Systematic Active Equity Insight

Sustainable investing: active equities

Systematic Investing |Jul 30, 2020

Investors are increasingly making sustainable investing a fundamental part of their approach. Yet sustainable investment still remains a broad, and often vague, category. The search for clarity continues.

The Systematic Active Equity (SAE) team's deep belief in ESG (environmental, social and governance) issues and the principles of sustainability that underlie them has led us to ask: Can we move beyond a compliance-only mindset to one that is more results-centric? Only in this way, we believe, can sustainable investing become truly sustainable.

What’s in a number?

For most of its recent history, sustainable and ESG investing has been characterized by a clamor for externally imposed standards. A host of third-party vendors has responded to this demand by providing ESG scores or ratings (See Sustainable investing: A ‘why not’ moment). We aren’t against scoring – to the contrary, a quantitative approach demands it. 

However, we also believe it is essential to take multiple issue areas into consideration when assessing sustainability, including indirect indicators of deep company attributes. Everything we consider must have an ability to tell us something about security performance, and not just a headline issue.

Actively seeking solutions

We took on the conceptual and measurement challenges in an effort to capture differences across companies. Our research set out to find more ambitious solutions with our goal in mind: to offer an approach to sustainability that is intentional and driven by results, rather than compliance alone.

Three key takeaways from our work:

  1. What you measure matters
  2. Be prepared to navigate some difficult trade-offs
  3. Portfolio construction is key to sustainable investing

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