The free-to-use applications are designed to help professional investors integrate ESG into investment decisions in a more meaningful way
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Spotted: Twenty-two per cent of professional investors in a recent survey by the UK Investment Association (IA) reported that they integrate environmental, social, and governance (ESG) factors into at least 75% of their portfolios. And this figure is set to grow over the next two years. Indeed, the IA states that ESG investing is growing faster than the industry body expected. But how can ESG be meaningfully integrated into the nuts and bolts of investment decision-making?
To sustainable wealth manager Arvella Investments, risk-adjusted returns are the key to ESG integration being taken seriously. Arvella felt that existing ESG integration tools were not sufficiently focused on this all-important metric – so they built their own.
The innovative new solution—ESGforInvestors.com—was developed with input from fellow investors and academics and is designed to complement existing risk and analytics software.
The software is free-to-use and currently comprises two tools. Since the 1950s, investors have been using ‘portfolio optimisers’ that seek a balance between risk and return. The first tool from Arvella integrates the third dimension of ‘impact’ into this trade-off. The second allows investors to take a dataset and identify which two or three ESG improvements could boost each company’s value the most.
In addition to the free tools, Arvella will partner with other investment companies, integrating verified research into its own data.
“This tool is a potential game changer for effective engagement,” argues Benoît Mercereau, CIO at Arvella Investments. “Not only does it sharpen investor focus, but the notion of ‘more money’ is likely to prove more persuasive with management and shareholders than ‘more impact’, creating a virtuous circle between impact and returns.”
Green investment is becoming big business, and, at Springwise, we have spotted several innovations focused on sustainable investing. These include an equity crowdfunding platform for socially responsible investing, and the world’s first nature-backed financial instrument.
Written by: Matthew Hempstead