T Rowe Price has updated the investment process for more than 50 funds available to US investors to incorporate a new “pecuniary” approach to environmental, social and governance (ESG) investing issues.
According to a regulatory filing on the Securities and Exchange Commission’s website, 52 funds with a combined $404 billion in assets under management have been affected by the change.
The funds’ prospectuses have been updated to state: “The firm integrates pecuniary environmental, social, and governance factors into its investment research process. We focus on the ESG factors we consider most likely to have a material impact on the performance of the holdings in the fund’s portfolio.”
Funds affected include the $67.5 billion T Rowe Price Growth Stock Fund, the $38.3 billion T Rowe Price New Horizons Fund, and the $31.2 billion T Rowe Price Value Fund.
In the company’s most recent ESG annual report, Rob Sharps, head of investments and group CIO, said that T Rowe Price had been building out its responsible investing research capability since 2017, and would continue to expand the incorporation of ESG factors into its product offering.
“The value that a proactive and systematic ESG integration process brings is to help investors more clearly identify long-term trends and how companies or other issuers are positioned against them,” Sharps said.
“It also helps us identify companies that are generating profits at the expense of other stakeholders–a business strategy that will rarely be successful over the long term.”
He added that T Rowe Price had found that “heightened ESG interest is impacting our interactions with our clients, the companies in which we invest, and regulators”.
“Our discussions with companies and regulators have mainly focused on corporate disclosure,” Sharps explained. “We have found that many of our investee companies are looking for guidance on ESG reporting – so many that we established a seminar for investor relations professionals on the topic.
“We think all market participants can benefit from the implementation of more globally consistent and standardized environmental and social disclosure.”
The news follows the announcement from research and analytics provider Morningstar in November that it had fully integrated ESG data into its processes.