2021 Impact Report

Mid Cap Growth Impact ETF

MID is different from traditional ETFs. 
Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment.

  • You may have to pay more money to trade the ETFs' shares. These ETFs will provide less information to traders, who tend to charge more for trades when they have less information.
  • The price you pay to buy ETF shares on an exchange may not match the value of the ETF's portfolio. The same is true when you sell shares. These price differences may be greater for these ETFs compared to other ETFs because it provides less information to traders.
  • These additional risks may be even greater in bad or uncertain market conditions.
  • MID, ESGY and ESGA will publish on their website each day a "Proxy Portfolio" designed to help trading in shares of the ETF. While the Proxy Portfolio includes some of the ETF's holdings, it is not the ETF's actual portfolio.

The differences between these ETFs and other ETFs may also have advantages. By keeping certain information about the ETFs secret, these ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETFs' performance. If other traders are able to copy or predict the ETFs' investment strategy, however, this may hurt the ETFs' performance.

For additional information regarding the unique attributes and risks of these ETFs, see the additional risk discussion at the end of this material.

Explore     Letter to Shareholders  |  How We Invest for Impact  |  Impact Results  |  Climate Change  |  Download the Full Report

The COVID-19 pandemic has rattled business models, created immense humanitarian challenges and spurred unprecedented policy responses. It has also highlighted the importance of sustainability, ranging from the health care system that was on the front lines to our homes where we took sanctuary. While the tasks ahead of us are large, young and innovative companies have risen to the challenge and positively impacted the world.

Rob Brookby, Senior Portfolio Manager

Letter to Shareholders 

We are pleased to share our inaugural Mid Cap Growth Impact ETF Impact Report. The time between the July 2020 inception of the fund and its one-year anniversary can be characterized by one word: disruption.

The COVID-19 pandemic has rattled business models, created immense humanitarian challenges and spurred unprecedented policy responses. It has also highlighted the importance of sustainability, ranging from the health care system that was on the front lines to our homes where we took sanctuary. While the tasks ahead of us are large, young and innovative companies have risen to the challenge and positively impacted the world.

Our investment philosophy has helped us chart a course through this turbulent environment: We invest in innovative businesses that we believe have strong balance sheets, are making a positive societal impact and are fueled by durable investment themes.

We believe our investment decisions can both make the world a better place and offer compelling financial returns. These goals are not mutually exclusive. We endeavor to add long-term outperformance by investing in innovative companies that sit at the nexus of profit and purpose.

The United Nations Sustainable Development Goals (U.N. SDGs) guide our framework for assessing a company’s impact.* In this report, you will find examples highlighting unique businesses that contribute to meeting these goals.

We also seek companies that demonstrate rigorous environmental, social and governance (ESG) risk management practices.

The confluence of ESG risk management practices and businesses that support the SDG goals provides fertile ground for creating the fundamental changes needed to support a more equitable, healthy and sustainable future.

Providing investment solutions with this gearing is innate to American Century’s corporate DNA. By distributing more than 40% of our dividends to the Stowers Institute for Medical Research, we enable our clients to directly support breakthrough medical research and contribute to the global fight against gene-based diseases. This is how we and our clients become a powerful force for positive impact.

As we reflect on our fund’s first year, we are proud of the contributions the companies we have invested in have made to the positive side of the past 12 months’ widespread disruption.

We will continue to seek and invest in innovative, disruptive companies that challenge the status quo, drive industry change and help lead us to a brighter future.

Thank you for partnering with us in this important undertaking.

*Developed by a global team of industry and government leaders and adopted by all 193 U.N. member states, the SDGs include 17 goals and 169 attendant targets aimed at solving some of the world’s most pressing problems by 2030. The goals include eradicating poverty, protecting environmental resources, and achieving gender and income equality.

How We Invest for Impact

Businesses with the resources and expertise to innovate and provide creative solutions to social issues can help bring about positive systemic change. By investing in these companies, we, too, can play a role in social transformation.

Accepting the Challenge

Innovation Accelerates Impact

Transforming society demands committed collaboration among diverse stakeholder groups. The U.N. estimates that we must invest a staggering $5 trillion to $7 trillion annually to attain the 17 SDGs set forth in its Agenda for Sustainable Development by 2030.

Achieving these global goals requires the human, technical and financial resources of governments at all levels and those of public and private businesses.

Innovation harnesses human ingenuity in a capital-efficient way to address these societal demands head-on. Small and midsize companies are attracting talent across various industries from technology to energy and marrying them with advances in research and development to both disrupt and bridge old-world industries to a more sustainable future.

We believe mid-cap companies with durable business models at the foothills of impactful investment themes will help the world attain the SDG goals while also generating sustainable growth in revenue and earnings.

We Believe Change Is Possible

The U.N. SDGs are broad goals that affect businesses, investors, governments, nonprofits and policymakers. It’s our view that investors make the best contributions to these goals by focusing on areas in which their investment dollars can add meaningful value.

Each security in the fund is mapped to one or more SDGs, so investors can see how individual securities link to the global effort for a sustainable future.

Using the Sustainable Development Investments (SDI) taxonomy developed by Dutch pension investors PGGM and APG, we group the SDGs into five specific investment themes that provide pathways to achieving impact.

1
Health Care

Provide access to affordable health care, medical innovation, and more productive and efficient equipment, services and software

2
Sustainable Living

Achieve harmony with ecosystems, accelerating circular economy transition and providing access to a better quality of life, food security, efficient energy and transportation options, and basic services

3
Technological Progress

Develop paradigm-breaking technological innovation that could transform the global economy and improve society

4
Empowerment

Enable equitable growth by democratizing the technological advances and human ingenuity to empower billions of people and millions of small businesses

5
Environmental Protection

Drive positive environmental impact from biodiversity loss prevention to climate change mitigation to the transition toward a lower-carbon energy system

Impact Generation Framework

We believe an asset manager can offer both dedication to investment performance and an opportunity to make a positive impact in the world. In our view, companies with enduring growth backed by impactful thematic drivers have the potential to outperform as they compound shareholder value over long periods. As these companies attain their fundamental growth objectives, they also tend to create meaningful social change. When we find companies that complement these characteristics with positive societal change, we consider including them in our Mid Cap Growth Impact ETF. 

Our goal is to invest in companies that not only generate a financial return but also fuel societal change by contributing to the United Nations Sustainable Development Goals.

Core Philosophical Tenets

  • Deploying a thematic approach focused on identifying themes that are driving positive social change.
  • Recognizing that key events or inflection points which result in business improvement can help indicate a shift in fundamentals (i.e., competitive advantages, business models, management changes, corporate governance).
  • Focusing on high-quality companies, which we define as businesses with durable franchises and strong management teams, leading products or what we believe to be superior business models.

The framework also consists of five impact themes. The SDGs align to one or more themes to help enable investors recognize how an individual company links to sustainability. Investment candidates must exhibit accelerating growth characteristics alongside current or projected revenue stream alignment with one or more SDGs underpinning the themes. Using a proprietary ESG scoring system, we then evaluate each company to help identify and manage any potential risks to impact.

To ensure proper SDG alignment, our portfolio managers reference the SDI taxonomy to help determine whether a company addresses one or more of the SDGs. Our analysts may also utilize a variety of resources, including mapping tools and direct company engagement, to further validate SDG alignment.

Our process culminates in an impact thesis for each company that explains current or projected SDG alignment in combination with the company’s fundamental growth profile.

Impact Thesis

Businesses with the resources and expertise to innovate and provide creative solutions to social issues can help bring about positive systemic change. By investing in these companies, we, too, can play a role in social transformation.

Investment Thesis

Idea Generation and Fundamental Analysis

• Identify companies exhibiting improving business fundamentals, relative strength and valuation

• Assess ESG risks and opportunities

• Validate the company’s SDG exposure

Measuring Impact by Applying the Theory of Change*

Input

Identify company resources used to achieve impact

Output

Identify products or services that lead to impact

Outcome

Articulate or quantify impact enablers

Impact

Measure actual or projected contribution to SDGs

Measuring impact continues to be a challenge. This is especially true in mid-cap companies where sustainability disclosure may be limited. This challenge offers an opportunity for investors to conduct deep-dive impact research and pursue active engagement with companies. As part of our focus on continuous improvement, we will continue to review our impact approach against industry standards and best practices to ensure alignment with our processes. We will also continue to work with our investee companies to improve the availability and quality of our reporting.

*The Theory of Change is a methodology for impact evaluation under IRIS+, a generally accepted system for impact investors to measure, manage and optimize impact. 

Impact Results

We believe companies have the potential to generate a financial return and fuel positive societal change. 

Total Portfolio Impact 

By investing with the intention of helping advance the SDGs, our investors have played a critical role in creating a more inclusive society in emerging markets. Many of the portfolio holdings impact more than one SDG, so numbers will add up to more than 100%.

How the Portfolio Impacts Each Theme

Based on portfolio allocation to each company and its primary themes

Data as of 06/30/2021. Source: American Century Investments, FactSet.

Impact in Action

Health Care

Help more than 1 million diabetes patients save hundreds of dollars per month and improve their lives with 24/7 glucose monitoring

Sustainable Living

Recycle/reuse 400 billion plastic drink bottles and 1 billion liters of water

Empowerment

Democratize financial services for 36 million people and more than 4 million small businesses

Technological Progress

Deploy solar products to generate 6 gigawatts (GW) of energy and provide 3.5 million homes with clean electricity per year

Environmental Protection

Provide more efficient HVAC systems that help eliminate 20 million metric tons of carbon dioxide equivalent from their products

Explore More

Download the full 2021 Mid Cap Growth ETF Impact Report for more information on these topics. 

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Health Care

Good health is key to leading a happy and productive life. In accordance with U.N. SDG 3—ensuring healthy lives and well-being—we have identified four health care themes that can benefit diverse global populations. 

New or innovative treatments for diseases, including cancer

More productive medical equipment, services and software

Greater access to medicine and health care services

New solutions for lowering health care costs

Health care is a natural area of investment focus for American Century because our firm deploys 40% of its profits to support research into improving health care outcomes.

Critical Challenges

• Almost 8 million youth died globally of preventable disease in 2019, and the pandemic accelerated this trend.1

• Nearly 2 billion people still have no access to basic medicines, and more than half the global population lacks access to essential health care. 2

• Nearly 150 million people have been pushed into extreme poverty due to health expenses, and 800 million people spend at least 10% of their household budgets on health-related costs.3

Sustainable Living

We believe the key to sustainable living is attaining growth and development while improving quality of life in a responsible way. This theme seeks to find ways to replace existing and outdated systems with more environmentally friendly, efficient and cost-effective alternatives.

Electric vehicles, power-storing infrastructure and pooling services

Efficient and more resilient infrastructure that enables a better quality of life

Smarter, sustainable materials reducing the carbon footprint of existing systems

Increased recycling of products to reduce waste and energy usage

Critical Challenges

• Transport accounts for nearly 30% of end-use energy consumption.4

• Only 8.6% of the 100+ billion metric tons of materials that enter the economy are reused.5

• At this pace, we will need three planet earths’ worth of resources to meet our needs by 2050.6

• About one-third of all food produced for human consumption is lost or wasted annually, costing $1 trillion.7

Technological Progress

We believe technological innovation is the backbone of economic growth and a critical element for achieving several U.N. SDGs. This theme lays the groundwork for many of the other themes by leveraging innovative technologies to rethink or replace aging, outdated infrastructure. The ability to commercialize these solutions has the potential to impact society in a meaningful way.

Commercialize innovative technologies to enable electric vehicles and reduce battery costs

Deploy renewable energy products like solar, wind and LED with higher efficiency and lower costs

Leverage smarter materials and efficient equipment to reduce building and construction carbon footprint

Critical Challenges

• The energy sector accounts for almost 75% of carbon emissions, but renewable resources generate only 23% of electricity worldwide.8

• Over two-thirds of the global economy has committed to carbon neutrality, but achieving it will require massive investment in things like renewable energy.9

• More than 40% of the world’s population lacks regular access to the internet.10

• Over 2.6 billion people globally lack access to constant electricity.11

Empowerment

Enabling equitable growth is crucial to helping nearly half the world to come out of poverty. Technological advances that democratize what the developed world has taken for granted means empowering almost 3 billion people and 65 million small businesses with the tools to success.

Enable access to capital and financial services

Leverage technology and digital transformation to bring decent work, education and economic growth

Achieve gender equality by helping women achieve fuller integration into society

Critical Challenges

• More than 470 million people were unemployed or underemployed globally in 2019, and this number accelerated throughout the pandemic.12

• Nearly 50% of individuals globally do not use the internet.13

• As of 2017, 1.7 billion adults were unbanked, and 2.9 billion adults did not borrow from a financial institution.14

Environmental Protection

Climate change and renewable energy sources dominate the topic of environmental protection. While we acknowledge the importance of these two pillars of pro-environmental investing, this theme looks beyond anti-fossil fuel and clean energy solutions.

Addressing biodiversity protection

Reducing environment footprints

Working toward achieving the circular management of resources

Addressing opportunities in environmental control and negative-emissions technology, renewable energy, and bio-based plastics and materials

Critical Challenges

• Building and construction sectors account for 40% of energy emissions, but building stock is set to double by 2050.15

• Some 29% of the world’s population lacks access to safe drinking water.16

• About one-quarter of the world faces extreme water stress, and over 800,000 people die each year due to inadequate water supplies.17

• Deforestation and forest degradation account for nearly 20% of global carbon emissions.18

• In the U.S. alone, extreme weather events causing losses above $1 billion have increased more than 400% since the 1980s.19

Climate Change

While several key issues related to ESG themes are important to investors, climate change remains at the forefront.

In addition to having enormous financial consequences, climate change impacts many aspects of ESG investing. We expect asset owners increasingly to take the position that climate change poses risks to the global economy, financial systems and their portfolios. 

A Closer Look at Carbon Emissions

Asset managers will need to demonstrate how they assess and integrate into investment processes the impacts of climate change—both physical risks and those arising from the transition risks of shifting to a low-carbon economy.

While the exploration and development of alternative energy sources may mitigate climate change risk, there continues to be a significant reliance on fossil fuels to meet much of the world’s energy needs. Though many asset owners may employ fossil fuel divestment to reduce climate change-related risk, our approach focuses on decarbonization rather than full-fledged divestment. We will favor energy players working toward carbon neutrality and making solutions-driven investments in clean tech (e.g., negative emissions technologies and bioenergy) to combat climate change.

As long-term investors actively engaging with our investee companies as stewards and voting shares in the best interest of clients, we believe climate change is an important topic for engagement and proxy voting. As such, we dialogue with those players that still have room for improvement. In our view, the combination of a clean-technology thematic and engagement approach will contribute to more informed investment decisions relating to those companies and the relative attractiveness of the energy sector over time.

Our Affiliations

Carbon Disclosure Project (CDP)
The firm is a member of CDP, a global disclosure system that encourages companies and local, state and regional governments to measure and manage their environmental impacts. Investors and purchasers may use this environmental information in their financial decision-making.

Task Force on Climate-Related Financial Disclosures (TCFD)
American Century is a supporter of TCFD, a global organization that develops voluntary, consistent climate-related financial risk disclosures that companies, banks and investors use to share such information with stakeholders.

Portfolio Carbon Footprint Results

Our portfolio carbon footprint tool measures the portfolio’s carbon exposure in four key dimensions and compares these measures to the Russell Midcap® Growth Index*.


The three-year simple average carbon emissions for all the holdings in the portfolio (unweighted). The three-year simple average carbon emissions for all the holdings in the portfolio (unweighted).**


The sum of the portfolio’s share of holdings’ three-year average carbon emissions based on participation rights, divided by the total current market value of the portfolio, per million dollars invested.
 



Ratio of the portfolio’s weighted-average three-year carbon emissions per $1 million of sales.



Compound annual growth rate (CAGR) of portfolio holdings’ three-year average carbon emissions per $1 million of sales, unweighted.***


*The Russell Midcap Growth Index measures performance of those Russell Midcap Index companies (the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization) with higher price-to-book ratios and higher-forecasted growth values.
**Methodology: We determine each holding’s three-year average carbon emissions by first tallying its scope 1 (direct) and scope 2 (indirect) emissions (metric tons of CO2) from the most recent three fiscal years and then dividing that total by the number of fiscal years. To determine the three-year simple average carbon emissions for the portfolio, we tally all holdings’ three-year average carbon emissions and divide that sum by the number of holdings.
***CAGR is the rate of return needed for an investment to grow from its beginning balance to its ending balance.

Data as of 6/30/2021. Source: American Century Investments.

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Exchange Traded Funds (ETFs) are bought and sold through exchange trading at market price (not NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.

You should consider a fund's investment objectives, risks, and charges and expenses carefully before you invest. The fund's prospectus or summary prospectus, which can be obtained at AmericanCenturyETFs.com, contains this and other information about the fund, and should be read carefully before investing.

MID is classified as non-diversified. Because it is non-diversified, it may hold large positions in a small number of securities. To the extent it maintains such positions; a price change in any one of those securities may have a greater impact on the fund's share price than if it were diversified.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

The fund is an actively managed ETF that does not seek to replicate the performance of a specified index.

Proxy Portfolio Risk: The goal of the Proxy Portfolio is to track closely the daily performance of the Actual Portfolio. The Proxy Portfolio is designed to reflect the economic exposures and the risk characteristics of the Actual Portfolio on any given trading day.

  • ETFs trading on the basis of a published Proxy Portfolio may exhibit wider premiums and discounts, bid/ask spreads, and tracking error than other ETFs using the same investment strategies that publish their portfolios on a daily basis, especially during periods of market disruption or volatility. Therefore, shares of the fund may cost investors more to trade than shares of a traditional ETF.
  • Each day the fund calculates the overlap between the holdings of the prior Business Day's Proxy Portfolio compared to the Actual Portfolio (Proxy Overlap) and the difference, in percentage terms, between the Proxy Portfolio per share NAV and that of the Actual Portfolio (Tracking Error).
  • Although the fund seeks to benefit from keeping its portfolio information secret, market participants may attempt to use the Proxy Portfolio to identify a fund's trading strategy, which if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the fund and its shareholders.

Premium/Discount Risk: Although the Proxy Portfolio is intended to provide investors with enough information to allow for an effective arbitrage mechanism that will keep the market price of the fund at or close to the underlying net asset value (NAV) per share of the fund, there is a risk (which may increase during periods of market disruption or volatility) that market prices will vary significantly from the underlying NAV of the fund.

Trading Issues Risk: Trading halts may have a greater impact on this fund compared to other ETFs due to the fund's nontransparent structure.

Authorized Participant Concentration Risk: Only an authorized participant may engage in creation or redemption transactions directly with the fund. The fund may have a limited number of institutions that act as authorized participants. The fact that the fund is offering a novel and unique structure may affect the number of entities willing to act as Authorized Participants. During times of market stress, Authorized Participants may be more likely to step away from this type of ETF than a traditional ETF.

When portfolio managers incorporate Environmental, Social and Governance (ESG) factors into an investment strategy, they consider those issues in conjunction with traditional financial analysis. When selecting investments, portfolio managers incorporate ESG factors into the portfolio's existing asset class, time horizon, and objectives. Therefore, ESG factors may limit the investment opportunities available, and the portfolio may perform differently than those that do not incorporate ESG factors. Portfolio managers have ultimate discretion in how ESG issues may impact a portfolio's holdings, and depending on their analysis, investment decisions may not be affected by ESG factors.

End Notes

Health Care
1 “Child mortality and causes of death,” World Health Organization, accessed June 18, 2021.
2 “Access to medicines: making market forces serve the poor,” World Health Organization, accessed June 18, 2021.
3 “COVID-19 to Add as Many as 150 Million Extreme Poor by 2021,” World Bank Press Release, October 7, 2020.

Sustainable Living
4 “Sources of Greenhouse Gas Emissions,” U.S. Environmental Protection Agency, last modified April 14, 2021.
5 Damian Carrington, “World’s consumption of materials hits record 100bn tonnes a year,” The Guardian, January 22, 2020.
6 “Investing in the Sustainable Development Goals,” GS SUSTAIN, Goldman Sachs, February 12, 2021.
7 Amy Quinton, “Why is one-third of our food wasted worldwide?” UC Davis, October 1, 2019.

Technological Progress
8 “Energy and the environment explained,” U.S. Energy Information Administration, last modified May 21, 2021.
9 “Investing in the Sustainable Development Goals,” GS SUSTAIN, Goldman Sachs, February 12, 2021.
10“With nearly 4 billion people still offline, UN forum to tackle ‘digital divide,’” United Nations Sustainable Development Goals, last modified December 7, 2016.
11“Tracking SDG7: The Energy Progress Report,” 2021, International Energy Agency, June 2021.

Empowerment
12“World Employment and Social Outlook: Trends 2020,” International Labour Organization, January 20, 2020.
13“The State of Mobile Internet Connectivity 2020,” Groupe Speciale Mobile Association (GSMA), September 2020.
14Asli Demirguc-Kunt, et al., “Chapter 2: The Unbanked,” The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution, World Bank Group, April 19, 2018.

Environmental Protection
15“2019 Global Status Report for Buildings and Construction,” Global Alliance for Buildings and Construction, December 2019.
16Hannah Ritchie and Max Roser, “Clean water: What Share of people have access to safe drinking water?” Our World in Data, June 2021.
17“Drinking-water,” World Health Organization, June 14, 2019.
18Gregory P. Asner, Ph.D., “Measuring Carbon Emissions from Tropical Deforestation: An Overview,” Environmental Defense Fund, 2009.
19“Special Report on Global Warming of 1.5°C,” Intergovernmental Panel on Climate Change, October 8, 2018. 

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.