ESG and Investment Stewardship

Genuine ESG integration



Environmental, Social, and Governance (ESG) issues are increasingly important to the long-term financial success of a company.  As skilled, experienced, and active investment managers we believe it is our duty to our clients to evaluate and integrate material ESG factors into the overall investment process. We believe doing so can contribute to better investment outcomes.

Genuine ESG Integration means our investment teams:

Invest

in extensive in-house ESG resources, training and education
 

Integrate

ESG across strategies within an overarching research framework
 

Incorporate

ESG considerations consistent with each portfolio’s distinct philosophy
 


Exercise

active ownership responsibilities

 

Develop

custom solutions that meet each client’s ESG objectives
 

Strive

to achieve 100% integration







Our ESG Approach

At American Century Investments, we believe good active management naturally incorporates ESG issues. All risks and opportunities, including ESG related, are taken into consideration when we make investment decisions. We view ESG issues as important inputs into fundamental analysis that can help mitigate downside risk or increase upside potential associated with ESG issues otherwise not captured by traditional financial analysis.

Anchored by three key tenets, American Century’s multi-faceted ESG approach complements existing investment processes and aligns with our fiduciary duty to serve clients:



And partnering with us offers an opportunity unlike any in the asset management industry. By investing with us, you also invest in the future of others and potentially impact the lives of millions. That's possible because of the distinct relationship with our primary owner, the Stowers Institute for Medical Research. Our dividend payments support the Institute's work of uncovering the causes, treatments and prevention of life-threatening diseases, like cancer, Alzheimer's and diabetes. Since 2000, those payments have totaled $1.7 billion*


Investment-Led ESG Platform

We believe it is crucial to maintain the independence of our fundamental analysts and the integrity of the investment process. Our ESG research framework augments the existing fundamental research process and helps portfolio managers make better long-term investment decisions for clients. The ESG views generated by our proprietary scoring system reflect an analysis of financial materiality and its investment implications. We believe integrating ESG provides the opportunity to increase portfolio diversification and improve client outcomes through the incorporation of both ESG- and alpha-related inputs within our fundamental research processes.





Focus on Financial Materiality

ESG Integration Framework

Our ESG integration process is guided by a three-layer analytical framework that is aligned with our fundamental analysis process and fiduciary duty. The framework is applied to equity and fixed income strategies and seeks to 1) identify macro-level ESG issues impacting market dynamics, 2) determine which of these issues are relevant at the sector level, and 3) evaluate ESG materiality at the issuer level.



ESG Macro Analysis

Identify ESG issues affecting
sectors and companies

Sector Analysis

Determine ESG risk exposures at sector level

Issuer Materiality Assessment

Assess ESG materiality at issuer level



Investment Teams:

  • Consider relative ESG assessments in context of analysis/fundamental research process.
  • Address company management with any ESG issues and controversies deemed material to an issuer's long-term financial condition.


To assess whether sector ESG issues could result in risks or opportunities to a security's valuation or cause a downgrade of its fundamental profile, we utilize a combination of third-party data and proprietary ESG assessment tools. The ESG views generated by our ESG scoring system are considered in the context of our analysts' fundamental research process, with a focus on investment performance implications. Our analysts work closely with the ESG and Investment Stewardship team in an effort to ensure that any ESG risk identified by the ESG integration process is not financially material to the investment thesis. We assign a final ESG score composed of a quality rating and trend signal that is both historical and forward looking.



Client-Driven Platform

There are many ways to apply ESG considerations to an investment strategy. Approaches can vary based on asset class, style, time horizon, opportunity set and client objectives.



Exclusionary/Negative Screening


ESG Integration



Positive/Best-In-Class ESG Tilt


Thematic Investing



Impact Investing


Combined Approaches



While American Century emphasizes ESG integration as we believe it leads to better diversification and a more robust opportunity set within the investable universe, we position our ESG program as solutions driven. To that effect, we also offer bespoke ESG solutions for our clients. We are capable of, and have been, providing ESG solutions-ranging from negative screening to best-in-class tilting, to thematic, to impact investing-in relation to all our investment disciplines, subject to client requests.



Evolution of ESG and Impact Investing

Our ownership structure is unique in the asset management space as it enables our clients to directly support lifesaving research and contribute to the global fight against cancer. With responsible investing firmly rooted in our DNA, American Century Investments' focus on ESG factors is integral to our corporate citizenship and business model.


1994

The Stowers Institute for Medical Research  was founded by Jim and Virginia Stowers who dedicated the vast majority of their net worth to benefiting humankind.
Through its distinct business model, American Century directs more than 40% of dividends to its owner, the Institute, to fund life-saving research that can improve human health and save lives.


In 1994, American Century Investments' founder, James E. Stowers Jr., and his wife Virginia dedicated the vast majority of their net worth to create the Stowers Institute for Medical Research (SIMR) .

The Institute owns a controlling interest in American Century. Through this unique ownership structure, dividend payments ensure the ongoing support of important work that can improve human health and save lives. Since 2000, those payments have totaled $1.7 billion.*



2006

Began incorporating exclusionary screening into select portfolios.


2014

Formally incorporated ESG MSCI ratings/analysis into fundamental analysis of equity portfolios.


2016

Launched first ESG-focused strategy: U.S. Sustainable Large Cap Core strategy


2017

Hired Head of ESG and Investment Stewardship
Created ESG integration framework and proprietary scoring model


2018

Signed United Nations-supported Principles for Responsible Investment (PRI)
Established firm ESG Investment Policy
Incorporated ESG matters into Proxy Voting Policy and established ESG Proxy team
Launched Health Care Impact strategy


2019

Integrated ESG analysis into additional equity and fixed income strategies
Launched Emerging Markets Sustainable Impact strategy
Introduced ESG Investment Champions training program


2020

Continued integrating ESG considerations across equity and fixed income strategies
Implemented formal engagement protocol
Designated and trained additional ESG Investment Champions
Launched sustainable semi-transparent active ETFs


Insights

Health Care Monthly Monitor 

This timely update provides insights into health care sector stock performance and social impact themes related to U.N. Sustainable Development Goal 3 (Good Health and Well-Being).

Adding Value Through Large-Cap ESG Investing 

Can my investments do well while the companies I invest in do good? This is a question many investors ask as they consider portfolios that assess ESG factors as part of the investment process.

Biden's Victory—A Likely Boon For ESG, But Is It Enough? 

The Democratic-controlled House of Representatives will likely echo Biden's stance on climate change, resulting in a strengthening of the federal government's role in energy and environmental policy.




ESG Integration Extends to Proxy Voting Practices

Our ESG integration process extends to our proxy voting practices. As per American Century Investments' proxy voting policy, our ESG Proxy team reviews, on a weekly basis, each proposal affecting our positions across the entire equity complex. With various inputs, including the Institutional Shareholder Services Socially Responsible Investment (ISS SRI) proxy recommendations, the ESG Proxy team assesses the financial materiality of ESG issues underpinning the proposals and makes appropriate voting recommendations to portfolio managers. The investment teams review and approve the recommendations. The ESG Proxy team is composed of senior legal and compliance professionals, in addition to the Head of ESG and Investment Stewardship.

Details on our proxy voting policies are available here

*as of 12/31/2020

This information is for educational purposes only and is not intended as investment advice.

Diversification does not assure a profit nor does it protect against loss of principal.

A strategy or emphasis on environmental, social and governance factors ("ESG") may limit the investment opportunities available to a portfolio. Therefore, the portfolio may underperform or perform differently than other portfolios that do not have an ESG investment focus. A portfolio's ESG investment focus may also result in the portfolio investing in securities or industry sectors that perform differently or maintain a different risk profile than the market generally or compared to underlying holdings that are not screened for ESG standards.