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A Collaborative Approach to ESG

May 2019
Maria Elena Drew , Director of Research, Responsible Investing

DONNA ANDERSON: The term responsible investment in our industry has come to cover what we would call three different categories. There are environmental issues that companies face, social issues, and corporate governance issues. Together these issues are often called ESG, or on a higher level responsible investment.

The way we have organised our research in this area at T. Rowe Price is we group environmental and social issues together and corporate governance as a separate pillar, so we view these as side by side pillars under the responsible investment umbrella.

The reason to separate them is there's a cadence to corporate governance. Every equity security has to have a shareholder meeting every year, so there's a certain annual cadence to that. There's also a lot better disclosure in markets around the world about governance issues relative to environmental and social issues, so they are related certainly, but they are distinct specialties in our view.

MARIA DREW: At T. Rowe Price the responsible investing, or RI, team are subject matter experts on environmental and social issues. We work in tandem with our governance team to support our analysts and portfolio managers in ESG integration.

A core tenant of our ESG integration philosophy is that it is most effective when done by analysts and portfolio managers. As such our team works to provide the right information and tools so that our investors can easily understand which environmental and social factors could impact the performance of an investment.

: When I think about the match between the ESG program we have and the core values of this firm, one clear link is we're very client focused at T. Rowe Price and our clients are deeply interested in matters of environmental, social and governance considerations. Whatever our clients are interested in we're going to be interested in.

The other way I would say is our dedication to fundamental research. I mean, this is a firm built on core research capability.

MARIA DREW: To help our analysts and portfolio managers consider the impact of environmental and social factors, the RI team conducts analysis on individual securities as well as the wider portfolio. It also assists with company engagement. At T. Rowe Price our central mission is to help our clients reach their long-term financial goals.

Consistent with that objective, we have an obligation to understand the long-term sustainability of the companies and issuers in which we invest.

This is why environmental, social and governance factors are a consideration in our investment approach.




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