How ESG fits into MFS LifePlan Funds

Our approach brings ESG integration into our research process as well as proxy voting and issuer engagement, and helps us to identify companies that we believe exhibit long-term competitive advantages.

ESG integration works its way into our target date suite. For our investment personnel to make effective investment decisions, all relevant material factors are considered when evaluating securities and constructing portfolios. ESG information represents an additional dataset, which enables a more holistic understanding of risks and opportunities that could affect the long-term viability of a business. 

The power of engagement

It is our view that stewardship is a critical component of ESG integration. We believe influencing real-world outcomes is more likely to be achieved through strong relationships and regular, mutual dialogue with the companies we invest in rather than through taking an exclusionary approach. ESG topics are some of many topics we discuss with companies. Our goal when engaging is to exchange views on any fundamental topic that represents a material risk for companies or issuers, and to effect positive change on such issues. We believe that long-term-oriented asset managers who constructively engage companies on these topics can positively influence a multitude of better business practices, which we believe may ultimately accrete value.

While we recognize the appeal of seeking to exert influence through exclusions, we view this approach as an abdication of responsibility, and feel that ESG-labelled products based on exclusion and divestment are misaligned with our clients’ objectives and our stated purpose of creating value. Moreover, we believe an exclusionary approach can hinder future returns by seeking to avoid low-rated companies with improving ESG characteristics, or certain sectors, such as energy. As is true in all aspects of investing, we can’t simply avoid every material ESG risk that may arise. Instead, we must focus our efforts on engaging with the companies we invest in to ensure our portfolios are well positioned to manage those risks, while also aiming to take advantage of ESG opportunities.

MFS LifePlan funds incorporate ESG

Security-level recommendations by MFS analysts reflect integration and assessment of ESG factors in addition to other material fundamental factors. Recommended securities will often make their way into our equity and fixed income portfolios. The LifePlan funds, as a fully proprietary suite, are 100% invested in a broad range of MFS portfolios. As a result, ESG integration is embedded within the target date portfolios, not because we target a specific long-term outcome or ESG rating, but because ESG is integrated into our research process in an effort to maximize risk-adjusted returns.

MFS LifePlan Funds — What’s Under the Hood*

*As of December 31, 2023.

Key takeaways for plan sponsors to consider

• Screen with care: Consider the extent to which your manager employs exclusions and how this might affect the underlying characteristics of the portfolio. Managers’ tools of influence should be aligned with the overall values of the organization and should be working in the best interest of portfolio returns and their fiduciary duty. 
• Process over product: Consider the extent to which your managers incorporate ESG as part of their overall investment process. Are the investment decision makers incorporating ESG, or is there a separate team of individuals responsible for managing ESG considerations? 
• Harness active ownership: Engagement is a powerful way to influence companies. Managers who take this approach should be able to demonstrate that they are regularly and actively engaging with companies on ESG issues. They should be able to articulate their objectives and describe their rationale for choosing them, as well as be able to provide examples of engagements they have had with companies.

The views expressed are those of MFS and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any other MFS investment product. No forecasts can be guaranteed.

Please keep in mind that a sustainable investing approach does not guarantee positive results and all investments, including those that integrate ESG considerations into the investment process, carry a certain amount of risk including the possible loss of the principal amount invested

MFS may consider environmental, social, and governance (ESG) factors in its fundamental investment analysis alongside more traditional economic factors where MFS believes such ESG factors could materially impact the economic value of an issuer. The extent to which any ESG factors are considered and whether they impact returns will depend on a number of variables, such as investment strategy, the types of asset classes, regional and geographic exposures, and an investment professional’s views and analysis of a specific ESG issue. ESG factors alone do not determine any investment decision. MFS may incorporate ESG factors into its engagement activities when communicating with issuers but these engagement activities will not necessarily result in changes to any issuer’s ESG-related practices.

Issued in Canada by MFS Investment Management Canada Limited. MFS Institutional Advisors, Inc. provides certain sub-advisory services to all MFS Investment Management Canada Limited portfolios, including discretionary investment management for non-Canadian portfolios or components of portfolios.

Pursuant to a sub-advisory agreement executed between MFS Institutional Advisors, Inc. and MFS Investment Management Canada Limited, MFS provides investment advice pursuant to statutory exemptions or regulatory relief, as applicable. Such advice is being rendered outside of Canada and certain members of the team may not be registered in any capacity with any Canadian securities regulatory authority.

Unless otherwise indicated, logos and product and service names are trademarks of MFS^® and its affiliates and may be registered in certain countries.

Important Risk Considerations: Target date funds may not achieve its objective and/or you could lose money on your investment in the fund. There is no guarantee that the fund will provide adequate income at and through your retirement. You may experience losses near, at, or after the target date. There is no guarantee of the fund’s principal value, including at the target date, or that the fund will provide adequate income at and through your retirement.

Keep in mind that all investments carry a certain amount of risk including possible loss of the principal amount invested.