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Integrating Fundamental Analysis with Environmental, Social and Governance Factors

Investors are paying increasing attention to the Environmental, Social and Governance (ESG) records of public companies, a focus that has been a constant at ClearBridge Investments for many years. In 2015, we formally recognized the importance of these factors to our investment process by establishing ESG ratings for every company covered by our research analysts. These ESG ratings are proprietary scores intended to signal to investment teams how well a company has executed its ESG practices.

With companies early on in their adoption of ESG practices, a primary motivation in publishing ratings is to engage companies and help them establish baseline ratings against which to measure their progress and communicate their accomplishments. We strive for our ratings to accurately reflect the most current sustainability efforts of the stocks we cover and they provide a framework to prioritize our one-on-one discussions with these companies.

ESG ratings, which support the concentrated position weightings we often take in companies, are the latest effort in our mission to drive positive corporate change, a mission that also includes making an impact through proxy voting and promotion of best practices.