50. Sarah Bratton Hughes on Sustainable Investing for a Sustainable Future

Purpose and Profit with Kathy Varol

Sarah Bratton Hughes is the Head of ESG & Sustainable Investing for American Century Investments. American Century is not your standard investment firm. They have embedded purpose into their core, with a focus on supporting breakthrough medical research.

In the 1990s, the founder of American Century and his wife, Jim and Virginia Stowers, established and endowed the Stowers Institute for Medical Research from their personal fortune. This world-class biomedical research organization owns a controlling interest in American Century, and more than 40% of American Century’s profits go to the Institute to ensure ongoing funding for medical research. In 2015 American Century and the Institute received the Financial Services Cares Award for their roles in the fight against cancer.

Sarah Bratton Hughes has been a senior leader in the finance industry for the past 15 years. Before joining American Century, she worked at JP Morgan and Schroders.

In this episode we discuss:

● What ESG and Sustainable Investing means

● The 3 factors that are accelerating ESG and Sustainable Investing

● American Century’s unique business and ownership model (that funds medical research)

Key Takeaways:

● The impact American Century - and its employees - are able to have has two key components. Like any company, the first is based on their industry. As an investment firm, they create impact based on the businesses they choose to invest in. This can be positive or negative. On a basic level, investments act as a vote for the type of companies that will be around in the future. With the American Century focus on ESG and Sustainable Investing, they are including not just financial returns, but social and environmental returns in their investment approach. By doing this, the company is voting with its investments to shift what business looks like in the future.

● The second component is something most companies don’t think about or innovate around. It’s their unique business structure. The way Jim and Virginia Stowers restructured the ownership model of American Century to establish a sustainable funding mechanism for medical research that supports their values and benefits society. How a business is owned and structured has an enormous impact on the role it plays in society. Ownership models are an area that’s ripe for disruption. A more recent example is Patagonia. In 2022 Patagonia made Earth the only shareholder when the Chouinard family transferred all ownership to two new entities: Patagonia Purpose Trust and the Holdfast Collective. With this ownership move, every dollar that is not reinvested back into the company will be distributed as dividends to protect the planet. How would your relationship with your job change, if you knew its success was funding what you value most?

● There’s a lot of work to be done around changing the way we measure the success of an investment, and equally, the way we measure the success of a company. Collectively, we don’t have the measurement systems nailed down yet for ESG. This will take time. A lot of organizations are innovating new approaches. It’s important to find ways to come together and collaborate, to share what’s working and what’s not working, and to establish best practices. We don’t have the luxury of time for each company to invent the wheel from scratch.

References:

● Connect with Sarah on LinkedIn

● American Century Investments

○ Sustainable Investing at American Century

● Stowers Institute for Medical Research

● The UN’s Sustainable Development Goals

● Sarah’s article about the Dept. of Labor’s new rules on allowing firms to consider ESG factors when building 401k retirement plans.

Connect & Share:

If you enjoy the podcast, would you please consider leaving a short review on Apple Podcasts/iTunes? It takes less than 60 seconds, and it really makes a difference in helping to convince hard-to-get guests. I also love reading them!

If this episode resonated with you, I ask you to send it to a friend. Help bring even more visibility to these leaders that are using business as a force for good!

Subscribe to the Purpose and Profit newsletter to make sure you don’t miss future episodes.

This podcast is for you, the listener. I’d love to hear what resonated with you, or if you have a suggestion on who would be a great guest for this show. Please send me a note at [e-mail].