A Differentiated Approach to ESG InvestingApr 9, 2018

KEY POINTS

ESG factors have always been integral to our research process, but we have more recently established a rigorous score-based framework for its analysis. This paper outlines what ESG is, our ESG methodology and how ESG is incorporated into our overall investment model.

Michael Hasenstab

Michael Hasenstab 
Executive Vice President, Portfolio Manager
Chief Investment Officer
Templeton Global Macro

Sonal Desai

Sonal Desai 
Senior Vice President, Portfolio Manager
Director of Research
Templeton Global Macro

Julie Moret

Julie Moret 
Head of ESG
Franklin Templeton Investments

Vivian Guo

Vivian Guo 
Research Analyst
Templeton Global Macro


Introduction

Information, data and research are the fuel for investment decisions. Over the years, as new information has emerged and evolved, investors have found innovative means to harness additional insights to help inform their decisions.

Today, forward-looking investors are turning to environmental, social and governance (ESG) analysis to complement existing research efforts.

ESG factors have always been integral to our research process, but we have more recently established a rigorous score-based framework for its analysis. This paper outlines what ESG is, our ESG methodology and how ESG is incorporated into our overall investment model.



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What Are the Key Risks?

The value of shares in the funds and income received from it can go down as well as up and investors may not get back the full amount invested. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The funds invest mainly in debt securities issued by government, government-related or corporate entities in any country and in derivatives. Such securities and derivatives have historically been subject to price movements, generally due to interest rates, foreign exchange rates or movements in the bond market. As a result, the performance of the funds can fluctuate over time. The funds may distribute income gross of expenses. Whilst this might allow more income to be distributed, it may also have the effect of reducing capital. Other significant risks include: credit risk, currency risk, derivatives risk, liquidity risk, emerging markets risk. For full details of all of the risks applicable to these funds, please refer to the “Risk Considerations” section of the fund in the current prospectus of Franklin Templeton Investment Funds.



Important Legal Information

This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares of the UK-domiciled Franklin Templeton Funds or Luxembourg-domiciled SICAV Franklin Templeton Investment Funds (“Funds”). Nothing in this document should be construed as investment advice. Opinions expressed are the authors’ at publication date and they are subject to change without prior notice.

Subscriptions to shares of the Funds can only be made on the basis of the current prospectus of the Funds and, where available, the relevant Key Investor Information Document, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter.

The value of shares in the Funds and income received from it can go down as well as up, and investors may not get back the full amount invested. Past performance is not an indicator or a guarantee of future performance. Currency fluctuations may affect the value of overseas investments. When investing in a fund denominated in a foreign currency, your performance may also be affected by currency fluctuations.

An investment in the Funds entails risks which are described in the Fund’s prospectus and, where available, the relevant Key Investor Information Document. In emerging markets, the risks can be greater than in developed markets. Investments in derivative instruments entail specific risks that may increase the risk profile of the Funds and are more fully described in the Fund’s prospectus and, where available, the relevant Key Investor Information Document. All or most of the protections provided by the UK Regulatory System will not apply to Franklin Templeton Investment Funds (SICAV) Investors.

No shares of the Funds may be directly or indirectly offered or sold to residents of the United States of America. Shares of the Funds are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making any plans to invest.

Any research and analysis contained in this document has been procured by Franklin Templeton Investments for its own purposes and is provided to you only incidentally. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a Fund’s holding at any one time. Given the rapidly changing market environment, we disclaim responsibility for updating this document.

References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.

Please consult your financial adviser before deciding to invest. A copy of the latest prospectus, and if available for this product the Key Investor Information Document, the annual report and semi-annual report, if published thereafter can be found on our website.

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