ESG has become an increasingly contentious investment approach, with several states issuing bans on public ESG investing and thus requiring judges to review the legality of restrictions on ESG practices. Furthermore, a late 2023 SEC rule cracked down on “greenwashing,” or deceptive marketing practices that mislead investors into believing a fund has greater ESG strategies or holdings than it actually does. Firms are thus hesitant and cautious when making public claims about their strategies and investments. CI’s recent April Asset Management Monitor Investor ESG positioning report examines how firms integrate ESG content into its product pages, investment framework and corporate governance information. The report indicated that most firms tie ESG into their investment framework in lieu of highlighting specific products as ESG-focused or sustainable, perhaps following the Name Rule that targets greenwashing. Firms tend to focus ESG as sustainability rather than focus on social or governance elements, but typically highlight Diversity, Equity and Inclusion (DEI) efforts when promoting social elements.

Investment framework integration

Most firms offer investment strategy or capability pages that discuss the firm’s approach, either at a broader level or a more granular level that covers asset classes and vehicle types. Firms tend to leverage these pages to expand upon their commitment, or general approach, to ESG investing. Some firms discuss their general investment approach or framework within “About Us” pages that highlight its history and how its fund management has evolved to the present day. These pages provide a convenient opportunity for firms to integrate a brief discussion of ESG investing, as they can briefly mention sustainability or ESG investing in the context of their entire investment framework without providing explicit detail of specific funds or methodologies. Firms still opt to do this, however, using sustainable investing strategy pages to highlight fund selection processes, criteria, screening and other ways that they might determine what constitutes a sustainable company.

American Funds does not label any products as ESG on its product list pages but takes care to highlight how it integrates sustainable investing into its investment framework, which it calls the Capital System. It also offers a dedicated ESG investing page that focuses on ESG as an investment strategy and details its research methodology as well as proxy voting process while explaining to investors how this process fits into the Capital System, suggesting ESG investing holds a spot in its overarching investment framework.

American Funds ESG Fueled by the Power of Three Page

ESG positioned as sustainability

Although ESG goes beyond just environmental issues, many firms focus heavily on the first letter of the acronym and position ESG content as “sustainable” investments, or they may even use ESG and sustainability interchangeably. While a fund that invests in biodegradable products may be focused on sustainability, a firm that focus on selecting companies with diverse corporate governance structures may not be considered “sustainable” in the traditional sense. This usage might be unclear at times, but for firms who focus exclusively on environmental investing, it suffices.

Some firms, such as Calvert, use buzzwords related to ESG. These words may not have ESG-related meanings outside of an asset management context, but investors will likely catch on to terms like “responsible” and “impact” to signify ESG investing. Calvert, however, does not shy away from the implications of sustainability. The firm includes an Impact Tool on its site that allows investors to gauge how certain funds can help to reduce carbon emissions, landfill waste and other environmental concerns.

Calvert What’s Your Impact Tool Page

DEI as the social element of ESG

For the Social component of ESG, firms typically offer some kind of DEI content—either as a dedicated page or section on an About Us page—that highlights the firm’s commitment to establishing a diverse workforce internally while also representing the primary focus of the S in ESG. Some firms also include subsections like community engagement or company organizations to further establish their commitment through proof of concept. These topics showcase firms’ community volunteer efforts and specialized groups to provide support to underrepresented groups in asset management like female, Black or Hispanic employees. DEI pages allow firms to avoid explicit mentions of sustainability while still expressing a commitment to ESG, although this commitment may be less obvious to investors who do not bother to read the firm’s About Us pages and simply read product-focused pages.

American Century offers investors a robust Diversity, Equity and Inclusion page that goes beyond standard DEI pages to indicate ways in which the firm implements a DEI framework into its workplace culture. The firm includes a Learn, Unlearn and Relearn section that expresses how the firm attempts to encourage employees to learn about different experiences, unlearn bias and relearn behaviors. While some firms may claim to be committed to DEI, American Century provides specific ways in how it attempts to change culture, indicating a serious and explicit commitment to DEI. The firm also lists resources for underrepresented groups, rather than simply promoting the existence of said groups.

American Century Diversity, Equity and Inclusion Page Learn, Unlearn and Relearn Section

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Emily Olson