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™ .
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 50+ data sources.
Materiality matters
Seema Suchak, head of ESG sector research, discusses materiality.
Our ESG framework
Jess Ground, global head of ESG, discusses how we integrate ESG into our investment approach, The Capital System™.
Frameworks in action: Mining
Frank Beaudry, analyst, discusses how the investment frameworks help evaluate material ESG issues in the mining sector.
MONITORING PROCESS
How we identify, evaluate and assess
To complement our fundamental, bottom-up research, our monitoring process leverages multiple data providers to surface market views of potentially material ESG risks.
Identify
Our monitoring process uses third-party data* (where available) to identify external views of ESG risks for our corporate and sovereign holdings.
Flag
A subset of issuers with potentially higher ESG risk is flagged automatically in Ethos** for further review by the relevant investment analysts.
Evaluate
For flagged issuers, investment analysts share perspectives on potentially material ESG risks and evaluate whether those affect their investment thesis.
Action
Where action is needed, ongoing monitoring and additional engagement are the most frequent outcomes.^
Want more on monitoring?
Learn how our process works in the real world.
ENGAGEMENT & PROXY VOTING
Deep analysis on hard-to-measure ESG issues
We have long-standing relationships with company management that allow us to have meaningful dialogue about managing material ESG risks and opportunities.
ENGAGEMENT
Our investment group had 1,100+ ESG-related engagements across 650+ companies in 2023.
INVESTOR-LED
Investment professionals partner with our stewardship team to ensure companies hear consistent messages.
TRANSPARENCY
ESG engagement goals and discussion outcomes are documented to measure progress.
PROXY VOTING
Our dedicated team analyses each proxy with final outcomes decided by investment professionals.
ESG resources
Capital Group stewardship report
Want to know more about Capital Group's engagement and proxy voting efforts? Explore case studies, key data and more in our latest stewardship report.
Want to stay ahead of the curve?
Explore the latest research and insights in our ESG perspectives library.
Your gateway to all things ESG at Capital Group
*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 (government) 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 and World Bank Worldwide Governance Indicators. Historically, our methodology has most heavily weighted governance metrics. We have viewed “G” as typically more material for sovereigns (government) because governance indicators can provide important signals about a country’s ability to meet its financial obligations. In the future, the relative importance of “E” and related “S” risks may increase.
**Capital Group's in-house tool, Ethos, helps enable investment analysts to identify areas of ESG risk and conduct rigorous security-level analysis and peer comparison.
^While monitoring and further engagement are the most frequent outcomes, divestment is a possibility.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.
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.