Net Zero and the Enhanced Approach to EM Equities

    by Simon Roe, Co-Head of Portfolio Management, Toby Warburton, Co-Head of Portfolio Management and Chen He, Senior Quantitative Equity Research Analyst, Active Quantitative Equity, State Street Global Advisors

    The characteristics of emerging markets (EM) equities bring key challenges and opportunities for investors considering a net zero, or climate-aware, approach. State Street Global Advisors’ Active Quantitative Equity (AQE) team sought to determine whether investors can address their net zero objectives without sacrificing the risk and return characteristics of an “enhanced,” or low-risk active, approach in EM equities.

    By utilizing the natural active risk within the enhanced framework, the AQE team was able to integrate climate objectives with only a marginal change in the overall tracking error relative to the benchmark; this approach also preserved the information ratio and fee efficiency characteristics of an enhanced approach.

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    Image courtesy of Denys Nevozhai on Unsplash

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