Legg Mason: Active Expertise & ESG

Investing with a purpose has garnered lots of attention of late.

Reviewed by: Legg Mason
Edited by: Legg Mason

[This industry perspective is sponsored by Legg Mason.]

ESG (environmental, social and governance) investing, SRI (socially responsible investing), socially conscious investing, impact investing—call it what you will, investing with a purpose has garnered lots of attention of late. But is it warranted? Asked just a few years ago and the answer would have been, probably not. Asset growth in ESG-related ETFs in the U.S. simply did not support the narrative. But that dynamic appears to be changing.

Source: Morningstar Direct. Represents ETFs in the Morningstar Socially Conscious Category. As of 2/28/2019.

While ESG strategies still make up a small percentage of the $3.5 trillion U.S. ETF market, assets invested in them have more than doubled since 2016. The number of ESG ETFs has grown as well, with just 17 U.S.-based ETFs in 2009 and 85 today.

Part of this growth can undoubtedly be attributed to the increase in wealth transfer from older generations to more socially and environmentally conscious generations like Generation X and millennials. With the potential of greater occurrence on the horizon, tail winds behind the growth of ESG investing look poised to accelerate. Investors have taken notice and are looking carefully at this once-beleaguered segment of the investing market.

Clearbridge Investments, a long-standing affiliate of Legg Mason, has experience in the ESG space that dates back decades, being one of the pioneers of actively managed ESG strategies. ClearBridge integrates sector-specific ESG considerations into its fundamental research process that guides stock selection and regularly engages with companies to share and promote ESG best practices and monitor ongoing improvements in their financial and sustainability profiles. 

While there are many ESG ETFs to choose from, there are few that are actively managed. Investors may find ClearBridge’s active expertise and strong ESG heritage compelling as they seek to enter this growing segment of the ETF investment landscape.

ClearBridge Large Cap Growth ESG ETF (LRGE)

  • Distinctive. The largest actively managed large-cap growth ETF* with the added benefits of ESG.
  • Actively Managed. Fundamentally driven, focused mandate that emphasizes sustainability, diversified sources of growth, and attractive valuations with an ESG focus and rigorous re-examination process.
  • Dually Purposed. Professionally managed approach to ESG growth investing allows investors to simultaneously pursue capital appreciation and social good.

ClearBridge Dividend Strategy ESG ETF (YLDE)

  • Distinctive. The only actively managed dividend-focused ESG ETF.*
  • Actively Managed. Bottom-up stock selection that emphasizes dividend growth, strong balance sheets, dominant market positions, and attractive valuations with an ESG focus and rigorous re-examination process.
  • Dually Purposed. Professionally managed approach to ESG dividend investing allows investors to simultaneously pursue financial return, income growth and social good.

For more information including risks and fund performance for these and other Legg Mason ETF offerings, please visit LeggMason.com/ETFs.

*Source: Morningstar Direct. As of 2/28/2019.

What should I know before investing?

The Funds are newly organized, with a limited history of operations. Equity securities are subject to price fluctuation and possible loss of principal. In rising markets, the value of large-cap stocks may not rise as much as smaller-cap stocks.

However, small-cap and mid-cap companies involve a higher degree of risk and volatility than investments in larger, more established companies. Investments may also be made in depository receipts and other securities of non-U.S. companies in developed and emerging markets which involve risks in addition to those ordinarily associated with investing in domestic securities, including the potentially negative effects of currency fluctuation, political and economic developments, foreign taxation and differences in auditing and other financial standards. These risks are magnified in emerging markets.

The fund’s environmental social and governance (ESG) investment strategy may limit the types and number of investment opportunities available to the fund and, as a result, may underperform funds that are not subject to such criteria. Dividends may fluctuate and a company may reduce or eliminate its dividend at any time. Active management and diversification do not ensure gains or protect against market declines. Distributions are not guaranteed and are subject to change.

Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

If you are neither a resident nor a citizen of the United States or if you are a non-U.S. entity, a fund’s ordinary income dividends (which include distributions of net short-term capital gains) will generally be subject to a 30% U.S. federal withholding tax, unless a lower treaty rate applies. For further information, please see each fund’s prospectus, which is available on the website www.leggmason.com. Redemption payments will be affected within the specified number of calendar days following the date on which a request for redemption in proper form is made. For more information, please see the ETF’s statement of additional information (SAI) which can be found on www.leggmason.com.

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Before investing, carefully consider a Fund’s investment objectives, risks, charges and expenses. You can find this and other information in each prospectus, or summary prospectus, if available, which is available at www.leggmason.com. Please read it carefully.