Systematica recognises that certain asset classes present a more effective opportunity than others to implement ESG considerations - i.e. equities. Notwithstanding this, Systematica is committed to looking to include ESG considerations across all asset classes and strategies to the extent that it is able to do so. For asset classes where ESG considerations are at an earlier stage of development, a formal ESG approach is currently being considered and Systematica is evaluating the most effective way to integrate these in its investment decision making process. As an example, an approach on how to measure exposure to climate risk and carbon footprint is currently being developed.
For equities in specific, Systematica’s research team continuously evaluate multiple sources of ESG raw and derived data - whether this is data voluntarily disclosed by issuers as part of their sustainability fillings or collected by experts in the field - with the goal of obtaining the best possible indicators to incorporate in our systematic investment approach.
The current ESG integration process consists in using a prorietary ESG score as a factor alongside the alphas in the portfolio construction process. All else being equal, more sustainable holdings should be preferred.
Our proprietary ESG score consists in selecting a small set of material measures in each industry. To this end, Systematica Investments GP Limited licenses and applies the SASB Materiality Map® General Issue Categories in our work. For each industry and each material measure, we perform a relative ranking of issuers on their level and improvements along these dimensions and combine these rankings within the industry. This includes the identification and triage between ‘best in class’ (i.e. companies selected for positive ESG performance relative to industry peers) and ‘worst offenders’ (i.e. companies that significantly underperform their industry peers).
Furthermore Systematica is currently developping monthly climate-related reporting to be deployed across all funds trading equities and plans to investigate ESG integration for fixed income investments.