At ROBO Global, it’s an easy question to answer. We’ve understood the need for transparency from day one. To provide investors with the ‘open window’ they desire and keep the index aligned with our own values, ROBO Global began by building a clear ESG filter into the core of our ROBO Global Industry Classification Methodology. By doing so, the performance of the index is tilted toward ESG from the start. We identify a universe of technologies and applications that are suitable for inclusion in the index. We then apply ESG risk ratings from Sustainalytics, a global leader in ESG and Corporate Governance research and ratings. Using that input and additional information from Bloomberg and the knowledge of our Strategic Advisory Board, we ensure that every index member is appropriate for inclusion in portfolios with even the strictest of ESG conformance requirements. Today, ROBO Global is the only robotics index with an ESG Policy that is built into its selection criteria.
Ultimately, ESG is about much more than simply punishing companies that don’t comply or promoting environmental and social change. It’s also about assessing the non-financial factors that can potentially dampen returns. Environmental policies affect future profitability by impacting a company’s ability to be energy and resource efficient and to thrive in the future. Social policies dictate how effective a company is at contributing to society, attracting and retaining top talent, and appealing to increasingly ESG-conscious consumers. Governance policies—which include compliance standards and regulatory adherence—can directly affect profitability and stock market valuations. Combined, ESG is about identifying and investing in stocks that are positioned to thrive in a world that is increasingly conscious about environmental and social issues that impact us all.
The alignment between the companies within the ROBO Global Index Series and ESG is a key reason investors eyeing robotics and AI are so interested in our offering. Here in the UK, our index partner has one of the most forward-thinking ESG visions in the industry. The company’s vision is “to encourage positive change in the companies and markets in which we invest,” and their focus on active ownership that uses their “scale and influence to bring about real, positive change to create sustainable investor value” seems to carry through in everything they do. This level of commitment to ESG is growing every day, and the next generation of investors will only increase the importance of this mandate.
Transparency in every aspect of a company’s operations is the new norm. That’s great news for corporate and retail investors who are seeking to invest in companies that are helping to improve our world and to increase long-term investment returns. As ESG grows to become a truly global mandate, that transparency will be key to ensuring that every investment is aligned with the investor’s own values, the values of their customers, and the need to create a portfolio that is designed to thrive in the future.
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