ERI Scientific Beta excludes three companies
Scientific Beta, which was recently selected by Desjardins Global Asset Management to design a family of indices that respect high responsible investment standards, said that its filter has allowed Renault, Nissan and Mitsubishi to be excluded from environmental, social, governance (ESG) indices.
The decision was intended to warn investors and help them avoid being stuck with these stocks in the wake of the Carlos Ghosn scandal, the firm said.
The SciBeta Desjardins Responsible Investing family would also exclude companies that were involved in controversial activities or in critical controversies with respect to principles of responsible business conduct.
By separating ESG and financial performance objectives in index construction, Scientific Beta ESG indices aimed to treat responsible investing policies as fiduciary constraints and build smart beta indices that could add performance in a robust manner by establishing exposure to rewarded risk factors once these exclusions were carried out, the firm said.
“Traditional integrated approaches promoted by a large majority of ESG solution providers that target an ESG or low carbon score without any exclusions and ultimately offset the poor ESG scores of some companies with the good ESG scores of other companies or, worse, offset the poor ESG score of a firm with the same firm’s good exposures to selected financial factors, are practices that do not correspond to what a truly responsible investor should implement,” Scientific Beta’s chief executive, Noel Amenc, said.
“In a passive investment context, outright exclusions on the basis of international norms and relative ESG performance also send clear signals to companies regarding the progress they need to make in respect of environmental, social and governance issues to meet their basic responsibilities and position for sustainable success.”
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