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Smart ESG Integration
Optimizing the power of ESG scores

Smart ESG Integration

Robeco continuously works to enhance the integration of environmental, social and governance (ESG) factors into investment decisions. To help investors reap the benefits of Sustainable Investing we developed an innovative “Smart ESG” scoring methodology.

The next generation of ESG scores

Conventional ESG scoring methodologies do not fit into traditional factor models and typically result in size or regional biases. Large cap companies tend to have better corporate sustainability processes and disclosures than smaller companies, and European companies tend to be more transparent. As a result, these companies tend to receive higher ESG scores. In addition, in contrast to mainstream factors such as value or momentum, traditional ESG scores are broad, often aggregating hundreds of individual indicators into a single score, diluting financially material information. To address these challenges, we have built upon our existing methodology to develop unbiased and financially material ESG factor scores that are more relevant for investors.

Our Smart ESG methodology leverages the wealth of sustainability data in our proprietary sustainability database to identify the most financially material sustainability criteria in order to develop an ESG signal that can be effectively used in portfolio management.

Smart ESG methodology

Source: Robeco

Removing biases

Differing transparency standards across many structural factors - regions, countries, sectors, market capitalization - can affect the perceived sustainability of companies and negatively affect both the implementation of sustainable investment strategies and investment returns. This transparency bias needs to be neutralized in order to extract a purer and stronger sustainability signal. At the same time, certain segments of the market might simply be more sustainable. Our approach accounts for this transparency bias in an efficient way, and makes sure companies are compared versus representative peers.

Combining forward-looking views with past evidence

Our sustainability research is based on a forward looking financial materiality framework for each industry, which reflects our Sustainability Investing Analysts’ (SI Analysts) expectations on which ESG indicators are most likely to contribute to a company’s financial performance. Quantitative research is further used to test which sustainability indicators have had a strong impact on past financial performance. Together, questions are weighted in such a way to ensure the most materially relevant factors are well reflected in the Smart ESG Score.

Simply put, the RobecoSAM Smart ESG methodology uses quantitative analysis to remove the bias that clouds standard ESG data and helps clarify the true sources of sustainability. As a result, investors are better equipped to reduce risk, spot opportunities and improve portfolio performance.

Sustainable Investing Research
Sustainable Investing Research
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Tap into our expertise

Keep up with our knowledge and trends through articles, podcasts and videos:

More insights

Tap into our expertise

Keep up with our knowledge and trends through articles, podcasts and videos:

More insights
SI Opener: Let’s be clearer about what ESG integration actually does
SI Opener: Let’s be clearer about what ESG integration actually does
At Robeco we have been integrating environmental, social and governance (ESG) factors into our investments since 2010.
21-10-2021 | SI Opener
Bracing for climate change impact
Bracing for climate change impact
Institutional investors agree that they need to prepare for climate impact.
18-10-2021 | Digital event
The CO₂lumnist: What is the ‘e’ in CO₂e?
The CO₂lumnist: What is the ‘e’ in CO₂e?
Greenhouse gas emissions are reported as carbon dioxide equivalents – it’s not just CO2 that’s the main villain out there.
14-10-2021 | Column
At the forefront of climate investing solutions
At the forefront of climate investing solutions
Everything you need to know about climate challenges and climate investing solutions.
01-10-2021 | Insight
Factoring climate change into Expected Returns forecasts
Factoring climate change into Expected Returns forecasts
The impact of climate change has been factored into the core forecasts in Expected Returns for the first time in the five-year outlook’s 11-year history.
30-09-2021 | 5-Year outlook
SI Opener: How Covid-19 is worsening inequality
SI Opener: How Covid-19 is worsening inequality
The Covid-19 pandemic has reversed gains in global poverty reduction and has had a profound impact on multiple facets of inequality.
23-09-2021 | SI Opener
The CO₂lumnist: Data providers and the greenhouse gas pie
The CO₂lumnist: Data providers and the greenhouse gas pie
The greenhouse gas emissions of different sectors forms parts of giant pie.
22-09-2021 | Column
Our introductory guide to investing in SDG credits
Our introductory guide to investing in SDG credits
The UN’s Sustainable Development Goals (SDGs) have captured the imagination as a great way of impact investing.
21-09-2021 | Insight
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Disclaimer

Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.

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