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Sustainable Enhanced Indexing Equity

Sustainable Enhanced Indexing Equity

A sustainable alternative to passive investing

Key points

  • Delivering advanced sustainability exposure while offering market-like returns after costs
  • Significantly better ESG profile, smaller environmental footprint and exclusions
  • The strategy is fully customizable in terms of investment region, sustainability profile, expected outperformance and tracking error

Philosophy

Robeco’s quantitative investment strategies are based on the following beliefs:

Evidence-based research. Identifying factors that are rewarded with superior risk-adjusted performance. This includes extensive empirical testing over longer periods and in different markets.

Economic rationale. We want to move beyond statistical patterns and understand the economic drivers behind factors. Risks that are not adequately rewarded should be avoided.

Prudent investing. We manage easily explainable portfolios and prevent unnecessary trading costs, and we integrate environmental, social and governance (ESG) factors.

Process

Robeco's Sustainable Enhanced Indexing Equity strategy offers the advantages of passive investing while also targeting a superior sustainability profile. We overweight those index constituents that score highly on sustainability and underweight those that score poorly. As well as incorporating 50 years of academic insights, when ranking stocks or constructing the portfolio, we can also take into account stock characteristics proven to deliver superior returns. These characteristics are value, quality, momentum and analyst revisions.

The strategy can be customized, for example to target a high information ratio, a high sustainability profile or to maximize the sustainability profile while reducing the risk of underperformance. This customization can include the following elements:

  • An improvement of at least 20% on the market’s sustainability score
  • A 20% reduction of the environmental footprint based on impact scores
  • Exclusion of companies with controversial business models such as tobacco and firearms producers
  • Voting and engagement for portfolio holdings

Regions

The strategy is available for different investment regions: global developed and emerging markets.

Region

Global developed

Emerging markets

Benchmark

MSCI World Index

MSCI Emerging Markets

Information ratio target

0.5

0.7

Tracking error (expected average)

1.0%

1.5%

Number of stocks strategy

≈ 750

≈ 450

Inception date

November 2013

September 2019

Proven alternative to passive investing

Enhanced Indexing offers all the benefits of passive investing, while compensating for its many disadvantages.

Read more

Team

Our strategy is managed by an experienced group of investment professionals within an organization that is fully committed to quantitative investing. The team consists of more than 40 portfolio managers and quantitative researchers, dedicated solely to quantitative investing, research and model development. The team works closely with RobecoSAM, which focuses exclusively on ESG and provides the stock-specific sustainability information for the strategy.

Get in touch with us

Contact us if you would like to know more about this topic.

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Disclaimer

BY CLICKING ON “I AGREE”, I DECLARE I AM A WHOLESALE CLIENT AS DEFINED IN THE CORPORATIONS ACT 2001.

What is a Wholesale Client?
A person or entity is a “wholesale client” if they satisfy the requirements of section 761G of the Corporations Act.
This commonly includes a person or entity:

  • who holds an Australian Financial Services License
  • who has or controls at least $10 million (and may include funds held by an associate or under a trust that the person manages)
  • that is a body regulated by APRA other than a trustee of:
    (i) a superannuation fund;
    (ii) an approved deposit fund;
    (iii) a pooled superannuation trust; or
    (iv) a public sector superannuation scheme.
    within the meaning of the Superannuation Industry (Supervision) Act 1993
  • that is a body registered under the Financial Corporations Act 1974.
  • that is a trustee of:
    (i) a superannuation fund; or
    (ii) an approved deposit fund; or
    (iii) a pooled superannuation trust; or
    (iv) a public sector superannuation scheme
    within the meaning of the Superannuation Industry (Supervision) Act 1993 and the fund, trust or scheme has net assets of at least $10 million.
  • that is a listed entity or a related body corporate of a listed entity
  • that is an exempt public authority
  • that is a body corporate, or an unincorporated body, that:
    (i) carries on a business of investment in financial products, interests in land or other investments; and
    (ii) for those purposes, invests funds received (directly or indirectly) following an offer or invitation to the public, within the meaning of section 82 of the Corporations Act 2001, the terms of which provided for the funds subscribed to be invested for those purposes.
  • that is a foreign entity which, if established or incorporated in Australia, would be covered by one of the preceding paragraphs.
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