Integrating ESG Factors into the Investment Process Moves the Needle Forward

By Guillaume Mascotto - July 2019

Environmental, social and governance (ESG) investing is an evolving concept that currently lacks standardized definitions, consistency and a solid baseline for analysis and measurement. Despite recent progress at the regulatory level and higher levels of issuer ESG disclosure, investors are increasingly relying on ESG information about companies, which can differ per third-party ratings, scores and other beta-type filters. Much of that data hasn’t been audited or contextualized around financial materiality and company fundamentals. In fact, overreliance on that type of guidance may limit investors’ ability to understand which ESG factors and their time horizons are financially material for companies.

Guillaume Mascotto
Guillaume Mascotto
Head of ESG and Investment Stewardship

“Integration of ESG disclosures and company fundamentals is an essential component in the evaluation of an issuer’s ability to mitigate a given ESG risk or capitalize upon an opportunity.”

Integrating ESG Factors into the Investment Process Moves the Needle Forward

Notes from the ESG Desk

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    Integrating ESG Factors into the Investment Process Moves the Needle Forward

    Guillaume Mascotto, head of ESG and Investment Stewardship, discusses how integration of ESG disclosures and company fundamentals is an essential component in the evaluation process.

      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.

      Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.