The tools are designed to be used alone, or to complement existing sustainable risk rating and analytics solutions.
Arvella believed that existing tools to integrate ESG in portfolios were not sufficiently focused on what matters most to investors: risk-adjusted returns, leading it to develop its own investment tools in conjunction with fellow investors1 and scholars from top institutions.2
As well as offering the tools to other investors without charge, Arvella will partner with them, integrating verified research3 into its own data. The first investor partner is Fulcrum Asset Management, which has joined as both a user of the tools, and a contributor to the research.
The free tools available at launch on the website are: 3D (Risk-Return-Impact) Portfolio Optimisers and the ESG Engagement Maximiser.
The 3D (Risk-Return-Impact) Portfolio Optimisers were designed to bolster “rules of thumb” – such as screening and best-in-class, with science. Many ESG investors still use such “rules” to build portfolios, leading, in Arvella’s view, to sub-optimal capital allocation. In 1952, Nobel Prize laureate H. Markowitz developed a portfolio optimiser to find the most efficient trade-off between risk and return. By adding impact as a third dimension, Arvella’s 3D optimisers enable investors to maximise impact without straying from their financial goals.
The other tool available at the time of launch is the ESG Engagement Maximiser. This helps investors prioritise which two or three company-specific ESG improvements can unlock the most shareholder value for a universe of approximately 2,200 companies.
This tool can be used in conjunction with analytics offerings and in-house research, to hone in on impact outcomes, allowing investors to take a data set and find out which two or three ESG improvements could boost each company’s value the most.
Benoît Mercereau, CIO at Arvella Investments, says: “This tool is a potential game changer for effective engagement. Not only does it sharpen investor focus, but the notion of “more money” is likely to prove more persuasive with management and shareholders than “more impact,” creating a virtuous circle between impact and returns.”
Potential financial gains are large: if all firms in Arvella’s database were to bring two of their most relevant ESG metrics in line with peers’ best practices, the average potential share price upside is 20%, according to the firm.4
Benoît Mercereau, CIO at Arvella Investments, adds: “Money is a powerful incentive. Thoughtful approaches striving to boost investment returns will likely generate outsized impact. More collaborative efforts are key to developing the rigorous tools needed to “mainstream” ESG for all investors”.
Nabeel Abdoula, Deputy CIO, Fulcrum Asset Management says: “We’ve been delighted to work with Arvella over many years, including for the launch of the Fulcrum Climate Change Fund in July last year. We’re proud to be ESG for Investors’ first investment house partner and are contributing an ongoing research resource to this important project.”
Matthew Roberts, Chair of the Responsible Investment Committee, Fulcrum Asset Management added: "To create a robust responsible investing framework, it is essential that financial and sustainability factors be viewed jointly, not as operating separately from one another."
ESG for Investors.com is a collaborative effort bringing together investors and scholars. The website is an easy-to-use platform, where Arvella’s investment tools are available for free to all investors, magnifying impact.
Arvella, which is based in London and Paris was founded with two goals; to excel at managing wealth and to make the world a better place. Benoît Mercereau says: “We are happy to share our knowledge freely. Spreading impact helps us fulfil our mission.”
1. Lionel Melin (MacroLucid Research), Donough Kilmurray (Davy), and Gino Cenedese (Fulcrum Asset Management).
2. Ahyan Panjwani (Yale University); Tianhao Yao (HEC Paris).
3. Research will have to have been published in a scientific journal, to be considered
4. ” Creating Shareholder Value through ESG Engagement,” Benoît Mercereau, Lionel Melin, and Margarita Lugo. Mimeo, Arvella Investments, October 2021 (paper available upon request).
About Arvella Investments
Arvella Investments is a sustainable wealth manager and investment advisor based in London and Paris. Its mission is to excel at managing wealth while making the world a better place. The firm received the 2021 PAM Award for Innovation, one of the most sought-after awards in the UK wealth management sector.
Arvella Investments is authorised and regulated in France by the Autorité des Marchés Financiers. Arvella Investments Limited, its London subsidiary, is an Appointed Representative of Sapia Partners LLP (FRM 550103) which is authorised and regulated in the UK by the Financial Conduct Authority. Find out more at www.arvella.com.
For professional investors only.
The 3D Optimisers and ESG Engagement Maximiser are provided for information purposes only and should not be construed as investment advice. Any statistics-based output may be inaccurate and must be complemented with in-depth analysis.
About Fulcrum Asset Management
Founded in 2004, Fulcrum Asset Management is an independently owned asset manager with a core focus on global, multi-asset investing across liquid markets. The firm manages £4.2bn* on behalf of a global client base of institutions, wealth managers and private investors.
Fulcrum provides investors with both multi-asset solutions and the component parts of these solutions as independent standalone strategies across its discretionary, systematic and alternatives strategies. The discretionary multi-asset funds are offered as both relative and absolute return funds and the systematic funds cover trend as well as risk premia. All Fulcrum funds offer transparency, liquidity and competitive fee structures.
This material has been approved for issue in the United Kingdom solely for the purposes of Section 21 of the Financial Services and Markets Act 2000 by Fulcrum Asset Management (“Fulcrum”), Marble Arch House, 66 Seymour Street, London W1H 5BT.
Fulcrum Asset Management LLP is authorised and regulated by the Financial Conduct Authority (No: 230683). © 2021 Fulcrum Asset Management LLP. All rights reserved. For professional investors only.
* As at 31 October 2021
Arvella: Michel Stofer
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