Capitalizing on Undervalued Global Equities in a Divergent Macro Environment

In an era of divergent macroeconomic conditions, where monetary policies and trade dynamics vary sharply across regions, the search for undervalued global equities demands a nuanced approach. The ClearBridge Global Value Improvers Strategy exemplifies this by combining value investing principles with a forward-looking environmental, social, and governance (ESG) lens. This strategy seeks companies not merely undervalued by traditional metrics but those actively transforming their ESG profiles, creating a dual mandate of financial and societal returns.

Strategic Entry Points: ESG as a Catalyst

The strategy's success in 2025 underscores its ability to identify entry points aligned with structural shifts. For instance, the portfolio's emphasis on energy efficiency enablers-such as Siemens Energy and Nexans-capitalized on global electrification trends and AI-driven data center demand, according to ClearBridge's Q3 commentary. These companies, positioned at the intersection of decarbonization and technological innovation, demonstrated resilience even as broader industrials sectors faced headwinds. Similarly, investments in AI infrastructure, including semiconductor equipment maker Tokyo Electron and U.S. developer Broadcom, reflected a proactive stance on long-term growth drivers, according to ClearBridge's strategy page.

A critical element of the strategy's approach is its focus on "improvers"-companies on a path to ESG enhancement rather than those already classified as best-in-class. This allows the portfolio to capture value before the market fully appreciates the transformation. For example, the addition of U.K. supermarket chain Tesco in Q3 2025 followed competitive price cuts, positioning it to benefit from fiscal stimulus in Europe, according to ClearBridge's June commentary. Such decisions highlight the strategy's agility in repositioning capital toward domestic businesses poised to thrive under accommodative financial conditions.

Navigating Macroeconomic Divergence

The strategy's performance in 2025 also illustrates its adaptability to macroeconomic shifts. As U.S. trade developments and potential Federal Reserve rate cuts reduced global uncertainty, the portfolio reduced exposure to high U.S. dollar-weighted companies, reallocating capital to regions with more favorable monetary policies, such as the Eurozone and Japan, as noted on ClearBridge's strategy page. This rebalancing not only mitigated currency risks but also aligned with structural opportunities in energy efficiency and grid modernization.

For instance, the exit of Novo Nordisk from the portfolio in Q3 2025, driven by competitive pressures in the diabetes and obesity drug sector, exemplifies the strategy's discipline in exiting positions where growth catalysts have been priced in, as described in ClearBridge's Q3 commentary. Conversely, the addition of Vertiv (VRTX), a provider of AI-related data center cooling solutions, underscored its focus on companies directly enabling long-term industry trends, per ClearBridge's June 2025 commentary.

Performance and Long-Term Positioning

Quantitative results reinforce the strategy's effectiveness. As of August 31, 2025, the strategy delivered a 12-month return of 21.5%, outperforming the MSCI World Value (Net) (AUD) Index's 16.0%, as reported on ClearBridge's strategy page. Over three years, it returned 22.3% versus the benchmark's 16.2%, demonstrating consistency in capturing value across cycles. These figures are not merely a function of stock selection but reflect a disciplined approach to macroeconomic positioning.

Conclusion: A Model for Future-Proof Investing

The ClearBridge Global Value Improvers Strategy offers a compelling framework for capitalizing on undervalued equities in a macro-divergent world. By integrating ESG improvement as a catalyst for value creation, it aligns with global structural trends such as decarbonization, AI adoption, and energy transition. Its ability to reposition dynamically-whether reducing USD exposure or pivoting toward domestic growth drivers-ensures resilience in shifting economic landscapes. For investors seeking to navigate today's fragmented macro environment, this strategy provides a blueprint for combining financial rigor with forward-looking sustainability.