Scientific Beta disagrees with exclusion of controversial weapons

22 February 2019
| By Oksana Patron |
image
image
expand image

The smart beta index provider, Scientific Beta has disagreed with the recent announcement from MSCI to exclude controversial weapons from global cap-weighted indices.

According to Scientific Beta’s chief executive, Noel Amenc, there were no practical or academic grounds for the idea that a broad cap-weighted index representing all investment opportunities could not as a result contain an environmental, social and governance (ESG) filter by default.

Amenc also said, in response to Swiss Sustainable Finance’s open letter: “From a practical point of view, we know that the exclusions on controversial weapons proposed by Swiss Sustainable Finance represent a very marginal weight that in any event is far lower than the exclusions or weight limitations implemented by all index providers to guarantee the liquidity and investibility of their global cap-weighted indices.”

The firm said it believed that the cap-weighted index was the representation of the theoretical true market portfolio has no scientific credibility.

“We know that the cap-weighted index is ultimately an index like any other that has the particular virtue of providing the weighted average performance of the market, “he said.

“Excluding stocks that represent controversial weapons would not affect this average significantly.”

Scientific Beta, which does not provide broad cap-weighted index series, believed that promoting an opt-in option that corresponded to a paid service falls short of what is at stake with this exclusion from an ethical and humanitarian standpoint.

It admitted it was restricted by the failure of the major index providers to take a decision in this area. However, from June 2019, Scientific Beta committed to offering all its clients an ESG option on its smart beta index series, at no additional cost, that would provide for a minimal exclusion representing fewer than five per cent of the stocks in the global universe, without pre-empting a more active exclusion policy.

 

 

 

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 5 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

17 hours 50 minutes ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 3 days ago