4 MIN ARTICLE
Our mission at Capital Group is unwavering: to improve people’s lives through successful investing. Deep, fundamental research has always been at the heart of our investment approach, and we believe that considering material ESG issues as part of our research can help us understand long-term risks and opportunities for investors.
ESG is an important consideration for long-term investors
Capital Group was founded in 1931 on the belief that a deep understanding of the organizations in which we seek to invest will result in better outcomes for investors. This belief is part of our DNA and continues to shape the structure and operation of our investment effort. The hallmark of that effort is engagement. We visit companies, build relationships with their management teams and develop investment perspectives focused on long-term outcomes. Our process* rewards investment professionals for their long-term results.
We’ve always believed that knowing how organizations interact with and impact their communities, customers, suppliers and employees is important in understanding their potential as investments. We’ve sought to invest in firms that we believe are well-positioned for the future and can sustainably grow their businesses, because that should eventually be positively reflected in a company’s share price and growth trajectory.
In addition to supporting our stewardship of investor assets, ESG principles are an organizational priority and guide our own operations and corporate citizenship. We manage our business for the long term, continually investing in our people, communities and environment.
ESG is woven into our investment approach
Our research effort has always aimed to create a deep and nuanced understanding of companies and issuers. We integrate ESG into our investment approach, The Capital System, through three interrelated elements:
Commitment to transparency
Robust processes and thoughtful frameworks are crucial, but we know that clients want more than pledges and opaque internal processes. They want a clearly articulated ESG approach and a straightforward methodology.
Building an in-house ESG capability supports these important objectives. We are committed to reporting on our ESG process to clients and disclose quarterly fund-level monitoring outcomes for our corporate and sovereign holdings − where data is available − to show which companies have been flagged for more in-depth review. This is just one example of the reporting datasets we are creating and distributing and we’re continuously evaluating future enhancements to our process.
Investing for the future
Capital Group is deeply committed to the integration of material ESG issues in our investment approach. It’s a firmwide effort that involves associates from nearly every part of our organization. Since we hold Capital Group to the same high standards as the companies in which we invest, we are backing up our commitment with significant investments in our capabilities.
As we learn, we’ll continue to refine and innovate, just as we have done for more than 90 years in our business. There is much work ahead of us and we’re excited about the future. We believe that focusing on material ESG issues plays to our strength as responsible stewards of our clients’ assets.
* Compensation paid to our investment professionals is heavily influenced by results over one-, three-, five- and eight-year periods, with increasing weight placed on each succeeding measurement period to encourage a long-term investment approach.