RobecoSAM continuously works to enhance the integration of environmental, social and governance (ESG) factors into financial analysis to help investors reap the benefits of Sustainability Investing. Using the information collected through our annual Corporate Sustainability Assessment (CSA) over the past 20 years, RobecoSAM’s Quantitative Research Team has developed an advanced “Smart ESG” scoring methodology.
Watch RobecoSAM’s Head of Indices Guido Giese and Quantitative Analyst Steven Bacon explain how Smart ESG works.
Advanced ESG scoring methodology
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. Our new generation of ESG scores builds upon our existing sustainability data by eliminating known biases such as market cap, industry and regional biases. By removing these known biases, we are able to pinpoint which ESG indicators are the most financially relevant for different industries, sharpening our focus on financial materiality. This results in an unbiased, evidenced-based ESG score – or Smart ESG – a powerful score that has an attractive risk-return profile and low correlation to other common factors.
Integrating Smart ESG
Having enhanced the predictive and explanatory power of our sustainability data, we have integrated Smart ESG into the DJSI Diversified Select Family of sustainability indices, and are now working on integrating Smart ESG across an even wider range of solutions, both active and passive.