Introducing Smart ESG: A Revolutionary Approach to Sustainable Investing

• Our research reveals diverse alignment with the UN’s Sustainable Development Goals (SDGs) among Sustainable Finance Disclosure Regulation (SFDR) fund classifications, casting doubt on their true sustainability impacts.
• We also highlight the lack of ESG within both passive and active funds.

We believe that factorised data is the key to unlocking greater impact potential; while maintaining the same level of risk, we:

• Backtest factorised impact data that shows that certain ESG factors yield ‘ESG alpha’, with positive returns for environmentally beneficial products, low carbon emissions and low water use.
• Introduce Smart ESG, a portfolio optimisation engine that exploits factorised data to maximise ESG impact and minimise tracking error. We reveal real-world applications of this engine, demonstrating substantial portfolio water use reduction by 90%, bolstering alignment with all 17 SDGs, and marking progress across 15 ESG factors – all achieved without an increase in tracking error.

Smart ESG responds effectively to the complexities of sustainable investing in today’s fast-paced and ever-evolving landscape.

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