ESG is a growing portion of the investment landscape–and growing larger everyday. But should investors focus on the companies that are adapting to today’s greatest challenges; or the companies positioning themselves to become tomorrow’s leaders?
Now investors can do both. Putnam Investments recently entered into the world of ETFs with four new ETFs, two of which are ESG related: the Putnam Sustainable Future ETF (PFUT) as well as the Putnam Sustainable Leaders ETF (PLDR).
Both PLDR and PFUT are actively managed ETFs that use Putnam’s proprietary sustainability ratings system and criteria to invest in top ESG-performing companies.
But the investment objective of each fund is different: PLDR focuses on companies that are currently demonstrating leadership in sustainability efforts, while PFUT focuses on the companies finding solutions to sustainability challenges for the future, via their products and services.
PLDR Invests in the Leaders of Today
PLDR invests in companies whose focus on ESG issues goes well beyond just basic compliance, but for whom ESG is an integral part of their long-term success, These companies have transparent goals and provide consistent, measurable progress updates.
PLDR invests larger percentages of its portfolio in fewer stocks, and the companies invested in by PLDR exhibit creative, proactive leadership in the sustainability issues that create long term success, both for the company itself and the community as a whole..
As a semi-transparent fund using the Fidelity model, PLDR does not disclose its current holdings on a daily basis. Instead, it publishes a tracking basket of previously disclosed holdings, liquid ETFs that mirror the portfolio’s investment strategy, and cash and cash equivalents. The tracking portfolio is designed to closely track the actual fund portfolio’s overall performance, and actual portfolio reports are released monthly.
Holdings as of the end of June included Microsoft Corp. at 8.45%, Apple at 7.08%, and Amazon.com at 5.26%. The fund was heavily allocated to information technology stocks (31.84%), followed by health care at 15.27% and consumer discretionary at 14.96%.
PLDR has an expense ratio of 0.59%.
PFUT Invests in the Leaders of Tomorrow
Meanwhile, PFUT invests in companies seeking to provide solutions to future sustainability challenges. It is a forward looking approach as these companies are helping to develop ESG and solve problems related to sustainability.
PFUT focuses on impact companies as identified in its sustainability rating system, investing in companies driving economic development, as Putnam believes that strong sustainability practices equate to strong financial growth.
Like PLDR, PFUT is a semi-transparent active ETF. Holdings are disclosed monthly, but as of the end of June, they included Danaher Corp (which designs and manufactures products for professional, medical, industrial and commercial industries) at 3.53%; Adobe at 3.29% and Applied Materials at 2.67%.
PFUT’s top sector allocations as of the same time period were 30.55% in health care stocks, 30.43% in information technology, and 9.78% to consumer discretionary.
PFUT has an expense ratio of 0.64%.
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