Matt Oldroyd, Head of Corporate Sustainability, American Century Investments, Joe Reiland, CFA, Vice President and Portfolio Manager, American Century Investments, and Jonathon Bauman, CFA, Vice President and Senior Client Portfolio Manager, American Century Investments discuss American Century’s unique approach to sustainable investing.
There’s been a massive acceleration of flows into sustainable investing. Last year, there were over 50 billion dollars in net new flows into the space and over 250 billion in total assets in sustainable-oriented strategies. This shift can be attributed to the increased proportion of S&P assets driven by intangible assets, like patents, brand value, customer data, and software. In 1985, only 35% of the S&P 500 was driven by intangible assets, and as of 2020, that proportion has increased to 90%. Increased investment in ESG can also be tied to a global shift in values, which has led to a higher prioritization of sustainability.
American Century Investments prioritizes sustainability and positive social outcomes in their approach to investing, and is one of the leading sustainable investment management firms in the space. “American Century stands for much more than simply making a dollar. We look to do good in the world, through our unique ownership structure,” says Oldroyd.
For example, over 40% of American Century Investments’ profits go to Stowers Institute for Medical Research, a controlling owner and a world-class biomedical research organization dedicated to defeating life-threatening diseases. American Century invests alongside the ESG leaders and the best-in-class names within each economic sector.
American Century has a broad range of ESG approaches, based on asset class, style, time horizon, opportunity set, and objectives to meet clients’ needs. “Our objective is to deliver competitive long-term financial returns while integrating material environmental, social, and governance factors into our investment process,” says Oldroyd.
American Century’s Sustainable Equity strategy is designed for investors who desire an ESG solution, while remaining focused on investment performance. American Century considers ESG risk and opportunities alongside traditional financial information to provide a more holistic view of the return and risk potential of a security.
“It’s important that ESG analysis complements traditional financial analysis, and it’s not a substitute,” says Reiland.
The portfolio holds minimal cash and foreign exposure to remain consistent in the large-cap blend space, and it serves as a building block in an investor’s asset allocation plan.
“Incorporating ESG is an important component, but you have to do it in a way that you’re building an investable portfolio that ultimately is designed to outperform a broad market index while also having positive benefits on society and the environment,” says Bauman.