Frankfurt-based index engineering firm Solactive AG and AI-driven ESG data specialist, Truvalue Labs, have joined forces to create a ground-breaking series of ESG Indices designed to provide investors with diversified exposure to global large- and mid-cap equities with strong ESG characteristics. The move reflects a growing demand from the global investment community for measures that analyse the vast quantities of unstructured ESG information now available.
As the topic of EGS gains significant traction amongst financial professionals, many different solutions have emerged, offering the financial industry a diverse set of ESG options. While being spoiled for choice benefits some investors, others are lost in the maze of alternatives that are virtually interchangeable. One ESG provider that does not fall into this category is San Francisco-based ESG provider Truvalue Labs. The company’s unique selling point is its sophisticated artificial intelligence algorithm, which parses big data from more than 115,000 sources and produces ESG metrics in real-time. Hence, it is located at the intersection of three crucial trends driving modern-day investment decisions: AI, Big Data, and ESG. Leveraging new technology, Truvalue Labs bypasses conventional company disclosures and, therefore, gains an independent perspective on a company’s ESG performance.
“Since investor confidence in ESG data is a matter of trust, its two most crucial factors are timeliness and quality,” says Timo Pfeiffer, CMO at Solactive. “As an index provider focused on innovation, we found an ally in Truvalue Labs, which also believes in the power of big data and artificial intelligence. As kindred spirits, we are looking forward to bringing this new and innovative index series to life!”.
The composition of the first index deployed by Solactive and Truvalue Labs is the Solactive Truvalue ESG United States Index. It builds on the Solactive GBS United States Large & Mid Cap USD Index, which covers a broad universe of more than 500 US large and mid-cap stocks. In the first stage, companies classified in controversial industries such as Oil and Gas production, Coal mining, or Tobacco are excluded from the index. The exclusions are based on SASB´s Sustainable Industry Classification System (SICS).
Based on Truvalue Labs’ data, the remaining companies are ranked via the ESG provider’s proprietary Volume and Insight Scores. The stocks constituting the final index are weighted according to their free-float market capitalisation.
“Truvalue Labs’ technology-driven approach generates current, consistent, and relevant ESG signals. We’ve experienced rapid adoption of our real-time ESG information by leading asset owners and managers,” said Thomas Kuh, Head of Index at Truvalue Labs. “Now, we are very pleased to work with Solactive, the leading independent index provider, to offer investors transparent and cost-efficient exposure to Truvalue’s unique ESG factors through these indices.”
