Global asset manager Aberdeen Standard Investments (ASI) announced today the launch of the ASI Sustainable Index funds, a suite of funds within a tax efficient Authorised Contractual Scheme (ACS) structure, targeting pension funds and other institutional investors.
According to ASI, sustainable index funds each track customised MSCI sustainable equity indices that have been developed for the asset manager to provide materially improved, broad-based sustainability outcomes. The indices utilize exclusion screens for companies with significant sustainability risks including those engaged in and/or demonstrating very severe ESG controversies such as UN Global Impact fails, controversial weapons, tobacco production and distribution, thermal coal and unconventional oil and gas.
In addition, the funds target materially-improved sustainability outcomes at the portfolio level through enhanced aggregate ESG scores (by 10-20%), improved green revenue exposure (by 50%), and reduced carbon intensity (by 50%), relative to the applicable parent index.
David Wickham, Global Head of Quantitative Investment Solutions at Aberdeen Standard Investments, said:
“The ASI Sustainable Index funds, and our customised MSCI sustainable equity indices that they track, are designed to provide institutional investors with an opportunity to address their sustainability concerns through traditional indexation. Our sustainable index funds target broad improvements in sustainability outcomes – enhanced portfolio-level ESG scores, increased ‘green’ revenues, and reduced carbon intensity in addition to specific (financially-based) exclusions – with risk controls to retain the benefits of traditional indexing. Accordingly, they may represent a suitable core investment with the added benefit of tax transparency for fund investors.”
ASI stated that the suite will include seven funds, with the ASI Sustainable Index World Equity Fund and ASI Sustainable Index UK Equity Fund launching today, the ASI Sustainable Index Emerging Markets Equity Fund rolling out in Q1 2021, and the remaining four funds potentially launching in 2021, tracking Asia Pacific ex-Japan, Europe ex-UK, Japan and USA MSCI Select ESG Climate Solutions Target Indices. The sustainable index funds are managed by the QIS indexation team who currently manage £37 billion in index assets across equity and fixed income.
Caroline Silander, Head of Equity Indexation at Aberdeen Standard Investments, commented:
“The QIS team has been managing indexation strategies with a demonstrable track record of success on behalf of sophisticated institutional investors for over 15 years. The launch of our sustainable indexation range is a natural extension of our market-leading indexing capability and, while there are a growing number of sustainable equity indices to choose from, we felt there was a gap in the market as many index designs tend to be highly specific in their purpose. However, these approaches often induce greater tracking error and greater index/portfolio turnover than we believe is justifiable for those seeking a broad market-capitalisation weighted indexing approach.”