ESG statement

Our history of sustainability begins with American Century’s purpose-driven business model that sets us apart in the asset management industry. Our controlling owner, the Stowers Institute for Medical Research, is a world-class biomedical research organization, and more than 40% of our dividends go to support its efforts to better understand human health and life-threatening diseases. This business model has helped to shape our culture and makes incorporating sustainability principles into our investment practices a natural fit for us.

Is ESG integrated into your investment process? How? Which funds or does this apply to the entire firm?

We believe that integrating ESG factors into our fundamental investment process allows us to assess long-term sustainability of an issuer’s business model or durability of cash-flows over time more holistically. We believe ESG issues can be important inputs into the fundamental analysis process and may contribute to downside risk mitigation or the understanding of upside potential of an issuer’s long-term business value. That is why many of our investment teams incorporate ESG considerations into their investment processes.

To assess whether ESG issues could result in risks or opportunities to a particular security’s valuation or cause a downgrade of its fundamental profile, investment analysts, working with the Sustainable Research team, generate an ESG assessment that incorporates a proprietary ESG scorecard application. Although not every security in every portfolio’s investable universe may have an ESG assessment, for those that do scores are based on material quantitative and qualitative environmental and social indicators that are sector-specific and derived from company reported data. A governance risk assessment complements this analysis by benchmarking issuers against quantitative governance indicators based on company reported and third-party data, regardless of the sector.

The scores are dynamic and intended to capture if an issuer’s ESG management practices are improving or worsening over time. The assessment results in a final ESG rating composed of an ESG score and trend signal for the issuer. For those investment teams that consider ESG factors, the ESG assessment is a potential input into the fundamental research process. The investment analysts may incorporate this assessment of ESG risks and opportunities into their research with a specific focus on portfolio performance implications. However, the portfolio managers retain discretion as to whether or how to incorporate such ESG risk views into their investment decision-making. Even when such data is considered, they may conclude that other attributes of an investment outweigh ESG considerations when making decisions for a portfolio.

While all in-house fundamental ESG research is based on our foundational framework of macro thematic, sector and issuer materiality, investment teams that integrate ESG factors do so in alignment with a specific investment strategy’s asset class, style, time horizon, opportunity set and client objectives.

Who conducts ESG analysis within the team? Is it done by PM, financial analysts or a central ESG team?

Our investment teams are responsible for integrating ESG considerations into investment decisions and work in partnership with our dedicated Sustainable Research team as they seek to incorporate material ESG issues into their fundamental research. The Sustainable Research team is a part of the investment organization and serves as the center of expertise supporting those investment teams that seek to incorporate ESG issues into fundamental analysis and portfolio decision-making. The Sustainable Research team is responsible for:

  • Expanding issuer-specific and thematic research and training,
  • Developing sustainability assessment models and tools,
  • Advancing stewardship practices,
  • Publishing thought leadership, and
  • Innovating client solutions.

Each investment discipline has a dedicated Sustainable Research analyst who works closely with their respective investment teams to advance integration, enhance engagement practices, and support proxy voting.

Please summarise the key ESG metrics that are core to your strategy?

Material ESG issues determined likely to impact the long-term value of an issuer are not identical or uniform across the investment universe. ESG risks and opportunities facing an issuer can vary by industry or sector, and at the individual issuer level by business model. Therefore, our ESG research framework is designed to account for these differences.  We utilize a proprietary materiality mapping framework that seeks to identify key sustainability themes, sector- and issuer-level ESG risk and opportunity.

Depending on the sector, the environmental and social factors include, but are not limited to:

  • Circular economy
  • Climate change (including carbon reduction and biodiversity)
  • Cybersecurity and data privacy
  • Health care
  • Human capital management
  • Product safety and quality (supply chain and manufacturing)
  • Water stress

Regardless of the sector, the governance factors include:

  • Accounting practices
  • Board composition
  • Business (mis)conduct
  • Executive pay-for-sustainability performance alignment
  • Independence and entrenchment
  • Ownership structure

How is this research carried out? Positive/negative screening? Qualitative?

The imperfect and evolving nature of ESG data provides our investment teams with an excellent opportunity to demonstrate the value of active management and proprietary research. Because ESG data is typically voluntary and unaudited, our ESG analysis focuses on more than just company disclosures. To complement this research, our investment teams that incorporate ESG considerations may also refer to third-party ESG data from data aggregators and other specialized data providers. However, we do not rely exclusively on third-party ratings. Our conclusions are based on proprietary processes and research.

Our Sustainable Research team incorporates a thematic approach to sustainability research, believing that many of the challenges and opportunities that companies or issuers face cannot be assessed independent of other business drivers. Our five sustainability mega-themes include health care, empowerment, sustainable living, climate, and technological advancement. Opportunities within these areas to innovate solutions, address critical challenges, and transform society will help shape the future of sustainable investing. These themes help drive our sustainable investing research, including thought leadership, and stewardship practices.

How do you measure your success regarding ESG? Performance against benchmarks (which ones) Reports?

Our Sustainable Investing program is solutions driven, and for clients who have specific ESG and/or sustainability objectives, we partner with them to develop custom reporting designed to meet their needs. Our reporting menu includes:

  • Proprietary ESG scores and distribution
  • External ratings and distribution
  • Proprietary ESG screens
  • ESG attribution (for relevant portfolios)
  • Portfolio-level carbon footprint
  • Stranded assets analysis
  • SDG and impact alignment (stock- and portfolio-level)
  • Sustainability metrics
  • ESG engagement activity
  • ESG proxy voting

For ESG best-in-class and positive-tilt strategies, we can identify and report on excess return that is attributed to ESG factors.

For impact strategies, we use an impact generation framework to demonstrate each investment we make to exhibit both a financial business case and a quantifiable impact on society and/or the environment. For these portfolios, we provide reporting on sustainable development goal alignment, measurement, and overall portfolio impact.

For those strategies not labelled as ESG, but that systematically integrate ESG considerations alongside traditional financial data, we report performance in holistic fashion, whereby ESG factors serve as an input into attribution, among other factors, including industry specifics, fundamentals, time-horizon, and market-based measures.

Is your business a signatory to PRI? Why, why not?

American Century is a signatory of the Principles for Responsible Investment (PRI) and supports its missions to promote the incorporation of ESG issues into investment processes, ownership policies and practices.

Are you disclosing climate change policies in line with the Task Force on Climate-Related Financial Disclosures (TFCD)? Please briefly outline your policies.

American Century is a supporter of TCFD and believes our sustainable investing approach is aligned with the goals of TCFD. We believe climate change issues present material, systemic risks to the global economy and could affect long-term global market dynamics. We also expect to see tremendous investment opportunities arise as the world seeks to address these risks.

As part of our sustainable investing approach, we seek to understand how issuers are positioned for a world that faces significant threats from climate change even as we work to decarbonize. We also believe that moving to a low-carbon global economy should be consistent with the Climate Justice Alliance’s Just Transition initiative, which is an explicit area of focus in our climate-related engagements. Our approach combines:

  • understanding how companies are addressing climate risk,
  • investing in companies that provide innovative solutions to climate-related challenges, and
  • exercising our rights as active owners to influence companies’ policies and actions.

We assess individual companies’ climate risk using our proprietary materiality map and ESG scorecard, covering material climate-related risks and opportunities and their impact on an investment thesis. Our stewardship practices are focused on material ESG-related issues, including climate change, that we believe could potentially impact the value of an investment. Through engagement, we encourage increased transparency around and the disclosure of material issues related to sustainability and associated risks, including climate-related risks.

Has your business signed up or committed to any other campaigns relating to ESG?

As we further our commitment to stewardship, we participate in a select group of affiliations and industry collaborations that promote sustainable investing. We prioritize involvement with a smaller, more targeted number of initiatives that align with our investment-led approach and advance our sustainability themes. We highlight a few collaborations below:

  • Access to Medicine Foundation
  • Investors Against Slavery and Trafficking Asia-Pacific
  • ShareAction (Healthy Markets Initiative)
  • Human Capital Management Coalition

Other important industry affiliations we support that focus on responsible investing, governance, and disclosure include:

  • Principles for Responsible Investment (PRI)
  • Responsible Investment Association Australasia (RIAA)
  • International Corporate Governance Network (ICGN)
  • Investor Stewardship Group (ISG)
  • Carbon Disclosure Project (CPD)
  • Task Force on Climate-Related Financial Disclosures (TCFD)
  • Task Force on Nature-Related Financial Disclosures (TNFD)

Disclosures:

Many of American Century’s investment strategies incorporate the consideration of environmental, social, and/or governance (ESG) factors into their investment processes in addition to traditional financial analysis. However, when doing so, the portfolio managers may not consider ESG factors with respect to every investment decision and, even when such factors are considered, they may conclude that other attributes of an investment outweigh ESG considerations when making decisions for the portfolio. The consideration of ESG factors may limit the investment opportunities available to a portfolio, and the portfolio may perform differently than those that do not incorporate ESG considerations. ESG data used by the portfolio managers often lacks standardization, consistency, and transparency, and for certain companies such data may not be available, complete, or accurate.

American Century Investments and ESG Clarity are not affiliated investment companies.

No offer of any security is made hereby. This material is provided for informational purposes only and does not constitute a recommendation of any investment strategy or product described herein. This material is directed to professional/institutional clients only and should not be relied upon by retail investors or the public. The content of this document has not been reviewed by any regulatory authority.

The opinions expressed are those of American Century Investments and are no guarantee of the future performance of any American Century Investments portfolio. The information is not intended as a personalized recommendation or fiduciary advice and should not be relied upon for investment, accounting, legal or tax advice.

American Century Investment Management (UK) Limited is authorised and regulated by the Financial Conduct Authority. American Century Investment Management (UK) Limited is registered in England and Wales. Registered number: 06520426. Registered office: 12 Henrietta Street, 4th Floor, London, WC2E 8LH.

American Century Investments (EU) GmbH is registered with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)). American Century Investment Management, Inc. is not authorised by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)).

©2023 American Century Proprietary Holdings, Inc. All rights reserved.

 

Links and documents
– Sustainability
– Ownership Structure
– Corporate Responsibility
– Sustainable Investing
– Diversity, Equity & Inclusion

Funds to watch

Name ISIN Domicile Description
U.S. Sustainable Large Cap Core

The U.S. Sustainable Large Cap Core strategy combines ESG factors with fundamental business improvement metrics and systematically evaluates the factors throughout the research process and in portfolio construction. The strategy intends to have a weighted average portfolio ESG score that places the portfolio in the top decile of U.S. Large Blend peers, based on MSCI ESG fund quality rankings and Morningstar’s fund sustainability ratings. This is achieved by investing in companies that are considered ESG leaders in their respective sectors while excluding worst-in-class or issue-oriented companies and tobacco companies. The strategy’s lead portfolio managers work closely with the ESG Desk to ensure that any ESG risks identified by our ESG integration process are not financially material to our investment thesis.


Learn more | View annual sustainability report
Health Care Impact Equity

The portfolio primarily focuses on stocks of U.S. health care companies exhibiting sustainable and accelerating earnings growth and profitability. Furthermore, the portfolio is constructed to align with the United Nations’ Sustainable Development Goal 3 (SDG-3) to “ensure healthy lives and promote well-being for all at all ages.” The investment team uses a proprietary multi-factor model to rank health care stocks based on fundamental acceleration, earnings quality, relative strength and valuation. Next the team conducts deep fundamental analysis, as well as assesses the sustainability and profitability of the company. In addition, the strategy’s lead portfolio managers work closely with the ESG Desk to ensure any ESG risks identified by our ESG integration process are not financially material to our investment thesis.


Learn more | View annual impact report
Emerging Markets Sustainable Impact Equity

Our philosophy of growth is centered on the belief that improving business fundamentals of a company lead to acceleration in earnings and revenues, and this acceleration in growth can yield both stock price performance alongside positive societal and environmental value. We believe markets tend to be slow in recognizing inflection points in growth trends, which creates inefficiencies that may be exploited. Markets are also ineffective in recognizing the duration and magnitude of earnings improvement. By focusing on inflection points as well as on both the sustainability of earnings growth and impact characteristics, we can identify opportunities in their nascent stages. Managers use a bottom-up stock selection process utilizing proprietary fundamental and ESG research as well as engagement to invest in large-, mid- and small-cap companies in emerging countries that are exhibiting improving fundamentals and accelerating growth characteristics alongside an SDG impact.


Learn more | View annual impact report

ESG DDQ

Does the investment manager have a policy addressing its approach to the incorporation of ESG factors within the investment process? If there is no policy, please explain why.

American Century’s Sustainable Investing policy outlines the firm’s approach to sustainable investing and highlights our commitment to delivering sustainable investing solutions that meet our clients’ evolving needs.

Please explain what steps have been taken to ensure ESG specialists have authority in the portfolio management process?

Direct oversight and accountability for sustainable investing activities fall under the Chief Investment Officer who oversees the investment teams’ efforts to account for material ESG issues within their investment processes. The Investment Leadership team, which is composed of discipline CIOs and other senior leaders across the investment organization, serves as the governing body for investment practices, including sustainable investing initiatives.

The head of Sustainable Investing is responsible for driving and executing our sustainable investing strategy and overseeing the dedicated Sustainable Research team. Our investment teams work in partnership with our dedicated Sustainable Research team as they seek to incorporate material ESG factors into their fundamental research. The investment teams are well resourced to assess the materiality of ESG issues within their processes. Our Sustainable Research team’s research and expertise strengthen the investment teams’ sustainable investing knowledge and our innovative assessment tools facilitate the teams’ research and insights.

To underscore our investment-led approach to sustainable investing, the firm’s Sustainable Investment Council meets regularly to facilitate our sustainable investing strategy, promote best practices, and support consistency of our integration approach.  The Council includes our Head of Sustainable Investing and seasoned portfolio managers across all of our investment disciplines.

Please explain how the Sustainable Development Goals (SDGs) are integrated in the investment policy and decisions, if applicable.

Sustainability is truly in our genes, and as we help our clients achieve financial success, we make an impact on advancing U.N. Sustainable Development Goal 3 – Ensure Healthy Lives and Promote Well-Being for All at All Ages through our unique business model.  Our controlling owner, the Stowers Institute for Medical Research, is a world-class biomedical research organization, and more than 40% of American Century Investments’ dividends go to support its efforts to better understand human health and life-threatening diseases.

Providing investment solutions that incorporate sustainability principles is a natural extension of the impact our firm creates. In addition to integrating sustainability-related factors into many of its portfolios, we offer several investment strategies designed to invest in companies that support the United Nations Sustainable Development Goals (U.N. SDGs).

How do you collaborate with other investors to achieve successful engagement outcomes?

The majority of our engagement activity is directly with investee companies as we believe this is the most effective way to discuss material ESG-related issues that could affect a company’s long-term prospects and performance, and therefore make better informed long-term investment decisions for clients. We may also partner with clients to engage investee companies on issues that support their sustainability goals and where our goals align.

As further commitment to stewardship, we support a select group of affiliations and industry collaborations that promote sustainable investing. Our preference is to be involved with a smaller, more targeted number of initiatives that align with our investment-led approach and advance our sustainability themes.  We highlight examples below:

  • We are a signatory to Access to Medicine Investor Statement, joining other investors to improve the understanding of how pharmaceutical companies manage risks and opportunities related to access-to-medicine and antimicrobial resistance (AMR) and utilize the Foundation’s research in investment analyses and engagement activities.
  • We are a member of the Human Capital Management Coalition (HCMC), a cooperative effort among a diverse group of asset owners to elevate human capital management as a critical component in company performance. The Coalition engages companies and other market participants with the aim of understanding and improving how human capital management contributes to the creation of long-term shareholder value. Sarah Bratton Hughes is also a member of HCMC’s strike committee and is participating in a leadership role in their upcoming conference.
  • We are a participant in the Healthy Markets Initiative, a movement spearheaded by ShareAction that aims to improve consumer health outcomes by targeting the food and beverage industry and advocate for healthier, more sustainable diets globally. While originally focusing on players in the grocery retail market, the initiative has begun putting an emphasis on engagement with food and beverage manufacturers.
Please describe what ESG data, research, third-party consultants and other resources the fund manager uses, and how these are incorporated in the investment and risk management processes.

In developing issuer-specific ESG assessments, we rely heavily on reported disclosures (e.g., 10-K, 10-Q, 20-F, GRI-compliant or equivalent sustainability reports, proxy reports). We also utilize specialized datasets from governments and non-governmental organizations and a wide variety of publicly available sources. Our in-house sustainability assessment tools may leverage third-party data from providers such as MSCI, Sustainalytics, and ISS, but it is important to note that we do not rely exclusively on third-party data or ratings. Our conclusions are based on proprietary processes and research.

Partner Content