This allocation is specifically reflected in our Chief Investment Office (CIO) Sustainable Hybrid Impact and Core Impact model portfolios which were introduced in May 2015 and June 2018, respectively. Once we’ve selected strategies that meet both our Impact and Risk/Return Criteria, we then use them to build portfolios of Mutual Funds and Exchange Traded Funds (ETF) available for implementation.
The CIO Sustainable Hybrid Impact and Core Impact model portfolios seek to deliver a positive risk-adjusted return as well as a positive ESG profile relative to a traditional, non-ESG focused, benchmark.
The portfolios are constructed with the goal to balance active risk between asset allocation and fund selection, where typically funds with low tracking error are overweighted. The portfolios are optimized to minimize tracking error while targeting return through beta and alpha, with a positive ESG tilt.
It should be noted that the portfolios may include companies within sectors or industries that may not meet certain environmental or social client preferences, as the strategy managers and MSCI ESG Research use a variety of methodologies to assess a company’s ESG profile.