Industry Updates

Research Affiliates launches multi-factor ESG index strategy

The index incentivises companies to report their carbon emissions

George Geddes

a man in a suit

RAFI Indices, the index company of Research Affiliates, has launched a multi-factor index strategy with a focus on climate change.

The RAFI Multi-Factor Climate Transition offers diversified exposures to the value, low volatility, quality and momentum factors.

The factors are incorporated in tandem with integrating objectives related to greenhouse gas emissions reductions and a transition to a low-carbon economy.

The strategy is intended to comply with the Climate Transition Benchmark (CTB) as specified by the EU Commission’s Technical Expert Group.

The Group released a report on two climate benchmarks, the CTB and the Paris-Aligned Benchmark (PAB), as well as ESG disclosure in September 2019.

Another purpose of the strategy is to incentivise companies to start reporting their emissions as they will not be considered for the index unless they do so.

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Vitali Kalesnik (pictured), partner and director of research for Europe at Research Affiliates, commented: “Carbon emissions data are critical to investors’ increasingly important role in helping combat climate change.

“Our research finds that reported data are at least 2.4 times more efficient in identifying the worst emitters compared to the estimated data.”

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