ESG ImproversAn alpha-enhancing factor
The following content is intended for Institutional Investors and Financial Professionals only
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
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.
Improvers Investing Across Rockefeller Asset Management Strategies
We believe that the Rockefeller ESG Improvers Score™ (REIS) has wide-reaching applications across our investment platform
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.
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.
U.S. Small Cap
U.S. SMID Cap
ESG Improvers Index