improved energy efficiency and performance.
Their optimizer technology allows solar panels to produce more electricity and more consistent power output, which reduces the number of solar panels needed to produce the same amount of energy, and can reduce downtime and maintenance costs on solar arrays. In terms of sustainability, this reduces key raw materials needed for solar panel manufacturing, including silicon and other minerals, and more generally, helps enable growth of renewable energy infrastructure.- The company is a leader within the global solar inverter market, which are critical components in solar energy systems, that convert direct current (DC) electricity produced by solar panels into alternating current (AC) electricity that can be used by homes and businesses.
- The market for solar inverters is not as commoditized as other parts of the solar panel supply chain, such as solar panels themselves, which has enabled the company to achieve economies of scale and invest heavily in research and development including EV storage and uninterrupted power supply.
- The company's comprehensive range of products and strong track record of customer satisfaction has helped them gain market share in the US and Europe.
- The company benefits from continued adoption of solar products, and favorable regulatory policies, most notable the Inflation Reduction Act, which provides key incentives and supports growth of the solar industry and increased demand for SolarEdge's products.
- We expect that continued growth in residential solar demand could lead to strong growth in installation volumes and cash flow for the company.
As of 3/31/23 SolarEdge was 0.88% of Putnam Sustainable Future. It was not held in Putnam Sustainable Leaders.
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.

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.