Sustainability Signal in AQE

When the State Street Global Advisors Active Quantitative Equity team evaluates companies on one of the core themes1  that we deem most important — Quality — environmental, social, and governance (ESG) characteristics form a meaningful part of our analysis. 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.

Specifically, when tracked as a standalone signal, sustainability delivers strong results when compared with Value, Sentiment, and Quality. This piece digs into our process for creating sustainability scores for the companies we are evaluating. The kinds of ESG characteristics that we take into account are generally those that would be considered material for the future financial performance of a company.

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