Understand emerging markets opportunities and the American Century advantage.
There are many ways to apply ESG considerations to an investment strategy—one size does not fit all. Asset class, style, time horizon, opportunity set and investor objectives are interwoven into the solutions we offer clients.
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).
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.
A successful ESG integration strategy relies on 10 key steps.
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.
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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.
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.
Identify ESG issues affecting sectors and companies
Determine ESG risk exposures at sector level
Assess ESG materiality at issuer level
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.
Exclusionary/ Negative Screening
Positive/Best-in-Class ESG Tilt
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.
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.
With responsible investing firmly rooted in our DNA, American Century Investments' focus on ESG factors is integral to our corporate citizenship and business model. American Century’s founder established and endowed the Stowers Institute for Medical Research, which is dedicated to uncovering the causes, treatments and prevention of genetically based diseases, like cancer.
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.
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.
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.
Excluded tobacco company stocks in the One Choice® Target Date and One Choice® Target Risk Portfolios series
Formally incorporated ESG MSCI ratings/analysis into fundamental analysis of equity portfolios
Launched first ESG-focused strategy: U.S. Sustainable Large Cap Core strategy
Hired Head of ESG and Investment Stewardship
Created ESG integration framework and proprietary scoring model
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
Integrated ESG analysis into additional equity and fixed income strategies
Launched Emerging Markets Sustainable Impact strategy
Implement engagement protocol across all investment disciplines
Establish internal ESG training program for distribution teams
Complete proprietary ESG certification for ESG Investment Champions
Complete launch of proprietary ESG scoring system (equities, corporate bonds, sovereigns)
Launch sustainable semi-transparent active ETF
Further integrate ESG considerations across all investment disciplines
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) .
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.
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.