Sustainable Enhanced Indexing Equity
Key points
- Delivering advanced sustainability exposure while offering market-like returns after costs
- Significantly better ESG profile, smaller environmental footprint and exclusions
- Proven track record in developed markets with information ratio > 0.5 since inception in 2013
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. Proven track record with information ratio > 0.5 since inception in 2013
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 offers the advantages of passive investing but also targets a superior sustainability profile and better returns by incorporating 50 years of academic insights. We overweight those index constituents that score highly on sustainability measures and on characteristics proven to deliver superior returns, and slightly underweight those that score poorly.
These characteristics are value, quality, momentum and analyst revisions.
Furthermore, we take into account the following aspects of sustainability:
- 30% higher sustainability score than the market.
- 20% reduction of environmental footprint based on impact scores.
- Exclusion of companies with an controversial business model such as tobacco and firearms.
- 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 |
≈ 400 |
Inception date |
November 2013 |
Q3 2019 |
Enhanced Indexing offers all the benefits of passive investing, while compensating for its many disadvantages.
Team
Our strategy is managed by an experienced group of investment professionals within an organization which 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 closely cooperates with RobecoSAM, which focuses exclusively on ESG. RobecoSAM provides the stock-specific sustainability information for the strategy.
