Targeted sustainability
More than ever, investors recognize the risks and opportunities associated with the low carbon transition and are incorporating a wider set of considerations, including carbon, green revenues and ESG assessments into their decision making.
More than ever, investors recognize the risks and opportunities associated with the low carbon transition and are incorporating a wider set of considerations, including carbon, green revenues and ESG assessments into their decision making.
It is no longer sufficient to merely improve upon a set of sustainable investment (SI) characteristics compared to a benchmark, but rather that those improvements should achieve precise outcomes. Moreover, the desire to simultaneously control other index outcomes, such as tracking error, country/ industry weights and style exposures, provides additional complications. The ability to achieve such specific requirements in an index ultimately rests with portfolio construction.
FTSE Russell research shows how:
- Multiple SI objectives can be incorporated in an index in a transparent and flexible manner
- Increasing demand for index solutions that incorporate precise low carbon and ESG outcomes can be achieved with the Target Exposure methodology, an evolution of FTSE Russell’s tilting methodology
- Precisely targeted SI solutions can also be designed for ease of implementation and limited levels of tracking error
To read the full research paper click here.
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