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Rules-Based Approaches

UBS Asset Managementam 01.11.2018
Helikopterbild von Hochhäusern
Quelle: @MartinRuetschi/Switzerland

Incorporating sustainability factors in rules-based equity strategies

While there is a growing belief that rules-based strategies incorporating sustainable factors may offer investors potential long-term outperformance compared to standard market cap weighted indices, sustainable strategies are not directly associated with a particular risk-return profile. It is an undisputed fact, however, that the popularity of this investment theme continues to grow, both in active as well as in passive investing. 

In this article, we will not be adding further to the debate on why to invest sustainably via  index-based strategies, but will focus on the practical topic of incorporating sustainability and implementing these strategies efficiently in a passive strategy. 
We firstly discuss portfolio management aspects of replicating ESG/SRI indices; then we demonstrate several methods of constructing custom ESG/SRI rules-based portfolios, including stock exclusions and strategies with systematic ESG tilts.

Rules-Based Approaches

There is growing investor interest in rules-based strategies that incorporate sustainable factors. We explain our work on two factor-based strategies: climate aware and governance

In the second part, we focus on the design of rules-based strategies that integrate sustainable themes. In particular, our UBS AM approach with regards to climate and governance aware strategies is briefly discussed. We conclude by showing encouraging results to inspire the inclusion of ESG factors  as a part of investment process 

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