At Putnam, sustainable equity investing is our approach to identifying investments whose performance can benefit from a firm's strategic sustainability focus. We believe that our tailored and forward-looking sustainability research has the potential to mitigate risks and to generate strong risk-adjusted returns, and to be a key contributor to long-term investment results.
By researching on a company-specific basis, our team can:
- Discover innovations that offer sustainable solutions
“Putnam's active management approach asks, where does sustainability excellence improve a company's business prospects?”
Katherine Collins, CFA, MTS Head of Sustainable Investing
Putnam’s equity materiality map | Focus on what matters
- The investment relevance, or materiality, of specific ESG issues varies by sector, geography, asset class, and company context.
- Putnam's internally developed materiality map, inspired by the work of the Sustainability Accounting Standards Board (SASB), which is now part of the International Sustainability Standards Board (ISSB), illustrates how relevance of ESG issues can vary across sectors.
- Our Sustainable Equity team extends this analysis to identify sustainability leadership in financially relevant areas.
We invite you to gather more information about what ESG investing means, our sustainable equity portfolios and holdings, and our team.
Learn how our portfolio holdings are connected to thematic ideas such as renewable energy and sustainable agriculture.
Consult our research and reports for insight on sustainability topics and transparency about our approach.
Frequently Asked Questions | Sustainable Investing
What is the definition of sustainable investing?
At Putnam, sustainable investing aims to identify companies whose long-term business prospects are enhanced by a focus on sustainability. We believe that companies with leading strategies to manage business-relevant sustainability issues have the chance to improve growth and returns and mitigate long-term risks, and that companies providing solutions to key sustainability challenges have the chance to create businesses with strong growth and returns.
What do sustainable and ESG investing have in common?
There are important connections between sustainability and ESG. At Putnam, ESG integration is the incorporation of business-relevant environmental, social, and governance analysis into our research processes. Our sustainable equity products aim to go “beyond ESG,” by identifying companies whose fundamental prospects are enhanced by demonstrating leadership or providing solutions to key sustainability issues. In all cases, our goal is to enhance understanding and to improve investment decision-making.
Sustainable Equity Investing: Our approach to sustainable equity investing incorporates fundamental research together with consideration of sustainable environmental, social, and economic development impact. We believe that companies whose products and services produce positive environmental, social, and economic development impact also often demonstrate potential for strong financial growth. In selecting each investment, we consider the extent to which a company's products or services may provide solutions to forward-looking sustainability needs, creating positive impact in environmental, social, and economic development areas. We believe that analysis of sustainability factors is best utilized in combination with a strong understanding of a company's fundamentals (including a company's industry, geography, and strategic position). Relevant issues vary by sector, geography, asset class, and specific company context. Therefore, we use fundamental research of ESG factors that is tailored to specific sectors, locations, asset classes, and companies. Our approach to sustainability analysis is deeply intertwined with the fundamental research process. We use company disclosures, non-governmental organization or government disclosures, public data sources, and independent third-party data as inputs into our analytical processes. In some cases, measurement of a company's environmental, social, or economic development impacts will align with the United Nations Sustainable Development Goals, and we will consider the metrics reported through this or a similar framework. Our investment approach aims to include fundamental analysis of product and service benefits regardless of the reporting mechanism. While we may consider independent third-party data as a part of our analytical process, we perform our own independent analysis of issuers and do not rely on third-party screens.
Our ESG and sustainable equity research is guided by our internally developed materiality map, which shows the degree of relevance of ESG issues across industry sectors.
We believe that certain ESG issues are relevant and material to long-term business fundamentals, and for that reason, important to all investors. Investment-relevant issues vary by sector, geography, asset class, and company context. Therefore, fundamental research that is tailored to different settings has potential to add meaningful value.
Given this philosophy, our ongoing ESG and sustainability research is guided by our internally developed materiality map, which is inspired by the work of the Sustainability Accounting Standards Board (SASB), which is now part of the International Sustainability Standards Board (ISSB).
The materiality map shows that in equity research we focus on context-relevant issues for different types of businesses. We believe that this kind of tailored and forward-looking research focus has the potential to mitigate risk and to generate alpha, and be a key contributor to long-term investment results.
|Comm and Tech (software)
|Materials and Energy
|Board structure and composition
|Management incentives, ownership, and comp alignment
|Systemic risk management and leadership
|Corporate purpose, culture, and mission alignment
|Diversity, equity, and inclusion
|Employee well-being and development
|Product impact and customer well-being
|Supply and distribution network management
|Privacy, data security, and data use
|Marketing and selling practices
|Pricing philosophy and access
|Climate change mitigation and adaptation
|Physical climate change risk
|Greenhouse gas (GHG) emissions
|Energy intensity and renewable energy use
|Materials sourcing, intensity, and lifecycle management
|Water intensity and stress
|Biodiversity and ecosystems impact
As of 8/31/23. For illustrative purposes only.
Source: Putnam Investments, adapted from SASB Materiality Map.
Seeking corporate leaders in relevant areas
Our investment thesis is that companies exhibiting leadership in the sustainability issues that are financially material to their businesses also often demonstrate potential for strong long-term financial performance.
In our research process, we seek to identify corporate leadership by considering four key dimensions:
Companies with focus that is informed by thoughtful analysis of materiality and long-term business relevance
Creativity and proactivity:
Companies whose actions go beyond compliance or box-checking activity to demonstrate heightened commitment and potential benefit
Companies with goals that are specific, and produce candid and consistent reports of progress
Companies showing benefits that are meaningful both within the firm and beyond its corporate borders