SI Indexes: Top-Down Targets Or Bottom-Up Aesthetics?
Authors
Andrew Dougan & Elizaveta Nebykova
FTSE Russell
Report Date
June 1, 2021
Document summary
A debate is brewing as to whether headline (or “top-down”) Sustainable Investment (SI) targets, such as carbon emission reductions or ESG uplifts, are inconsistent with stock level (or “bottom-up”) conditions required for successful corporate engagement.
In this paper, the authors present a transparent portfolio construction technique that:
- Allows multiple and precisely set portfolio level SI targets to be achieved
- Has the flexibility to include various stock level constraints and exclusions
- Retains a simple relationship between stock weighting and SI characteristics that is essential for engagement purposes.
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