Scientific Beta will provide environmental, social and governance (ESG) options for its flagship multi-factor indices.
Investors would benefit from the performance of Scientific Beta’s high factor intensity (HFI) multi-beta multi-strategy (MBMS) indices while upholding ESG norms and reducing exposure to companies with exposure to ESG risks.
The ESG option would exclude companies that fell short of global standards of responsible business conduct, deprive shareholders of voting rights or are involved in activities that conflict with ESG norms.
Their incorporation was based on three principles: differentiating between non-financial objectives or constraints which was addressed by negative or positive filtering, treating ESG policy as fiduciary constraint and delivered on a non-financial mandate with diverse portfolios, and offering an off-the-shelf ESG option for HFI MBMS indices while retaining the capacity for customisation.
Noël Amenc, Scientific Beta chief executive, said the company’s ESG philosophy centred on exclusions determined as the first step of index construction.
“This approach respects the principles of ethical and socially responsible investors and, as a result, exclusions send clear signals to issuers and are straightforward to explain to stakeholders,” Amenc said.