American Century Investments Expands in ESG
Sarah Bratton Hughes, head of environmental, social and governance and sustainable investing at American Century Investments, has already had a landmark 2022 as she changed jobs and had her second child.
In January 2022 American Century announced the appointment of Bratton Hughes in her new role with responsibility for driving and executing the firm’s sustainable investing strategy; the management of its ESG research platform and active ownership practices; and leading the ESG and investment stewardship team. Her team will serve as the center of ESG expertise for all the firm’s investment teams, implement ESG research and training, develop ESG assessment tools, manage the ESG engagement and proxy voting protocol and drive sustainable investment initiatives and client solutions.
Bratton Hughes joined American Century Investments from Schroders, where she had worked for more than a decade, most recently as global head of sustainability solutions.
She told Markets Media : “I was attracted to the structure of the role at American Century as it is very much investment-led. The firm is taking this role seriously as I report into the chief investment officer and I am on the investment leadership team. “
In addition American Century Investments is 40% by the Stowers Institute for Medical Research, a non-profit basic biomedical research organization set ip by its founder Jim Stowers, Jr. The asset manager distributes more than over 40% of its dividends to the institute which has received payments of $1.8bn since 2000.
This structure is one factor which differentiates American Century amongst asset managers in sustainable investing according to Bratton Hughes. She said: “Our tagline is that sustainability really is in our genes due to our unique business model. No other asset manager is donating 40% of their profit to fund medical research.”
American Century is also a size where Bratton Hughes feels she can have a real influence while being large enough to scale. In November 2021 the firm said it achieved a significant milestone surpassing $250bn in assets under supervision.
Bratton Hughes explained that when Victor Zhang, chief investment officer at American Century, called her at Schroders she had no intention of moving, but she left for family reasons and to spread her wings after more than a decade at the UK asset manager. She gave her notice while pregnant and explained that it was reassuring from a cultural perspective that Zhang explained the firm was hiring her for a career, so maternity leave was not an issue.
Zhang said in a statement: “As we look ahead, we want to accelerate our sustainable investing efforts and believe Sarah will help take us to that next level. In hiring Sarah, we have added to our team a talented ESG and sustainable investing leader with a distinguished reputation in the industry.”
In May 2021 American Century had created a sustainable investment council, chaired by senior portfolio manager Patricia Ribeiro and also appointed Matt Oldroyd as head of corporate sustainability.
Ribeiro has been with the asset manager since 2006 and leads a team overseeing ESG-integrated and impact strategies focused on emerging markets. Oldroyd has been with American Century Investments for more than 20 years and was previously head of client portfolio management.
Bratton Hughes has also joined the sustainable investment council which she said was very important so ESG is investment-led. She added: “We have created a sub-series of working groups across key initiatives to ensure that we are at the cutting edge and best in class.”
At American Century Bratton Hughes has identified five large themes which are expected to dominate the next 10 to 20 years, with associated sub-trends, which are aligned to funding gaps for the United Nations Sustainable Development Goals. In American Century’s ESG outlook in March 2022 Bratton Hughes highlighted that the annual funding gap to achieve the UN SDGs is $2.5 trillion and public capital markets will need to provide between $1 trillion and $1.5 trillion.
Due to the asset manager’s ownership model, healthcare will continue to be an important theme alongside empowerment, sustainable living, environment and digitalization.
“I was really passionate about creating a top down thematic framework to acknowledge that many ESG issues are interconnected and cannot be solved with just the E, S or G alone,” she added. “The themes are driving our proprietary research.”
The themes will also drive engagement, both by American Century’s team and by the firm’s investors. American Century is structured as a series of boutiques so each investment team will integrate the framework within their own philosophy and process. Bratton Hughes said the framework should be integrated across 100% of assets by the end of this year.
In 2019 American Century rolled out Avantis Investors, an exchange-traded fund issuer. Avanti Investors announced the launch of its first three ESG ETFs in March 2022 – the Responsible U.S. Equity ETF; the Responsible International Equity ETF; and the Responsible Emerging Markets ETF
Eduardo Repetto, Avantis chief investment officer, said in a statement: “We have priced these strategies in line with our conventional equity ETFs because we think that investors hoping to incorporate their ESG considerations into their investment portfolios should not have to endure higher fees.”
It is the first time that Bratton Hughes will be involved in the ETF market. She said: “Eduardo completely embraces sustainable investing so it’s been great to work with them. It’s a positive for me as during your career you always want to be adding different tools to your tool belt.”
American Century expects sustainable investing this year to be propelled by rising demand for investments that incorporate ESG factors, favorable economics and supportive policies and regulations. For example, the European Union is implementing a taxonomy for sustainable activities while the US Securities and Exchange Commission has proposed corporate ESG disclosures.
Bratton Hughes said it will be a game changer if the U.S. Department of Labor allows retirement plans to incorporate ESG-related considerations into their investing.
“In our view, the most influential change will be a shift in focus away from sustainable investing as just a risk mitigator to an alpha generator,” she added. “We are calling this concept Alpha Plus, as we believe sustainable and impact strategies have the potential to provide market-beating returns coupled with societal and environmental alpha.”