The Value of ESG: Building on a Strong Foundation
Key Takeaways
We believe ESG integration is the optimal approach to sustainable investing for value investors. We think it can offer increased portfolio diversification and maximizes the integration of both ESG-quality and alpha-related inputs.
With a historical focus on quality and downside risk mitigation, the Global Value Equity team has systematically incorporated extra-financial issues into its investment process. To strengthen our process we evolved to include third-party ESG data and proprietary ESG research.
Our team’s ESG views are risk based and forward looking. They are formed within the context of fundamental analysis to help determine if ESG issues present potential risks to a company’s valuation or quality profile.
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The portfolio managers use a variety of analytical research tools and techniques to help them make decisions about buying or holding issuers that meet their investment criteria and selling issuers that do not. In addition to fundamental financial metrics, the portfolio managers may also consider environmental, social, and/or governance (ESG) data to evaluate an issuer's sustainability characteristics. However, the portfolio managers may not consider ESG data with respect to every investment decision and, even when such data is considered, they may conclude that other attributes of an investment outweigh sustainability-related considerations when making decisions. Sustainability-related characteristics may or may not impact the performance of an issuer or the strategy, and the strategy may perform differently if it did not consider ESG data. Issuers with strong sustainability-related characteristics may or may not outperform issuers with weak sustainability-related characteristics. ESG data used by the portfolio managers often lacks standardization, consistency, and transparency, and may not be available, complete, or accurate. Not all American Century investment strategies incorporate ESG data into the process.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.