Art by Jackson Epstein

Robeco Adds Sustainable Equities Model

Robeco has expanded its existing factor investing range with the Robeco Institutional Global Developed Sustainable Multi-Factor Equities Strategy.

The strategy invests in stocks in developed countries across the world. Stock selection is based on a proven quantitative model and follows a bottom-up driven investment strategy to gain efficient, well-diversified exposure to the factors value, momentum, low volatility and quality.

This strategy provides diversified exposure to established factors, all of which have shown strong long-term risk-adjusted return potential, according to the firm. Additionally, environment, social and governance (ESG) factors are systematically integrated into the disciplined and rules-based investment process, levering RobecoSAM’s Smart ESG Scores. The firm says the strategy offers a unique ESG profile compared to the MSCI World Index, in that the average Smart ESG score of the portfolio is at least 20% higher than that of the index, while the environmental footprint is at least 20% lower.

“Factor investing has been a key investment strategy of Robeco’s for over 25 years and we were one of the first asset managers to see the potential of sustainability to enhance the returns of our clients’ portfolios back in the 1990s,” says Joop Huij, head of factor investing equities and index research at Robeco. “Building upon these core strengths and combining the two aspects makes me believe that we’re well positioned to enable our clients to achieve their financial and sustainability goals.”

Morningstar Creates Index Group Targeting Low-Carbon Economy

Morningstar Inc. has announced the Morningstar Low Carbon Risk Index Family, a new group of indexes that provides diversified exposure to equities across regions and emphasizes companies aligned with the transition to a low-carbon economy. Powered by Sustainalytics’ Carbon Risk Ratings, the indexes are created through an optimization process that targets low portfolio-level carbon risk and fossil fuel exposure.

“Climate change is a significant challenge that impacts investors,” says Sanjay Arya, head of Indexes at Morningstar. “This new family of indexes will empower investors to evaluate and invest in companies that are adapting to the low-carbon economy and managing their businesses strategically for the long term. Whether motivated by environmental concerns, fiduciary obligations or investment outcomes, I believe the new indexes offer more options to lower carbon exposure without compromising returns.”

A new white paper, “Preparing for a Low Carbon Economy: Investing in the Era of Climate Change,” explains how the Morningstar Low Carbon Risk Index Family addresses the urgency around climate change by favoring companies aligned with the transition to a low-carbon economy. Not only do the indexes reflect lower climate-related risks, they also exhibit attractive investment attributes, according to the firm. 

“These indexes go beyond the common approach of carbon footprinting, which reflects current emissions and is just a starting point for analysis of carbon risk,” says Dan Lefkovitz, strategist for Morningstar Indexes. “Our new Morningstar Low Carbon Risk Indexes are the first to leverage Sustanalytics’ Carbon Risk Ratings, which assess not only a company’s overall carbon exposure but also its management of that exposure, to ultimately evaluate whether a company is positioned to survive and thrive in a low-carbon economy.”