Sustainable International Multi-Factor Equity
The strategy’s objective is to outperform the MSCI All Country World ex US Index by 1% over rolling 3 year periods, while systematically integrating sustainability into the investment process.
By integrating sustainability alongside traditional factors (Value, Momentum, Low Volatility and Quality), the strategy seeks to outperform the broad market, while providing environmental, social and governance benefits.
Schroder Sustainable International Multi-Factor Equity is a systematic international equity strategy with a fully integrated approach to sustainable investing. It is designed to provide investors with ongoing access to the best thinking in two increasingly important fields of investment: factor investing and sustainability.
Our approach to factor investing enables us to seamlessly integrate a number of sustainability criteria, including SustainEx (Schroders’ proprietary measure of ESG impact), sophisticated and material measures of corporate governance, and a 50% reduction in carbon intensity, compared to the MSCI ACWI ex US.
The strategy will evolve over time with new information and improved data, unlike strategies which lock investors into a simplistic or fixed approach. Schroders is committed to bringing the best thinking in factor investing and sustainability to our investors now and in the future.
Our factor investing philosophy is predicated on a bottom-up approach to multi-factor portfolio construction. This means that we combine information about many factors (such as Value, Momentum and Quality) at the stock level and then build a single portfolio that maximizes exposure to the set of factors collectively, subject to limits on risk.
SustainEx takes the diverse set of characteristics associated with environmental (E) and social (S) concerns and turns them into a dollar cost or benefit to society. The cost or benefit is derived from information such as the operations of a particular company, using published scientific research.
Governance (G) is integrated through the Quality factor. A quantitative, objective assessment is used to measure the impact of corporate governance, to avoid a potential conflict of interest between management and shareholders.
Sustainability is integrated into the our investment approach
Companies will be assessed on equity factors using a fully integrated systematic, bottom-up investment approach.
Sustainability will be assessed using a quantitative framework against which certain risk factors are assessed, such as the strength of environmental practices, climate change impact, responsible employment practices, and sensitivity towards the communities in which the companies operate. Low sustainability scores will not necessarily result in a company being excluded from the evaluation process but rather contribute to the overall evaluation of that company.
Other relevant factors include:
- Low volatility - evaluates indicators such as share price movement and historical performance to determine those securities that we believe will experience smaller price movements than international equity markets on average.
- Momentum - utilizes trends in stocks, sectors or countries.
- Quality - evaluates indicators such as a company's profitability, stability and corporate governance.
- Value - assesses indicators such as cash flows, dividends and earnings to identify securities that we believe are undervalued by the market.
Sustainable Multi-Factor Equity will resonate with investors who are trying to balance the responsibility to generate long-term equity returns, with a desire to manage sustainability risk.
Sustainability as an outcome. The strategy seeks to:
- Adjust over and underweights to companies based on the costs or benefits they pose from a sustainability perspective
- Cut carbon footprint by 50% relative to the benchmark*
- Apply sensible industry screens
A robust, systematic investment process
- A quantitative process targeting factors with the potential to add value
- Sustainability is treated as a factor – SustainEx tool is used to score companies for their environmental and social credentials
Broad exposure to global equities
- Proprietary factor analyses of a universe of 6,272 international companies*
- Invests in international developed and emerging markets
- Invests in smaller cap stocks with richer factor rewards
Low benchmark-relative risk
- Risk management implemented on multiple levels with a 2% tracking error target
Solid value for investors
- Management fee of 0.20% per year
*Source: MSCI ACWI ex USA IMI. There are 6,272 constituents in the index (data as of February 28, 2019). The index includes large, mid and small cap companies and targets coverage of approximately 99% of the global equity opportunity set outside the US.
- Separate Account