Willis Towers Watson has worked with MSCI, a provider of indexes and portfolio construction and risk management tools and services, to develop of a new investment strategy emphasising the importance of integrating Environmental, Social & Governance (ESG) factors within the investment process.
This strategy is part of the Willis Towers Watson belief that the principles underlying sustainable investments (long-term strategies that integrate ESG factors and effective stewardship) form the cornerstone of a successful investment strategy and should be a key part of all investors’ approaches.
Willis Towers Watson has worked with MSCI to establish an Adaptive Capped ESG Universal Index. The strategy offers a simple and differentiated way to invest in equities. The approach is suitable for many investors who are looking to manage a broad range of ESG factors within their investments rather than those focusing on a particular issue.
The strategy invests in both developed and emerging markets with a highly diversified portfolio that spreads capital and risk more evenly between stocks compared to a traditional index strategy (where large capital and risk allocations go to the largest companies). It also invests more in companies with strong and improving ESG attributes. It will exclude a small number of companies that fail to meet minimum ESG standards. This means that investors retain the ability to proactively engage with individual companies to drive change.
A number of defined benefit and defined contribution clients have already committed over GBP 500 million of capital to invest in the strategy as part of their core public equity allocations.
These assets join the existing GBP2 billion invested in the MSCI Adaptive Capped 2x Index family.
Craig Baker (pictured), Global Chief Investment Officer, Willis Towers Watson, says: “We have long been advocates of sustainable investing. We see the launch of this strategy as a big step forward in providing a mainstream sustainability solution for investors. We are really excited to see the progress the investment industry is making in this area and proud to be one of the organisations leading this change.”
Deborah Yang, Global Head of ESG Indexes, MSCI, says: “We are pleased to see more investors using ESG indexes to manage long-term risk-return drivers, and encourage effective stewardship and responsible ownership. MSCI is proud to support Willis Towers Watson’s ESG strategy.”