Introducing Smart ESG, our revolutionary portfolio optimisation engine designed to maximize sustainable impact while minimizing tracking error, reshaping the landscape of sustainable investing:

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Executive Summary

The ascendancy of sustainable investing has been marred by expensive ESG-labelled funds often offering little tangible sustainability impact:

  • 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.

Useful Links:

Visit our Smart ESG webpage