“Sustainable, profitable and little risk”

The sustainability topic remains interesting for investors. Studies show that sustainable corporate strategies are beneficial for the performance on stock markets. Especially passive products are successful in this area.

Sustainability is a topic that investors remain enthusiastic about. Even institutional investors including insurance companies, pension funds, corporates and charities invest more and more in sustainable assets. Mid of 2015, Union Investment published in a study that 58 percent of large investors include ESG factors in their investment decisions. Stopping to include those is not an option for 80 percent of ESG investors. 

The demand for socially responsible investing attracts more and more asset managers to enter the field with their products. Even MSCI has ESG rating products in their portfolio to allow investors an easier integration in their investment processes.
Index providers enter the field too. Even since 2007, the Hannover stock exchange publishes the Global Challenges Index, that is supposed to help investors when selecting sustainable shares. The index includes 50 companies that help to solve global problems including climate change, water supply, biodiversity, demographics and many more.

With passive products, some asset managers go one step further. They provide investors with a transparent and cost-effective measure to invest socially responsible. A pioneer in this field is Arabesque Asset Management. Since 2013, ecological, social and governance factors are used in their funds based on a quantitative model. One of them, the Arabesque Systematic, was just attributed a “strong performance with little risk” by Börse Online

Using an investment process with three steps, the fund is much more successful than competitor’s products. First, the 1000 best companies are filtered form a set of 70000 shares. In a second step, the 300 companies with the best fundamental data are found. From those 300, the final step finds the 100 shares that provide the best risk-return profile in combination.