Active ESG Integration Advances Long-Term Value Creation

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01 Active ESG Integration Advances Long-Term Value Creation

“Communicating with companies and holding them accountable for following through on their ESG commitments promotes better transparency and motivates companies to acknowledge areas for improvement.”

Scott Glasser

Scott Glasser, Chief Investment Officer

Portfolio Manager

As an active manager serving as a steward of our clients’ capital, ClearBridge seeks to deliver sustainable long-term returns while prudently managing risk.

We believe that by integrating ESG factors into our investment process we can achieve these objectives and that, further, through company engagement and proxy voting, we can have a positive impact on portfolio companies and ultimately all stakeholders.

While this practice may take many forms, ESG integration allows our analysts and portfolio managers to create a more holistic view of the companies they cover and evaluate how they interact with all stakeholders. Incorporating ESG factors into the investment process correlates well with ClearBridge’s long-standing focus on quality while also enhancing our risk management efforts. We believe by developing best practices with respect to ESG across different parts of their businesses, companies create more sustainable relationships that should enhance financial returns over time. Our own research has found a positive correlation between strong ESG characteristics, as measured by ClearBridge’s proprietary ESG ratings, and higher risk-adjusted returns and alpha generation. From a risk standpoint, communicating with and holding companies accountable for following through on their ESG commitments promotes better transparency and motivates companies to acknowledge areas for improvement.

At ClearBridge, we are proud of our long history of participation in ESG investing, from integrating ESG into our active management approach to engaging with public companies as well as educating different stakeholders across the industry about the importance of addressing sustainability and encouraging best practices. Our commitment to promoting sustainable investment practices is reflected in firm-wide initiatives that link ESG issues with research priorities and portfolio management. Here we explore ClearBridge’s latest thinking on ESG integration, the constant refinement of our understanding of the role of ESG in security analysis, portfolio construction and portfolio performance, and how this integration advances long-term value creation.