By Kathleen Anderson, Director, Client Portfolio Manager, ClearBridge Investments
(Sponsor Content)
Considering how much COVID-19 has dominated our thoughts over the past 18 months, it is important to remember the significant challenges the world was facing prior to the pandemic. Aging demographics, growing inequality, and of course, the massive threat of climate change remain major concerns for global leaders, and that holds true in the investment industry too.
Sustainable investing and a focus on the environmental, social and governance (ESG) ratings of companies has become an important consideration for investors in recent years. Our firm, now part of Franklin Templeton following its acquisition of Legg Mason last year, was a signatory to the UN’s Principles for Responsible Investment in 2008, and first introduced ESG-integrated portfolios in 1987. Back then, responsible investing was a niche part of the industry, but attitudes have shifted considerably in the years since. At ClearBridge Investments, ESG factors are fully integrated into all our investment strategies after we formally introduced ESG ratings in 2014.
That includes the new strategy available to Canadian investors, Franklin ClearBridge International Growth Fund and Franklin Clearbridge Sustainable International Growth Active ETF (FCSI).1
With this actively managed solution, the portfolio managers target international stocks they believe are mispriced by markets, and use a fundamental, bottom-up approach to invest in quality businesses across the growth spectrum (Structural, Secular, Emerging) (see chart below). Quality in this case means companies with strong balance sheets and good management, offering unique products or services, or having strong niche positions locally or globally. Portfolio construction is also governed by a strict buy and sell discipline, with all capitalization, sectors and regions represented among the fund’s 40–70 names.
The case for looking outside of North America is also strong right now as the vaccine rollout gathers pace internationally. As always, history offers us some guidance.
International equities outpaced U.S. stocks the decade before the financial crisis
The U.S. has been the undisputed global leader on equity performance since the Global Financial Crisis of 2008. Prior to that, international equities outperformed the U.S. for close to a decade, showing that geographic leadership tends to persist over a long period.