Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

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In our next Smartkarma Webinar, we are delighted to welcome Insight Provider <a href="https://www.smartkarma.com/profiles/kyle-rudden" target="_blank" data-smartkarma-citation="accounts:4495" rel="noopener">Kyle Rudden</a>, to discuss <a href="https://www.smartkarma.com/insights/sustainability-and-esg-indices-a-booming-ecosystem-and-new-investing-and-trading-opportunities" target="_blank" rel="noopener">the rising ecosystem of index providers</a> and the SRI (sustainable and responsible investing) and ESG (Environmental, Social, and Governance) indices and benchmarks they create, enabling the current growth in sustainable investing.
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<h3>The webinar was hosted on Wednesday, 14 April 2021, 17:00 SGT/HKT.</h3>
Subscribe and listen on the go:
<iframe src="https://open.spotify.com/embed/episode/3Ox6p00UpMomMDdQXqDT9B" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe>
<a href="https://www.smartkarma.com/profiles/kyle-rudden" target="_blank" data-smartkarma-citation="accounts:4495" rel="noopener">Kyle Rudden</a> is an ESG (Environmental, Social, Governance) analyst with an alpha-centric approach to ESG research. After all, ESG investing is, first and foremost, investing. "Alpha-centric" does not mean apathetic, however. Quite the contrary. Kyle believes global sustainability – i.e., environmental stewardship, social equality, and economic prosperity – is imperative, and private-sector capital is its cornerstone. Private-sector capital still has fiduciary responsibilities. Profitability is necessary for sustained impact. The Triple Bottom Line. People, Planet, AND Profit.
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In our next Smartkarma Webinar, we are delighted to welcome Insight Provider Kyle Rudden, to discuss the rising ecosystem of index providers and the SRI (sustainable and responsible investing) and ESG (Environmental, Social, and Governance) indices and benchmarks they create, enabling the current growth in sustainable investing.


The webinar was hosted on Wednesday, 14 April 2021, 17:00 SGT/HKT.
Subscribe and listen on the go:

Kyle Rudden is an ESG (Environmental, Social, Governance) analyst with an alpha-centric approach to ESG research. After all, ESG investing is, first and foremost, investing. "Alpha-centric" does not mean apathetic, however. Quite the contrary. Kyle believes global sustainability – i.e., environmental stewardship, social equality, and economic prosperity – is imperative, and private-sector capital is its cornerstone. Private-sector capital still has fiduciary responsibilities. Profitability is necessary for sustained impact. The Triple Bottom Line. People, Planet, AND Profit.


Smartkarma Webinar | Sustainability and ESG Indices: A Booming Ecosystem

Alpha-Centric ESG Research

Kyle Rudden

We see those big numbers in the press, almost daily it seems. About ESG assets under management (AUM) reaching US$40 trillion, expected to hit US$53 trillion by 2025. Or about quarterly ESG fund flows nearing US$100 billion, and the seismic shift in ESG AUM to passively-managed funds.Recent growth in SRI (sustainable and responsible investing) and ESG (Environmental, Social, and Governance) assets and investment products would not be possible without the growing ecosystem of index providers, and the SRI/ESG indices and benchmarks that they create.The ongoing boom in SRI/ESG indexing, which shows no signs of slowing, creates new opportunies for investors – and I do not mean investing in indexed mutual funds or ETFs. Too obvious, and too retail. I am referring to emergent opportunities associated with SRI/ESG index arbitrage.Index rebalancing/reconstitution events often create windows of abnormal returns for constituents being re-weighted, added, or dropped. That much is obvious, and the effects of broad market index changes are well-known. For SRI/ESG indices, this is uncharted territory with huge potential.This Smartkarma Original looks at the evolving SRI/ESG indexing landscape, and more importantly the emergent investing (e.g., stocks of listed indexers) and trading (e.g., arbitraging index changes) strategies arising from this global boom in SRI/ESG indices... from an Original perspective.<h2>WHAT'S ORIGINAL?</h2>Typically, discussions about SRI/ESG indices focus on their performance and in the context of that age-old "ESG-Alpha" debate – i.e., whether incorporating ESG factors into the investment process is worth the effort. To be clear, that is an important debate to have (and win). However, this report takes a different angle on SRI/ESG indices by focusing on investing and trading and strategies that capitalise on the boom in SRI/ESG indices. Theory (and a little speculation) backed by analysis.

We see those big numbers in the press, almost daily it seems. About ESG assets under management (AUM) reaching US$40 trillion, expected to hit US$53 trillion by 2025. Or about quarterly ESG fund flows nearing US$100 billion, and the seismic shift in ESG AUM to passively-managed funds.Recent growth in SRI (sustainable and responsible investing) and ESG (Environmental, Social, and Governance) assets and investment products would not be possible without the growing ecosystem of index providers, and the SRI/ESG indices and benchmarks that they create.The ongoing boom in SRI/ESG indexing, which shows no signs of slowing, creates new opportunies for investors – and I do not mean investing in indexed mutual funds or ETFs. Too obvious, and too retail. I am referring to emergent opportunities associated with SRI/ESG index arbitrage.Index rebalancing/reconstitution events often create windows of abnormal returns for constituents being re-weighted, added, or dropped. That much is obvious, and the effects of broad market index changes are well-known. For SRI/ESG indices, this is uncharted territory with huge potential.This Smartkarma Original looks at the evolving SRI/ESG indexing landscape, and more importantly the emergent investing (e.g., stocks of listed indexers) and trading (e.g., arbitraging index changes) strategies arising from this global boom in SRI/ESG indices... from an Original perspective.WHAT'S ORIGINAL?Typically, discussions about SRI/ESG indices focus on their performance and in the context of that age-old "ESG-Alpha" debate – i.e., whether incorporating ESG factors into the investment process is worth the effort. To be clear, that is an important debate to have (and win). However, this report takes a different angle on SRI/ESG indices by focusing on investing and trading and strategies that capitalise on the boom in SRI/ESG indices. Theory (and a little speculation) backed by analysis.

Sustainability and ESG Indices: A Booming Ecosystem and New Investing and Trading Opportunities

The collective carbon footprint of global freight transportation and logistics is utterly massive, and growing. Freight and logistics accounts for 10-15% of the world's greenhouse gas (GHG) emissions, or 3.4-5.1 billion tonnes of carbon dioxide (CO2) per year of the world's 34 billion-tonne total. Current GHG mitigation and decarbonisation policies will be enough to fully offset GHG emissions from expected growth in freight transportation and logistics. Projections suggest a 60-80% increase in emissions by 2050, when a decrease of 55-80% is needed to meet the Paris Agreement goals.Climate impacts of trade growth are compounded by how it will shift freight movement from North Atlantic to Indian Ocean corridors, increasing average distances 12%. More critical is the local leg; 10% by tonne-kilometres but 30% of GHGs (inland modes like trucking are more GHG-intensive).On a company level, carbon footprint – present and future – depends on several things. Aside from macro issues like regional fuel mix and climate policies, two big factors are: 1) a company's specific function (e.g., freight trains vs. logistics software), and 2) its decarbonisation initiatives.The collective carbon footprint is a major ESG issue but we should not apply a broad-brush. Freight and logistics companies are vital to the economy and deliver life-critical goods like medication and food. Moreover, companies like <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> – are leading a "greening" of supply chains.This is an important ESG issue to watch, but not an "exclusionary screen" by any means.

The collective carbon footprint of global freight transportation and logistics is utterly massive, and growing. Freight and logistics accounts for 10-15% of the world's greenhouse gas (GHG) emissions, or 3.4-5.1 billion tonnes of carbon dioxide (CO2) per year of the world's 34 billion-tonne total. Current GHG mitigation and decarbonisation policies will be enough to fully offset GHG emissions from expected growth in freight transportation and logistics. Projections suggest a 60-80% increase in emissions by 2050, when a decrease of 55-80% is needed to meet the Paris Agreement goals.Climate impacts of trade growth are compounded by how it will shift freight movement from North Atlantic to Indian Ocean corridors, increasing average distances 12%. More critical is the local leg; 10% by tonne-kilometres but 30% of GHGs (inland modes like trucking are more GHG-intensive).On a company level, carbon footprint – present and future – depends on several things. Aside from macro issues like regional fuel mix and climate policies, two big factors are: 1) a company's specific function (e.g., freight trains vs. logistics software), and 2) its decarbonisation initiatives.The collective carbon footprint is a major ESG issue but we should not apply a broad-brush. Freight and logistics companies are vital to the economy and deliver life-critical goods like medication and food. Moreover, companies like JD Logistics (JDL HK) – are leading a "greening" of supply chains.This is an important ESG issue to watch, but not an "exclusionary screen" by any means.

Carbon Footprint of Freight Transportation and Logistics and Other ESG Issues

Last week's announcement by Singapore Exchange – regarding its launching four FTSE ESG Index futures – is a really big deal for SGX. Not that it will not solve all of SGX's problems overnight; the liquidity-building takes time, and four ESG contracts won't make up for all those lost MSCI trades.Nonetheless, these ESG futures contracts are "worth" more than one might think, in two ways. For SGX FIRST, the launch proves its ability to execute. For SGX in general, it's a much-needed boost – financial and psychological – after last year's MSCI losses.I will be publishing a series of on various ESG investment products, starting with derivatives (very soon). That will provide additional detail.

Last week's announcement by Singapore Exchange – regarding its launching four FTSE ESG Index futures – is a really big deal for SGX. Not that it will not solve all of SGX's problems overnight; the liquidity-building takes time, and four ESG contracts won't make up for all those lost MSCI trades.Nonetheless, these ESG futures contracts are "worth" more than one might think, in two ways. For SGX FIRST, the launch proves its ability to execute. For SGX in general, it's a much-needed boost – financial and psychological – after last year's MSCI losses.I will be publishing a series of on various ESG investment products, starting with derivatives (very soon). That will provide additional detail.

SGX FIRST Launches ESG Futures Putting It in the Company of ESG Derivatives Leaders ICE and Eurex

Last week, <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">Singapore Exchange (SGX SP)</a> made a momentous <a href="https://www.sgx.com/media-centre/20201215-sgx-strengthens-commitment-sustainability-s20-million-plan" target="_blank" rel="noopener">announcement</a> in the sphere of Asian sustainable/ESG finance and investing. <a href="https://first.sgx.com" target="_blank" rel="noopener">SGX FIRST</a> is its new multi-partner sustainability initiative. The acronym, FIRST, is for "Future in Reshaping Sustainability Together," but it says so much more.SGX FIRST, puts SGX first, in the ranks of Asia's most sustainable stock exchanges.This is different. SGX FIRST is a well-conceived, high-level, strategic sustainability initiative on an entirely different plane than the many "platform" launches of late. It is indeed part platform, but to view it as only that misses its essence entirely. SGX FIRST stands out in three interrelated ways:<ol>
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Intelligent: Unlike "me-too" ESG portals, SGX FIRST is an integrated strategic plan leveraging existing strengths, products, and relationships. It's making progress, not even a week out.</li>
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Impactful: Intelligent design and synergies-galore should translate into real impact; the ability for SGX FIRST to foster and shape sustainable capital markets in Singapore, and APAC.</li>
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Profitable: Yet to be seen, but likely. This is the stuff of virtuous cycles, from establishing ESG domain authority to licensing fees and other incomes. Altruistic capitalism, but capitalism.</li>
</ol>In this game of ESG "platforms," SGX is playing chess, whilst others chew on checkers.In light of pandemic-induced hard times for SGX, this may be what the doctor ordered.

Last week, Singapore Exchange (SGX SP) made a momentous announcement in the sphere of Asian sustainable/ESG finance and investing. SGX FIRST is its new multi-partner sustainability initiative. The acronym, FIRST, is for "Future in Reshaping Sustainability Together," but it says so much more.SGX FIRST, puts SGX first, in the ranks of Asia's most sustainable stock exchanges.This is different. SGX FIRST is a well-conceived, high-level, strategic sustainability initiative on an entirely different plane than the many "platform" launches of late. It is indeed part platform, but to view it as only that misses its essence entirely. SGX FIRST stands out in three interrelated ways:

Intelligent: Unlike "me-too" ESG portals, SGX FIRST is an integrated strategic plan leveraging existing strengths, products, and relationships. It's making progress, not even a week out.

Impactful: Intelligent design and synergies-galore should translate into real impact; the ability for SGX FIRST to foster and shape sustainable capital markets in Singapore, and APAC.

Profitable: Yet to be seen, but likely. This is the stuff of virtuous cycles, from establishing ESG domain authority to licensing fees and other incomes. Altruistic capitalism, but capitalism.
In this game of ESG "platforms," SGX is playing chess, whilst others chew on checkers.In light of pandemic-induced hard times for SGX, this may be what the doctor ordered.

SGX FIRST Puts SGX First in the Ranks of Asia's Most Sustainable Stock Exchanges

United States

MSCI Inc. provides investment decision support tools to investment institutions worldwide. The Company produces indices and risk and return portfolio analytics for use in managing investment portfolios.

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MSCI Inc (MSCI US)

Smartkarma Webinar | Sustainability and ESG Indices: A Booming Ecosystem

On 14 April, 5pm SGT, we welcome Insight Provider Kyle Rudden to discuss the growing ecosystem of SRI-ESG index providers that enable the current...

Smartkarma Research

Sustainability and ESG Indices: A Booming Ecosystem and New Investing and Trading Opportunities

Index rebalancing and reconstitution often creates a window of abnormal returns (and opportunity). For broad market indices, these effects are well...

Kyle Rudden

Carbon Footprint of Freight Transportation and Logistics and Other ESG Issues

The carbon footprint of global freight and logistics is large, growing, and a source of ESG risk for investors. Fortunately, firms like JD...

Kyle Rudden

SGX FIRST Launches ESG Futures Putting It in the Company of ESG Derivatives Leaders ICE and Eurex

SGX's lauch of ESG futures is a big deal. It proves SGX FIRST's ability to execute, and softens the pain of MSCI losses.

Kyle Rudden

SGX FIRST Puts SGX First in the Ranks of Asia's Most Sustainable Stock Exchanges

"What's in a name? "asked Shakespeare. Quite a lot, when the name "SGX FIRST." FIRST is an acronym, but it also makes a bold statement; that SGX is...

Kyle Rudden

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