Performance Attribution for SRI funds
ESG/SRI fund is a growing trend because institutional regulations (1), client demands and link between performance and ESG strategies (2). Among the 4 major ESG investment approaches (3), a multitude of ESG strategies can be proposed. Indeed, in addition to the classics such: Best in Class, Positive or Negative Screening, Thematic, Impact Investing,... the combination of several of them is always a new alternative.
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(1) institutional regulations
(2) studies linking performance and ESG strategies
(3) ESG investments and strategies
Most providers disclose their own ESG Indexes (1). The construction’s methodology is specific for each and Indexes must be selected following the ESG strategy. Given the multitude of possible ESG strategies, the appropriate ESG index may not exist in market standards. Moreover, if the objective is to measure the contribution to the return of a specific ESG strategy, it seems logical to consider an index free of any ESG strategy for this analytics.
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To measure the contribution of the ESG strategy, we propose to use an original model based on a methodology of successive benchmarks. This methodology has a twofold advantage: first, performance measurement is performed against standard indices, which avoids the costs of acquiring specific ESG indices. Second, the method isolates the contribution to performance of the ESG strategy. The method is applied to two ESG strategies, the BEST in Class strategy and the Screening strategy, negative or positive.
This original ESG Attribution methodology has been developed by Philippe Grégoire and presented in the article "Measuring the Contributions of SRI/ESG Investment Strategies". The article was published in the Journal of Performance Measurement, volume 23-4.
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AMINDIS implemented the original ESG atttribution model based on a methodology of successive benchmarks. AMINDIS offers a solution to integrate ESG dimensions in complete outstanding reporting.
The unique and integrated software AM-DIS provides business functions in line with state-of-the art potfolio analysis, including all ESG dimensions.
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