Environmental, social, and governance (ESG) investing is top of mind for investors globally. Driven by new initiatives, expanding opportunities, and investors’ own sustainability goals, commitment to ESG initiatives continue to build.
As members of the Net Zero Asset Managers initiative, we are proud to announce our interim targets for 2030 to ensure our portfolios reach net-zero greenhouse gas emissions by 2050 or sooner.
Amid environmental and societal challenges, and incoming ESG regulations, how can investors build long-term resilience in their portfolios while benefiting from new investment opportunities?
We advise that investors define and develop specific ESG investment objectives and goals, based on their vision, mission and investment goals. Common investor objectives can include alpha generation, risk mitigation, adhering to ESG regulations or aligning the portfolio to the investor’s values. Investment principles can be developed based on these objectives, which will form the ESG investment strategy.
ESG Investment Strategies
Investors can pursue their specific ESG objectives through a range of investment strategies.
This is a thematic investment approach that aims to align portfolios with the transition to a low carbon economy and a reduction in global warming to well below 2°C.
For investors seeking to align portfolios with the Paris Agreement goals and the transition to a low-carbon economy, we offer a variety of options across equities and fixed income. Our Sustainable Climate Strategies may help investors benefit from both mitigation of current and future emissions, and adaptation to embedded climate risks.
This approach focuses on investment in sectors and companies that have superior ESG performance relative to the universe or industry peers. Research shows that companies with high ESG scores tend to outperform companies with low ESG scores in the long term.
At State Street, we aim to invest in sectors and companies selected for superior ESG performance relative to investment universes and industry peers, using our internal R-FactorTM ESG rating system and other ESG data sources.
We built a transparent, multi-source data architecture to help investors that we can leverage for our ESG analysis and to generate R-Factor scores. We can also provide ESG analysis at the portfolio level to help investors understand their ESG exposures.
At State Street, our mission is to invest responsibly to enable economic prosperity and social progress. As one of the world’s largest asset managers, we can partner with clients to achieve their ESG objectives through our global expertise in ESG research, investment strategy and data analytics.
Through engagement, voting and thought leadership, we encourage companies to enhance diversity at the board level, strengthen board leadership and improve disclosure on their sustainability practices.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio's specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio's ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. Past performance is not a reliable indicator of future performance.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee 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.