Our ESG approach

ESG is integral to how we invest.

EXPLORE

A fully integrated approach

At Capital Group, ESG is part of our investment process, not a separate product. ESG issues are deeply woven into The Capital SystemSM and are always a factor in our fundamental research, due diligence and engagement. We believe our approach can help investors achieve better long- term outcomes.

Approach in action: See our highly integrated three-step process for incorporating ESG into our investment decision-making.


How it works

Our deliberate and consistent approach to integrating ESG is designed to identify the material issues that can matter most to investors. It is built on three tightly woven components: proprietary ESG investment frameworks, multilayered monitoring process and engagement and proxy voting. Each element continuously reinforces the others, making the system smarter over time.

Investment frameworks
Monitoring process
Engagement & proxy voting

Investment frameworks 
Proprietary ESG frameworks identify material issues by sector.

30+

30+

Investment
frameworks

Investment frameworks

200+

200+

Analysts

14

14

Years of 
tenure

Years of tenure

Annual data as of 31 December 2020.

Our investment analysts average 14 years of experience and understand the specific challenges of the industries they cover. So they know the right questions to ask and go beyond third-party sources. Capital Group has invested nearly 4,000 hours creating approximately 30 proprietary, sector- specific frameworks that distill our perspective on material ESG issues and inform our evaluation and engagement processes.

Frank Beaudry, Capital Group analyst, explains how he identifies ESG issues that influence his investment decisions in the mining industry.

Monitoring process 
Securities and issuers are carefully screened for material ESG issues.

We gather data from widely accepted third-party data providers, news reports and company statements, but overly our own proprietary investment frameworks to determine which holdings raise flags. Low-rated holdings are flagged for review, and analysts provide detailed insights on the particular issues.

Our perspectives are built on long-term view, engagement and detailed analysis - never on screening results alone. We dig deeper and don't always agree with conventional ratings.

Our monitoring process has four steps.

STEP 1

ESG data 
aggregation

ESG data aggregation

Our single ESG data repository integrates our own research and third-party ratings, e.g., MSCI, Sustainalytics and UN Global Compact assessments.

STEP 2

Identifying and
flagging risks

Identifying and flagging risks

Key ESG issues are flagged based on our proprietary, sector-specific ESG investment frameworks, as well as third- party data and standards.

STEP 3

Evaluation and documentation

Flagged holdings require enhanced research and review. Insights and engagement are documented.

STEP 4

Assessment
and review

Assessment and review

If there are outstanding concerns, the Issuer Oversight Committee provides an additional layer of review.

Monitoring our 
New Perspective Fund (LUX)

Portfolio holdings are subjected to ESG screens using multiple leading data providers and risk methodologies. Click the chart below to see the percentages of flagged and non-flagged holdings.

Data as of 31 December 2020
Source: Capital Group.

Engagement & proxy voting
We gather more information with each new engagement.

We believe ongoing dialogue and engagement with companies and issuers are stronger tools then exclusion when seeking long-term, sustainable results. Based on learnings from our monitoring process, our investment professionals engage with management teams to understand their goals. Building long-standing relations gives us an opportunity to positively shape and lead industry standards. And as a large, active asset manager, we can adjust our investment decisions based on our findings.

Proxy voting is integral to our role as investment stewards. Our investment professionals are central to determining votes, supported by a specialist Governance and Proxy (GAP) team. Read our proxy voting policies and procedures to learn more.

Our approach to investment stewardship applies to our own business practices and is implemented globally. Beyond our direct engagement with individual companies, we join international agreements and industry initiatives that address ESG themes and focus on improving our communities and environment.

20,000+

20,000+

20,000+

annual meetings

annual meetings

annual meetings

can provide powerful leverage with management teams.

Annual data as of 31 December 2020.

1,850+

1,850+

1,850+

shareholder meetings

shareholder meetings

shareholder meetings

at which we voted keep us engaged and influential on behalf of our investors

Annual data as of 31 December 2020.

17

17

17

specialists

specialists

specialists

dedicated to Governance and Proxy issues. In 2020, our investment professionals had ESG-specific engagements with more then 400 organisations in which we hold shares.

As of 31 December 2020.

Download ESG at Capital Group (PDF) to learn more.