Paris-based investment manager Ossiam has introduced an environmental, social and governance (ESG) multi-factor strategy targeting US equities, listed on the London Stock Exchange on Tuesday.
The “low carbon” exchange-traded fund (ETF) applies a rule-based quantitative approach, selecting large, mid, and small cap equities in US markets according to their ESG characteristics and exposure to equity factors.
Once an initial filter has identified and selected the “80% best ESG-rated stocks”, the Ossiam US ESG Low Carbon Equity Factors Ucits ETF then applies normative filters to exclude securities that do not meet its criteria.
The fund will not invest in securities that “undergo severe controversy; are involved in controversial weapons business; have significant operations in the tobacco or coal industries; are in breach with at least one of the ten principles of the UN Global Compact; or have more than 20% of their production in coal-fired plants,” according to the Natixis Investment Managers affiliate.
From the subsequent post-filtered pool of stocks, two different equally-weighted portfolios will be built - a stock factor portfolio and a sector factor portfolio.
For the stock factor portfolio, individual stocks will be screened “for significant exposure to the standard equity factors (value, momentum, size and volatility) and their lower carbon footprint”, Ossiam said.
For the sector portfolio strategy, benchmark weights will be increased or reduced to optimise exposure to “value and momentum” factors, and to “reduce their total carbon footprint by 40% compared to the respective sectors in the benchmark,” according to the French firm, which has around €3.5 billion in assets under management as of March 29 this year.
In an effort to encourage businesses around the world to adopt sustainable and socially responsible policies, as well as report on their implementation, the UN Global Compact was founded in 2000.
Ossiam’s latest ETF strategy was listed on Deutsche Börse Xetra last week.
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