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    Environmental, Social and Governance

    Net Zero Takes Off

    With the 26th UN Climate Change Conference (COP26) around the corner, momentum is building for investors to plan for the transition to net zero emissions.

    What will this mean for you? Take a look at our roadmap for your Journey to Net Zero here.

    Journey To Net Zero

    Defining Your ESG Goals

    The COVID-19 pandemic has impacted all areas of our lives and highlights how globally interconnected we are. Encouragingly, the crisis has sharpened the focus of governments, companies and society on tackling the longer term threat of climate change. It has also increased awareness of the significance of ESG issues in general. 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 meet their specific ESG objectives through a range of investment strategies.

    Screening

    Negative screening excludes specific companies, sectors or countries based on ESG factors and/or an investor’s values-based ideals. The benefits include mitigating reputational risk and enabling investors to avoid allocating funds to companies or sectors that conflict with their beliefs.

    With over 40 years’ experience in developing screened approaches across equities and fixed income, we offer clients a tailored way to express their values or risk mitigation preferences in their portfolios.

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    Best in Class

    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.

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    ESG Integration

    ESG data is available to all teams at State Street, across all asset classes and investment styles. Our active portfolio managers systematically integrate ESG signals and factors into the investment analysis and decision-making process, to mitigate risk and identify opportunities for long-term outperformance

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    Climate Investing

    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 allow investors to benefit from both mitigation of current and future emissions, and adaptation to embedded climate risks.

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    ESG for Index Investors

    Index investing offers a wide range of benefits for ESG investors, including diversification and transparency. Index strategies provide investors with a clear-cut way to achieve broad diversification in their portfolios, which further strengthens risk mitigation. In addition, buy/sell decisions in index strategies are based on pre-stated rules, so the investment exposures are clear and transparent. Finally, as one of the world’s largest index managers, we can engage with portfolio companies to make meaningful change.

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    Data Analytics

    We built a transparent, multi-source data architecture to help investors better understand their ESG exposures, takeaction to achieve their investment goals and monitor results.

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    ESG: Central to Our Investment Philosophy

    At State Street, our mission is to invest responsibly to enable economic prosperity and social progress. We believe that identifying and systematically incorporating material ESG issues is integral to our role as fiduciaries of our clients’ capital. 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, leveraging our top rated* ESG capabilities.

    Through strong engagement, voting and thought leadership, we have seen companies respond to our calls to action to enhance diversity at the board level, strengthen board leadership and improve disclosure on their sustainability practices.

    Further information on our stewardship approach can be found in our Annual Stewardship Report.

    For details on our ESG investment processes, see our ESG Investment Statement.

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