Willis Towers Watson launches “broad” ESG strategy

The launch follows a study which warned that some ESG indices make it tricky to spot whether outperformance is from the ESG tilt.


Joe McGrath

Investment consultant Willis Towers Watson has announced the launch of a new broad ESG strategy, developed with index provider MSCI.

The Adaptive Capped ESG Universal Index is designed for investors seeking to incorporate a “broad range” of ESG factors within their investment portfolio rather than focussing on one specific issue, the company said in a statement.

Developed and emerging markets are included in the strategy, where capital is invested in companies with strong and improving ESG attributes, while those failing to meet minimum ESG standards will be excluded.

Willis Towers Watson said that more than £500 million has already been invested in the strategy from defined benefit and defined contribution pension clients, on top of the £2 billion already invested in the MSCI Adaptive Capped 2x Index family.

The launch comes several weeks after ESG Clarity reported on research from Axioma which raised questions about the use of dedicated ESG indices in a study published in August.

The report claimed that traditional approaches to ESG index construction could lead to a “fairly large set of unintended bets on other risk factors” which may make it difficult for investors to identify how much of their outperformance was from adopting an ESG tilt to their portfolio.

However, in launching the latest strategy, Craig Baker, global chief investment officer at Willis Towers Watson, claimed this latest strategy was “a mainstream sustainability solution”.

He said: “We have long been advocates of sustainable investing. We see the launch of this strategy as a big step forward.  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 at MSCI added: “We are pleased to see more investors using ESG indexes to manage long-term risk-return drivers and encourage effective stewardship and responsible ownership.”



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