Scientific Beta’s pension fund-friendly low carbon/multi-factor indices

Scientific Beta said being able to integrate ESG policies into investment strategies is now a prerequisite for pension funds as it announced the launch of two multi-factor indices that marry the academic rigour of their work on factors with the low carbon aims of new client SACRA, a pension fund for the French insurance sector.

The Scientific Beta SACRA US and Eurozone Low Carbon Multi-Factor Indices have been launched this week as part of the reorganisation of the management of SACRA’s equity portfolio.

Erik Christiansen, a senior consultant at Scientific Beta, said that the smart beta platform provider was seeing increasing demand for factor strategies that take ESG considerations into account.

“Over a third of the assets replicating our smart factor indices already apply an ESG and/or low-carbon filter,” he said.

“And among European pension funds, being able to integrate their ESG policies has almost become a prerequisite. This trend has only strengthened itself since EDHEC (Scientific Beta’s parent) designed its first ESG-compliant smart-beta index for the French pension fund ERAFP in 2011.”

ERAFP, he said, is “well known for being a precursor and a vocal promoter in the responsible investing space.”

Scientific Beta said today that SACRA’s equity portfolio reorganisation meant the US equity portfolio, and part of the Eurozone equity allocation, are now invested to track these two new multi-factor indices from Scientific Beta.

Both indices apply a low-carbon filter to enable  significant reduction in the strategies’ carbon intensities.

The rest of SACRA’s Eurozone equity portfolio remains managed by four traditional stock-picking asset managers, but these are also benchmarked against the Scientific Beta SACRA indices, both in terms of financial performance and carbon intensity reduction.

Stève Baumann, chairman of the board of SACRA, said this benchmarking was an important element of the deal. “We are very pleased to be doing so,” he added.

Scientific Beta said this means the expectations placed on SACRA’s other asset managers are much more demanding, both in terms of financial value added and climate change mitigation, than when standard cap-weighted benchmarks are used.
Noël Amenc, chief executive of Scientific Beta, said that reconciling low carbon and multi-factor investing is the fruit of an R&D process that their researchers in both Singapore and Nice have been conducting for many years.

“It is one of the top priorities for Scientific Beta, because the fight against climate change is one of our main corporate missions,” he added.

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