Insights

The Sustainability Signal in AQE


CIO, Active Quantitative Equity

When AQE evaluates companies on one of the core themes1 that we deem most important Quality environmental, social, and governance (ESG) characteristics form a part of our evaluation. This is because we believe that select ESG characteristics can be considered a proxy for long-term forward planning and thinking in companies, and can signal a different kind of resilience from that which is found on financial statements.

We create sustainability scores for the companies we are evaluating and use those scores to complement our other Quality metrics, which in many (but not all) cases are gleaned from financial data. When tracked as a standalone signal, sustainability has delivered strong results over the last three years. In fact, when compared with our core themes (Value, Sentiment, and Quality), sustainability delivered returns almost as high as sentiment and value, but with lower volatility, and delivered a higher return than quality. See chart below.

Three-Year Returns and Volatility, by Signal, as of October 31, 2022

Sustainable

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