Our decision to fully integrate ESG (environmental, social and governance) across our strategies comes from a number of beliefs. While ESG investing is not new, the data is becoming more widely available to data-driven managers such as Rosenberg Equities. This growing body of data helps inform our core beliefs that:
• ESG information is economic in nature: Companies that use their resources wisely should have an economic advantage over those that do not.
• ESG information is complementary to traditional fundamental data: ESG data is currently not well represented in traditional financial data and tends to be longer horizon in nature, giving us a window through which we can view a company’s long-term sustainability and a more holistic view.
• Based on this, ESG information may change our opinion of the fundamental ‘worth’ of a stock.
What is the process within the platform for integrating ESG?
We have a strong relationship with the RI team and our investment approach enables us to systematically incorporate ESG data directly and efficiently into our models. We take data from a variety of external vendors in addition to the corporate scoring framework that is maintained by the RI team. Once the data is in our system we can work with it in a variety of ways, from research and analysis to portfolio construction and reporting. For example, we add ESG scores and key performance indicator (KPI) targets alongside our traditional alpha and risk measures. In this way, we guarantee that ESG will be ‘part of the dialogue’ when it comes to driving portfolio positioning and real investment outcomes. That said, we are unwilling to sacrifice the traditional risk and reward profiles of our strategies when integrating ESG, so when faced with two stocks of identical ESG scores, our optimiser would always favour the one with the highest alpha, all other considerations being equal.
How has ESG evolved within the platform?
Rosenberg Equities has been running what used to be called SRI portfolios since the mid-1990’s for our clients. The focus of these strategies was largely exclusionary. In 2014 we launched our first truly ESG-integrated pooled fund in Australia and then launched the same strategy in the European market. We are pleased to announce that we have now integrated ESG in all of Rosenberg’s portfolios.
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10 ESG integration questions you didn't know you needed answered
A look at growing interest in environmental, social and governance (ESG) issues, Rosenberg’s approach to these ideas, and the influence they are having on the investment landscape.
Income with less 'C'
This is the second paper in a series intended to focus on the intersection of specific Environmental, Social, and Governance (ESG) themes and traditional investment concepts.