Acadian Asset Management, a USD74 billion quantitative equity investor, has launched the Acadian Sustainable Emerging Markets ex Fossil Fuel UCITS Fund.
The fund is the first of its type to focus on implementing this theme across emerging markets.
Anchored by a significant investment from a UK institutional investor advised by Cambridge Associates, the global investment firm, the fund has been created to help meet growing investor demand for divestment within portfolios, while maintaining investment returns, and ensuring investors are not penalised for investing in a sustainable manner.
Using a combination of third-party data and its own proprietary methods, Acadian has developed a process to identify and exclude companies which own fossil fuel reserves.
In addition to this, Acadian aims to apply screens to ensure that the aggregate carbon emissions applicable to the portfolio will be at least 25 per cent lower than those of the benchmark index. This process extends across Acadian’s 13,000-strong database of companies in the emerging markets.
Acadian’s quantitative approach allows stock selection from across the range of emerging markets including the less efficiently priced small and mid-cap space, where Acadian believes that some of the best opportunities for alpha lie.
In its ongoing analysis of the ESG market, Cambridge Associates has found that ESG factors have helped investors achieve significant outperformance in emerging markets. In the three years since its launch, the MSCI Emerging Markets ESG Index has outperformed its parent index, the MSCI Emerging Markets Index, by a cumulative 12 per cent on a total return US dollar basis. More than 50 per cent of this outperformance was attributable to ESG factors alone. Cambridge Associates has also looked at older data from January 2007 up to the index’s launch in June 2013, and found that ESG ratings were a strong source of stock-specific outperformance during most of this earlier six and a half year period as well.
Kelly Young (pictured), managing director of Acadian Asset Management (UK) Ltd, says: “ESG considerations have decisively moved from the niche to the mainstream, and we have seen a significant growth in confidence within the broad European investment market given the quality of the data now available.
“Responsible investing is an integral part of our investment process and we have long believed that sustainable companies can generate stronger performance over time. Given the growing demand for investors to play their part as active corporate citizens, our aim is to continue developing investor solutions that cater for our clients’ varied ESG requirements, while maintaining scope for strong performance.”
Chris Varco, senior investment director for mission-related investing at Cambridge Associates, says: “We are working with increasing numbers of investors who are looking to incorporate ESG factors in their portfolio. With issues such as the divestment from fossil fuels gaining traction, the Sustainable Emerging Markets ex Fossil Fuel UCITS Fund represents another option in emerging markets for investors considering the impact of climate change on their investments.”
