Russell Investments ESG Global Equity Pool

As organizations move to align their investments with their values, managing a portfolio has become increasingly complicated. The need to manage volatility and pursue portfolio growth remains, but can be balanced with the need to follow an environmental, social and governance mandate.

The Russell Investments ESG Global Equity Pool ("ESG Pool") is a global equity strategy that goes beyond reducing a carbon footprint - our solution tilts a portfolio away from those companies with greatest exposure to carbon-related risk and towards those companies expected to contribute to, and benefit from, the energy transition. The ESG Pool also excludes issuers whose primary businesses are directly involved in the production and sale of alcohol, tobacco or firearms.

As an equity mandate, the actively managed multi-manager ESG Pool invests in a select portfolio of high-quality companies with defensive characteristics and a value orientation, offering an attractive risk/return trade-off.

The result is a portfolio that allows clients to align their investments with their core values of environmental, social and governance responsibilities while still providing equity exposure and the potential for growth.

Investment approach

The ESG Pool is designed to reduce the portfolio's total exposure to carbon footprint and fossil fuel reserves by 50%, while avoiding the sector biases that can occur with a pure divestment approach. Based on the insight gained from our research into decarbonization strategies, we have developed a novel, rules-based solution that is designed to help our clients meaningfully reduce exposure to carbon-intensive holdings, and invest more in climate-resilient and renewable energy opportunities without materially impacting performance. The strategy will continue to evolve as the carbon management sector develops.

The ESG Pool also commits to have zero holdings in tobacco, firearms and alcohol industries and aims to achieve an ESG score greater than the MSCI World index.

Strategy objectives

1. Add alpha against MSCI World Index.
2. Reduce carbon footprint by at least 50%.
3. Reduce exposure to stranded assets¹ (fossil fuel reserves) by at least 50%.
4. Eliminate exposure to companies with more than 10% of revenue from power generation coal-related activities (unless carbon capture and storage procedures are used).
5. Exclusion of issuers whose primary businesses are directly involved in the production and sale of alcohol, tobacco or firearms.
6. Invest in companies expected to positively contribute to the transition to renewable (‘green’) energy sources.
7. Ensure aggregate portfolio has positive bias towards companies with high environmental, social and governance (ESG) characteristics.
8. Maintain tracking error of no more than 1% vs. the Russell Investments Focused Global Equity Pool.²

How the approach is designed to be wider than just carbon reduction.

Explore more with these related links:

Responsible investing is intelligent investing 

Decarbonization 2.0: Sustainable investing for the energy transition