Industry Updates

Ossiam takes machine-learning leap into ESG

Scott Longley

Ossiam has launched an ESG fund where the selected equities will be chosen using a machine-learning algorithm that can rank companies according to data-based criteria.

This is a first for a European-based smart beta ESG ETF and marks what the company suggests is a "turning point" for ESG-based investment.

The Ossiam World ESG Machine Learning UCITS ETF will aim to deliver the net total return of a selection of equities in global developed markets. The selection of the companies will be fine-tuned by the algorithm as it learns from the data.

"A clear trend has emerged of large equity investors putting ESG at the core of their allocation decisions, said Antonio Celeste, head of ESG business development at Ossiam.

"At the same time, progress in artificial intelligence, and the increased depth and quality of data, has enabled us to improve investment processes by incorporating the valuable information embedded in large amounts of ESG data."

Ossiam says the strategy's investment process is systematic and begins with an ESG filter first excludes equities that:

  • Have undergone severe controversies

  • Are involved in controversial weapons business

  • Have significant operations in the tobacco or coal industries

  • Are not compliant with the Ten Principles of the UN Global Compact

  • Are excluded by the Norges Bank Investment Management list

The remaining equities are then screened using machine-learning techniques that enable integration and processing of a large set of ESG and financial data in order to select equities showing a distinct link between ESG characteristics and potential future financial performance.

"It has always been Ossiam's mission to drive the investment industry forward," said Bruno Poulin, chief executive at the company. "This strategy and ETF mark a key turning point in combining ESG principles with advanced investment techniques as we reach a tipping point for ESG, driven by policy makers, regulators and investors."

The ETF will be available in January 2019 in USD and EUR share classes on the Deutsche Börse XETRA exchange with the ticker symbol OWLU and OWLE. The fund has a total expense ratio of 0.65%. The fund is domiciled in Ireland using an ICAV structure.

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