Why don’t you eliminate low-scoring companies or disagreeable industries from your indices?
Posted on September 21st, 2016 by OWLinsights
A big part of our business is building indices for clients. These indices sometimes eliminate low-scoring companies or disagreeable companies. For members of the OWL Benchmark Family of Indices, we’ve chosen to optimize by ESG scores, which sometimes eliminates companies with lower ESG scores and sometimes lowers exposure to negatively scoring industries. However, we believe wholesale elimination is not an advisable approach.
Our mission is to identify companies that do a better job managing their ESG risks and opportunities, independent of industry or business model. These companies show better long-term viability compared to their peers. Compared to peers, they also actively work to reduce their environmental footprint, operate their businesses in a more socially conscious fashion, and manage themselves with strong governance. This makes the world a better place.
Our inclusive strategy maintains good market exposure, reducing risks inherent in strategies that screen our certain industries or companies. By optimizing our indices in favor of higher ESG scores, we reward good behavior; by reweighting as we update scores, we reward improvement.