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Our 2022 ESG engagement report’s main themes include:
- Transparency, which is key for improving data quality. As the importance of non-financial metrics increases due to client demand, more types of data—quantitative, qualitative, and spatial—are being integrated into the decision-making process to fully grasp environmental and social impacts and dependencies.
- Most companies adopt certain best practices, improving technical capabilities and disclosure language. Lagging issuers are at a disadvantage from the perspective of ESG-oriented investors, as asset managers will continue to conduct annual engagements to fulfill both the expectations of their clients and regulators.
- The energy transition is likely the most urgent step in mitigating climate change. Issuers are undertaking various projects which entail not only investing in the deployment of well-known renewable energy sources, but also smart electricity and gas grids that allow for efficient integration of low-carbon and renewable sources into the network.
- Climate change is interconnected with the biodiversity crisis. Commitments from the public and private sectors to curb biodiversity loss, as well as the dependencies and impact of business sectors on nature, affirm to us that it must be factored into portfolios.
- Societies around the globe are weathering violent and uncertain conditions related to health, safety, rule of law and the rising cost of living.
Achieving sustainability is dependent on finding a balance between the needs of three realms:
- The economy
As the climate and biodiversity crises, along with geopolitical volatility, are influencing all three, we have designed our approach toward engagements to encompass this complexity and deliver comparable intra- and inter-sectoral data. We seek to focus our ESG research on the specific factors that we believe are material to both investment performance and the investor community. We invite you to read about them in detail in this year’s report.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the portfolio’s value may decline. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. Franklin Templeton and our Specialist Investment Managers have certain environmental, sustainability and governance (ESG) goals or capabilities; however, not all strategies are managed to “ESG” oriented objectives.
IMPORTANT LEGAL INFORMATION
This report discusses ESG capabilities available at FTFI; however, not all strategies at FTFI have ESG-oriented objectives or utilize these capabilities.
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. All investments involve risks, including possible loss of principal.
Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.
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