Sustainable investment strategies are on the rise – but as an institutional investor, the multitude of different approaches and regulatory classification standards make categorisation and overview difficult. There is no single standard for the absolute quantitative assessment of a company’s sustainability.
Quoniam has developed an investment approach for global equities that seeks to remove subjectivity and emotion from the topic of sustainability and instead focuses on standardised measurability.
Together with Effectual Capital, Quoniam has applied an innovative investment approach that is based on externalities and thus makes the sustainable cost-benefit calculation of a company measurable. Not only CO2, but also water, waste production and social factors are taken into account.
-
Advantages of the Quoniam solution
-
Measurable Compared to strategies that focus on ESG scores, exclusion criteria and thematic investment approaches, this strategy offers a standardised and holistic assessment of sustainability criteria and risks based on transparent data. -
Diversified The broadly diversified portfolio, which is close to the benchmark, makes our strategy suitable as a core investment for long-term investors.
-
Forward looking With increasing regulatory pressure on the industry and capital markets, stock prices may benefit from repricing.
-
Proven Our bottom-up analysis is based on scientific findings with proven application: We combine equity factors and externalities.
-
The strategy in numbers
Calculations per day
Companies are considered
Information per security
From Theory to Investment Solution
The theory of externalities is recognised in science, politics and business as a method for assessing sustainability issues. It therefore makes sense to use it as a basis for investment analysis and decisions.
-
What are Externalities?
Externalities are costs (or, less commonly, benefits) caused by the economic use of a public good by individuals, which are borne in part or in full by the general public without compensation.
-
Externalities in economics
In the 1920s, the English economist Arthur Cecil Pigou coined the term “externalities” and relied on the state to resolve the resulting conflicts. The level of his “Pigou tax” was designed on one hand to compensate for the costs and not place too great a burden on companies.
Around 40 years later, the US economist Ronald Coase looked at the amount of a possible tax to compensate for external effects and proposed a market mechanism for pricing them. He was awarded the Nobel Prize in 1991 for his work in this field, which forms the economic basis for today’s CO2 emissions trading.
-
What external effects are considered in the strategy?
The Effectual Capital externalities model currently considers four environmental and four social externalities groups. Realistic prices were determined for all external effects in a scientific project lasting several years. For this purpose, not only international scientific research results were used, but also data from government organisations and the private sector in order to enable consistent and realistic pricing.
“This co-operation is a good example of how we are tailoring our ESG data expertise to our clients’ needs.”
Jonathan Clenshaw,
CSO & CMO
Science-based cooperation
Effectual’s externalities model is integrated into Quoniam’s investment process. While Effectual introduces the prices for externalities, Quoniam forecasts the financial return and adjusts this for the respective positive and negative externalities of a company’s economic activity. The result is the “sustainable return” or Effectual® Sustainable Return, ESR.
About Effectual
Effectual Capital stands for economically effective sustainable investing based on the theory of externalities and enables efficient capital allocation for the transformation to a sustainable economy. The core of the approach is the Effectual® Sustainable Return. Effectual is backed by the family office Perpetual Investors GmbH.
Conclusion
Effectual Capital Fund SICAV S.A. –
Global Sustainable Equities
-
-
Transition Philosophy Focus on reassessing and reweighting companies rather than focusing on exclusions. -
Verifiable and measurable criteria Measurable criteria that are collected and interpreted quantitatively and are intended to generate a sustainable return (Effectual® Sustainable Return).
-
Holistic approach Integration of environmental and social criteria in a holistic approach with economic evaluation of external returns and costs.
-
