12-04-2022 · 市場觀點

Indices insights: Does integrating sustainability reduce opportunities for active investors?

In this Indices insights article, we show that incorporating sustainability does not constrain the potential for alpha. Indeed, active investors can still benefit from similar levels of market breadth, even after excluding stocks that contribute negatively to the UN SDGs


  • Joop Huij - Head of Indices

    Joop Huij

    Head of Indices

  • Simon Lansdorp - Portfolio Manager

    Simon Lansdorp

    Portfolio Manager

The potential to outperform market indices is the key advantage of active investment approaches, including popular styles such as growth or value. With investors increasingly seeking to integrate sustainability, active managers are tasked with generating alpha for their clients while simultaneously incorporating their sustainability preferences. The question is whether exclusions based on sustainability aspects can dilute the relative advantage of an active approach.

In the previous ‘Indices insights’ article, we looked at whether the integration of sustainability considerations has an impact on passive investors’ financial objectives. From our analysis, we demonstrated that it is possible for passive solutions to exhibit risk-return characteristics that are similar to those of the market even when high carbon emitters or companies that negatively impact the SDGs are excluded. We also saw that these sustainable passive solutions can enjoy the diversification benefits of market-cap weighted indices.

In this article, we will examine to what extent the integration of sustainability affects active investors. The application of sustainability screens reduces the size of the investment universe, which therefore could constrain the alpha potential of an active solution. Indeed, active investors have a greater chance of delivering alpha if the distribution of stock characteristics within an investment universe is more dispersed, i.e., reflecting higher market breadth.

Sustainability integration leaves investors with ample investment opportunities

To assess this, we analyzed the distribution of stock characteristics – including market capitalization, valuations, quality and risk – for two separate investment universes: one consisting of thousands of stocks globally (full universe), and the other comprising the full universe minus stocks with poor sustainability attributes (sustainable universe). More specifically, the sustainable universe excludes companies that contribute negatively to the SDGs, determined by Robeco’s proprietary SDG framework.

As shown in Figure 1, we found that the stock characteristics for the two universes were virtually identical. This is reflected by the blue ellipses (sustainable universe) almost completely overlapping the orange ellipses (full universe).

Figure 1 | Breadth and distribution of stock characteristics are similar for both full and sustainable universes

Figure 1 | Breadth and distribution of stock characteristics are similar for both full and sustainable universes

Source: Robeco, FactSet. Global stock characteristics as per 31 December 2021.

訂閱 – 指數洞察



More specifically, the centers of the ellipses indicate the average size, value, quality or risk characteristics of the two universes. Therefore, how the ellipses are rotated around their centers provides an indication of the correlation between stock market caps and their corresponding valuation, quality or risk metrics. Given that each pair of ellipses is rotated in a similar angle, we can conclude that applying the sustainability filter – using the SDG criteria – does not result in concentrated exclusions within specific market segments, for example stocks with low valuations or high quality.

Finally, the similar-sized areas within the blue and orange ellipses as well as the dispersion of the blue and orange dots indicate that the breadth of the investment universe is similar after the sustainability screen is applied. Put differently, the opportunity set for active investors is not significantly impacted by excluding companies based on their negative contributions to the SDGs.

We also scrutinized how stocks are distributed across 3x3 groups sorted on size and value, size and quality, as well as size and risk. We observed that the distribution across the full and sustainable universes was markedly similar, as depicted in Table 1.

Table 1 | Highly similar distribution of stocks across 3x3 sorted pairs of stock characteristics

Table 1 | Highly similar distribution of stocks across 3x3 sorted pairs of stock characteristics

Source: Robeco, FactSet. Global stock characteristics as per 31 December 2021.

Data and methodology

For our analysis, we based our investment universes on the constituents of the MSCI World Investable Market Index as at the end of December 2021. Regarding stock characteristics, we used the log of market caps for size, log of book-to-price ratios for value, gross profits-to-assets ratios for quality, and historical 36-month market betas for risk, all sourced from FactSet and rescaled to have a mean of zero and unit standard deviation. We excluded financials from our study when analyzing the size and quality traits.

To construct our sustainable universe, we applied a sustainability screen based on Robeco’s proprietary SDG framework. The framework provides a clear, objective, consistent and replicable approach to measuring the contributions that companies make to the 17 SDGs. More specifically, we excluded companies that contribute negatively to the SDGs. While our full universe consisted of roughly 6,000 stocks, our sustainable universe comprised approximately 4,700 names.

Similar to the Morningstar Style Box and Morningstar Ownership Zone analyses, we then produced scatterplots of the stocks in three dimensions based on their size and value, size and quality, as well as size and risk characteristics. We also added the breakpoints of the market cap and secondary characteristics to split the universes into 3x3 groups, using the 10th and 90th percentiles. These breakpoints are denoted by the vertical and horizontal lines in the plots. Additionally, we calculated ellipses for each pair of characteristics covering 95% of the stocks in the relevant universe that are closest to the average.1

1 A universe which is less dispersed will have an ellipse covering a small area versus a universe which is more dispersed.


Based on our findings, we conclude that an SDG-based sustainability screen has virtually no effect on the dispersion and distribution of stock characteristics, when we analyze an investment universe in the context of several stock attributes that are typically deemed relevant for explaining differences within the cross-section of stock returns.

Furthermore, we find that the integration of sustainability leaves investors with ample investment opportunities. This is particularly important to active investors who aim to generate alpha for their clients and adhere to their sustainability preferences. In the next ‘Indices insights’ article, we will put this notion to the test within the context of factor investing, by analyzing the effect such sustainability screens have on expected factor premiums.

Background to sustainability metrics

In defining sustainability, investors have a multitude of dimensions and metrics they could consider. For example:

  • Values-based exclusions

  • ESG integration

  • Impact investing

ESG scores typically put more focus on the operations of a business, whereas SDG scores also incorporate the impact that the business’ products and/or services have on society.

We see client sustainability objectives increasingly moving towards avoiding controversial businesses (values-based exclusions) and including those that provide sustainable solutions (impact investing). In the first few articles of our Indices Insights series, we will empirically show how the different sustainability metrics (negative screening/exclusions, ESG, SDG) relate to these increasingly impact-oriented client sustainability objectives.


本文由荷宝海外投资基金管理(上海)有限公司(“荷宝上海”)编制, 本文内容仅供参考, 并不构成荷宝上海对任何人的购买或出售任何产品的建议、专业意见、要约、招揽或邀请。本文不应被视为对购买或出售任何投资产品的推荐或采用任何投资策略的建议。本文中的任何内容不得被视为有关法律、税务或投资方面的咨询, 也不表示任何投资或策略适合您的个人情况, 或以其他方式构成对您个人的推荐。 本文中所包含的信息和/或分析系根据荷宝上海所认为的可信渠道而获得的信息准备而成。荷宝上海不就其准确性、正确性、实用性或完整性作出任何陈述, 也不对因使用本文中的信息和/或分析而造成的损失承担任何责任。荷宝上海或其他任何关联机构及其董事、高级管理人员、员工均不对任何人因其依据本文所含信息而造成的任何直接或间接的损失或损害或任何其他后果承担责任或义务。 本文包含一些有关于未来业务、目标、管理纪律或其他方面的前瞻性陈述与预测, 这些陈述含有假设、风险和不确定性, 且是建立在截止到本文编写之日已有的信息之上。基于此, 我们不能保证这些前瞻性情况都会发生, 实际情况可能会与本文中的陈述具有一定的差别。我们不能保证本文中的统计信息在任何特定条件下都是准确、适当和完整的, 亦不能保证这些统计信息以及据以得出这些信息的假设能够反映荷宝上海可能遇到的市场条件或未来表现。本文中的信息是基于当前的市场情况, 这很有可能因随后的市场事件或其他原因而发生变化, 本文内容可能因此未反映最新情况,荷宝上海不负责更新本文, 或对本文中不准确或遗漏之信息进行纠正。