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ESG fuelled by the power of 3

Our three-part process enhances our research by integrating material environmental, social and governance (ESG) issues.

  1. How it works
  2. Frameworks
  3. Monitoring
  4. Engagement & voting

HOW IT WORKS

Why integrate ESG?

Because it enhances our research.
Watch this video and learn how.

Jessica Ground, global head of ESG, explains how the three parts of our ESG process — Research & Investment Frameworks, Monitoring Process, and Engagement & Proxy Voting — naturally fit into The Capital System™ .

The Capital System™

Analysis of material ESG issues, alongside other considerations, helps us identify investment risks and opportunities. They can be, but are not necessarily, determinative to an investment decision.

RESEARCH & INVESTMENT FRAMEWORKS

What's material for one isn't material for all

We have developed 25+ sector-specific investment frameworks that distill our thinking on material ESG issues, brought to life with 40 data sources.

Read about how analysis of material ESG risks and opportunities is woven into our investment approach, The Capital System.

Learn more

MONITORING PROCESS

How we identify, evaluate and assess

To complement our investment research, our monitoring process uses available third-party data* to flag a subset of investments for further research and review.

Want more on monitoring? Learn how our process works in the real world.

Learn more

ENGAGEMENT & PROXY VOTING

Meaningful dialogue on hard-to-measure ESG issues

We believe our detailed, hands-on, case-by-case practice of engagement with companies serves an important role.

ESG resources

PRO

Want to stay ahead of the curve?

Explore the latest research and insights in our ESG perspectives library.

PRO

ESG policy statement

Learn more about how we integrate material ESG risks and opportunities into our investment approach, The Capital System.

*IMPORTANT INFORMATION

For corporate holdings, we use two data providers (MSCI and Institutional Shareholder Services Inc. (ISS)) and five different indicators to monitor and flag holdings. These indicators capture materially lower ESG performance relative to peers and potential violations of international norms via the UN Global Compact (UNGC) and Organisation for Economic Co-operation and Development (OECD) Guidelines. For sovereign holdings, our proprietary ESG score for an issuer is a weighted average of its raw scores from three data sources: Notre Dame Global Adaptation Initiative Climate Vulnerability Index, United Nations Human Development Index, World Bank Worldwide Governance Indicators. Historically, our methodology for sovereign holdings has most heavily weighted governance metrics. Governance indicators can provide important signals about a country’s ability to meet its financial obligations. Our monitoring process for municipal bonds focuses on physical climate risks and applies to obligors in certain sectors (excluding Tobacco, Corporates, Gas, as well as escrowed bonds) that exceed 0.25% of the assets of certain U.S.-based mutual funds in the Capital Group complex. We use third-party climate risk scores from Intercontinental Exchange (ICE) to monitor and flag certain large municipal holdings for potential financial risk arising from physical climate hazards. Obligors with physical climate risk scores above our thresholds are escalated for additional analyst review.

Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.