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
- 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 |
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 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.
