State Street Global Advisors, the investment management arm of State Street Corporation, has launched a strategy for institutional investors to capture the sustainability of emerging markets – the Rexiter Global Emerging Markets Sustainability Strategy.
Developed in conjunction with IFC, Rexiter Capital Management and Innovest Strategic Value Advisors, the strategy is based on a two-year track record that has outperformed its benchmark since inception on September 30, 2004.
(The value of investments is exposed to volatile market influences and can fluctuate accordingly. Past performance returns do not provide a guarantee that future performance will be similar.)
The strategy is designed to integrate environmental, social, and governance factors systematically into its portfolio construction process and aims to outperform the return of the MSCI Emerging Markets Index by 4% per year over the course of a full market cycle.
The pioneering Rexiter Global Emerging Markets Sustainability Strategy aims to establish best practice for future sustainability strategies in emerging market equities. Until now, the information and framework investors needed to integrate environmental and social issues into emerging markets investments were not available.
“Sophisticated investors are increasingly becoming aware of the impact of sustainability factors on investment value,” says Bill Page, chair of State Street Global Advisors’ environmental, social, and governance team. “This new strategy utilises an established investment process and combines it with a rigorous environmental, social, and governance stock-rating methodology that aims to generate attractive risk-adjusted returns.”
The strategy, managed by Rexiter, a State Street Global Alliance company that specialises in emerging market strategies, applies a sustainability overlay implemented by Innovest. Innovest, also a Global Alliance company, specialises in the analysis of companies” environmental and social performance.
IFC, the private sector arm of the World Bank Group, played a key role in the development of the strategy’s concept and structure. IFC is the first to invest in the strategy and will dedicate up to US$20mn in equity.
“This strategy enables institutional investors to make long-term investments in emerging markets while achieving their sustainability goals,” says Rachel Kyte, IFC director of environment and social development. “I sincerely hope it will have a catalytic effect and will encourage others to follow suit. IFC believes this is essential if we are to put global capital to work for sustainable development.”