ESG exclusion for index investors.
As more and more investors now agree that passive index funds are usually preferential over active funds, many investors struggle to implement their ESG-policy when invested in ETFs and other index funds. The problem is that when you invest in an index fund you invest in all the companies in the index, including the ones you do not want to invest in.
INSTITUTIONAL ESG-hedging overlay
In 2014 Quantrust started offering ESG-neutralisation to institutional investors as a way to overcome this problem. Quantrust first calculates the indirect look-through exposure of the whole investment portfolio, containing both passive and active funds and mandates, to the companies on the client's ESG-exclusion list. It then creates an ESG-hedging overlay, by shorting the companies on the list for the size of their exposure in the total portfolio. The ESG-overlay neutralises the exposure to the controversial companies. Quantrust has vast experience shorting companies this way due to its experience running long-short funds.
ESG-neutralisation is offered to institutional investors as a stand-alone service. Quantrust can cater its policy to any ESG-criteria, as long as the controversial company equities are readily available to short.