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MINIMUM VOLATILITY WITH ESG CONSIDERATIONS

Why minimum volatility?

  • If you’re looking for companies that may reduce risk in your portfolio
  • Screening for low volatility might help you in your quest
  • Minimum volatility strategies have proven track records of delivering market-like returns with less risk

The strategy should not be considered low risk in absolute terms and may not be suitable for cautious investors.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Incorporating ESG

With both stakeholder and regulatory demands accelerating, many investors are seeking to better integrate sustainability into their investment process. The iShares Edge MSCI Minimum Volatility ESG strategies are designed to achieve a systematic integration of environmental, social, and governance (ESG) characteristics with the Minimum Volatility factor.

This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This is for illustrative and informational purposes and is subject to change. It has not been approved by any regulatory authority or securities regulator. The environmental, social and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

How they work together

The strategy seeks to minimise risk while also improving the ESG profile of the index and reducing the carbon footprint vis-à-vis the underlying starting universe.

By optimising for factor exposures while taking both ESG score and carbon emissions into account, investors can take a sustainable approach to factor investing while maintaining historical factor exposure, risk and return characteristics with traditional factor portfolios.

Improved ESG scores

Higher ESG scores relative to the parent index

Seek improved ESG scores using an ESG-optimised approach

Source: BlackRock, MSCI as at 31st November 2019. For illustrative purposes only.

Environmental, social, and governance (ESG) ratings can provide insight into a company’s management effectiveness and long-term financial prospects. Companies with a higher rating (1-10) are projected to have a stronger commitment to sustainable business practices compared to their industry peers.

improve by 20%
Potential improvement in the ESG Score compared to the starting universe
reduce by 30%
Potential reduction in carbon emissions vis-à-vis the parent index
For more detailed information please refer to the document ‘MSCI Minimum Volatility ESG Reduced Carbon Target Indexes Methodology’ on msci.com. Published in February 2020.

Reduced carbon emissions

Lower carbon emissions relative to the parent index

Seek reduced carbon emissions

Source: BlackRock, MSCI as at 31 November 2019. For illustrative purposes only. Carbon Emissions are measured CO2e/$M Invested.

Product Insight by MSCI
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