Ossiam has launched a new smart beta ETF in Europe – the Ossiam World ESG Machine Learning UCITS ETF – which uses machine learning techniques to provide ESG-focused exposure to global developed market stocks.
Bruno Poulin, CEO of Ossiam.
Antonio Celeste, Head of ESG Business Development at Ossiam, said, “A clear trend has emerged of large equity investors putting ESG at the core of their allocation decisions. At the same time, progress in artificial intelligence, and the increased depth and quality of data, has enabled us to improve investment processes by incorporating the valuable information embedded in large amounts of ESG data.”
Although the fund is technically actively managed, its investment process is largely systematic. Within a large-capitalisation global developed equity universe, the fund first uses an ESG filter that excludes firms that have undergone severe controversies, are involved in controversial weapons, have significant operations in the tobacco or coal industries, are non-compliant with the Ten Principles of the UN Global Compact, or are excluded by the Norges Bank Investment Management list.
The remaining equities are then screened using machine learning techniques in order to select firms showing a distinct link between ESG characteristics and potential future financial performance. Securities classified as opportunities are considered for selection by the fund’s managers.
The last stage of the process applies Ossiam’s minimum variance portfolio construction technique which is used throughout several of the firm’s existing funds.
According to Ossiam, the resulting portfolio exhibits an improved ESG rating, as well as a reduced carbon footprint, compared to the broad global developed market universe.
Bruno Poulin, CEO of Ossiam, said, “It has always been Ossiam’s mission to drive the investment industry forward. This strategy and ETF mark a key turning point in combining ESG principles with advanced investment techniques as we reach a tipping point for ESG, driven by policymakers, regulators, and investors.”
The ETF will be available in January 2019 in USD and EUR share classes on Deutsche Börse Xetra under the tickers OWLU GY and OWLE GY respectively.
The fund has a total expense ratio of 0.65%.