Stewardship an Increasingly Integral Part of Investing

A recent report from Accenture found that investment stewardship is changing, reported Institutional Investor. The report found that 92% of the asset managers surveyed are looking to upgrade the way that their firms approach stewardship, reflecting an industrywide trend headlined by Putnam Investments.

Stewardship practices are the aspect of investments in which public corporations and companies are engaged in a way that encourages governance practices in line with the shareholder values. They help to create long-term value for all owners in the company. 80% of the asset managers surveyed believed that stewardship gives the opportunity to create this value and deliver strong performance.

It is an aspect of investing that currently has less guidelines than some other sub-sectors as it has historically been a less-important part of the investment process. In today’s economy though, with a growing shift toward sustainability, not only environmentally but also within governance, asset managers are looking to structure their approaches to stewardship differently.

“Whereas 10 to 15 years ago, investors were focused on the traditional investing process, today, there are other criteria outside of purely performance that investors are looking for,” Ross Tremblay, senior manager at Accenture, said in an interview with Institutional Investor. “Something like investment stewardship is not only a way asset managers feel they can improve performance: It’s a way to appeal to what’s important to their investors and their brand.”

Of the asset managers surveyed, a group made up of executives of 50 asset manager and alternative firms in North America, most said their main challenges came down to four areas: research and analysis, data standardization, access to data, and corporate interaction.

“This is an area that hasn’t had the level of attention in the past that it’s starting to gain,” Tremblay added. “As a result of that, it’s probably been an area that asset managers haven’t necessarily been able to build the infrastructure on yet, but it’s certainly an area that they’re looking to invest in now.”

Putnam Advancing the Field

Putnam believes in sustainability and holds ESG practices as a core aspect of its investment approach. Its ESG-focused active sustainability managers are a fundamental part of the business and are incorporated into the rest of the asset management team, participating in meetings, helping provide guidance through research, and interacting internally as well as externally to align shareholder ESG values with investment practices.

The approach goes above and beyond the current standards are in the industry; Putnam engages with the companies it invests in, speaking with top-level executives and providing sustainability strategies that benefit the company and its investors.

“For Putnam, as a long-term fundamental investor, engagement with corporate management is a critical part of our fundamental research process. For reference, Putnam’s research team held over 2,000 meetings with company management in 2019. We are in regular dialogue with companies about strategy and execution, and where applicable, relevant ESG issues,” according to the Putnam website.

Putnam’s stewardship practices include reaching out to and engaging with CEOs of the companies it invests in in. Last year the company sent out over 100 letters to CEOs. It also participates in proxy voting via the independent Trustees of the Putnam Funds, who are committed to advocating for strong corporate governance practices.

Putnam currently offers four different actively managed ETFs: the Putnam Focused Large Cap Growth ETF (PGRO); the Putnam Focused Large Cap Value ETF (PVAL); the Putnam Sustainable Future ETF (PFUT); and the Putnam Sustainable Leaders ETF (PLDR).

See also: One Week in the Life of an Active ESG Manager

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