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    Environmental, Social and Governance

    ESG Integration

    ESG integration aims to improve financial performance and/or mitigate financial risk. It involves considering ESG factors explicitly and systematically in investment analysis and decisions to lower risk and generate returns. 

    It is not about achieving particular environmental, social, or governance goals. It’s about looking at the whole investment picture and considering material ESG components as a driver of risk and/or return.

    From a fiduciary perspective, ESG integration should take into account all financially material risks and opportunities that arise out of ESG information. Integrating ESG into your investment decision is an important element in achieving superior long-term compounding benefits.

    ESG Integration in Practice

    Active

    ESG integration encompasses the use of qualitative and quantitative ESG information in the investment processes, with the objective of enhancing investment decision-making. Integration of ESG issues can be used to inform economic and industry research, at the stock or issuer level or at the portfolio construction level.

    Index

    Integration of ESG issues into alternative-weighted ESG indices in which the constituents’ security weighting takes into account the ESG characteristics of the company or country. ESG data are included in the investment process and could result in upward or downward adjustments to the weights of securities, including to zero.

    Smart Beta

    Integration here involves identifying correlations between ESG factors and price movements that can generate alpha and/or reduce risk.  Models are constructed to integrate ESG factors alongside other factors, such as value, size, momentum, growth, and volatility. 

    The main approaches to integrating ESG factors into quantitative models can involve adjusting the weights of:

    • Each security in the investment universe, according to the statistical relationship between an ESG dataset and other factors.
    • Securities ranked poorly on ESG to zero.
    • And reducing the exposure to poorly ranked stocks through constraints.

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    This website is intended for persons resident in Australia. State Street Global Advisors, Australia Services Limited ABN 16 108 671 441, AFSL Number 274900 ("SSGA, ASL") is the product issuer. State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”) is the Investment Manager. The material on this website is general information only and does not take into account your individual objectives, financial situation or needs.

    You should seek professional advice and consider the Product Disclosure Statement (PDS) and target market determination, available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.

    You can access our PDS online or by calling us. The offer made in our PDS is available to persons receiving the PDS within Australia and applications from outside Australia will not be accepted. Past performance is not a reliable indicator of future performance. Investing entails risks and there can be no assurance that State Street Global Advisors will achieve profits or avoid incurring losses.

    Investing involves risk including the risk of loss of principal. This material should not be considered a solicitation to apply for interests in the Funds and investors should obtain independent financial and other professional advice before making investment decisions. There is no representation or warranty as to the currency or accuracy of, nor liability for, decisions based on such information. Performance quoted represents past performance, which is not a reliable indicator of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.

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