ESG Improvers

An alpha-enhancing factor

The following content is intended for Institutional Investors and Financial Professionals only

“We believe that investors will increasingly differentiate between ESG Leaders and Improvers – firms showing the greatest improvement in their ESG footprint – and the latter offers a greater potential for generating uncorrelated alpha over the long term.”
Casey C. Clark, CFA, Global Head of ESG Investments and Portfolio Manager, Rockefeller Asset Management

ESG Improvers are Tomorrow’s Leaders

  • The market overemphasizes ESG Leaders while undervaluing Improvers, those companies showing improvement in their ESG footprint.
  • Improving ESG practices have the potential to increase brand value, enhance customer and employee loyalty, reduce cost, and create long-term competitive advantages.
  • Improvers provide another lens into management quality, a key attribute of future business success.
  • Active engagement accelerates ESG improvement

Introducing:
Rockefeller ESG Improvers Score (REIS)

 

The REIS is a proprietary score that ranks a company’s improvement in performance on material ESG issues relative to peers. Here are a few key highlights from our research covering U.S. Equities from 2010 to 2020:

 

  • A backtested, hypotherical portfolio of top-quintile ESG Improvers outperformed bottom-quintile ESG “Decliners” by 3.8% annualized. The signal is monotonic, in that outperformance grew with each quintile.
  • An optimized hypothetical ESG Improvers portfolio, which seeks to isolate pure ESG improvement while controlling for sector and factor biases, generated 0.5% annualized excess returns with 1.3% tracking error relative to the Bloomberg US 3000 Index.
  • The ESG Improvers factor enhanced returns when integrated with traditional factors over the backtest period. A hypothetical multifactor ESG Improvers + Quality + Low Volatility portfolio outperformed a two-factor Quality and Low Volatiity portfolio by 0.45% annualized.
Rockefeller’s ESG Improvers Score
Top Quintile Firms Outperform

Improvers Investing Across Rockefeller Asset Management Strategies

We believe that the Rockefeller ESG Improvers Score™ (REIS) has wide-reaching applications across our investment platform

Active Equity

We have long used materiality and ESG Improvers concepts alongside our fundamental, long-only actively managed research process. The REIS has the potential to supplement our bottom-up process and contribute to idea generation by sourcing investment candidates from top quintile improvers.

Long-Short Equity

Our Long-Short team sources potential short ideas from bottom quintile decliners.

Multi-Factor Passive Indices

Blending REIS with traditional investment factors for low-cost, passive multi-factor indices, including the Bloomberg Rockefeller Multi-factor ESG Improvers Index (BRAMUT).

We offer distinctive equity and fixed income strategies utilizing active, multi-factor passive, and thematic approaches that seek outperformance over multiple market cycles, driven by a disciplined investment process and a highly collaborative team culture. Many of these investment strategies employ ESG Improvers concepts alongside our fundamental research process.

ACTIVE

MULTI-FACTOR PASSIVE

THEMATIC

EQUITY
ALTERNATIVES
FIXED INCOME

Global
U.S.
Non-U.S.
U.S. Small Cap
U.S. SMID Cap

Long-Short Equity

Taxable
Tax-Exempt

Bloomberg Rockefeller Multi-Factor
ESG Improvers Index

Climate Solutions
Ocean Engagement

MULTI-ASSET

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ESG Improvers: An Alpha Enhancing Factor