Geneva based wealth manager 1875 Finance is set to launch what it believes to be the first Swiss sustainable indices covering developed markets for both equity and bonds, the group has revealed exclusively to Citywire Switzerland.
The indices will be developed using ESG information from RobecoSAM while S&P Dow Jones has collaborated on index construction.
As part of the project, 1875 is developing products using its indices and is set to launch ETFs as well as running segregated mandates for pension funds and institutions.
1875 Finance managing director, Edouard Crestin-Billet commented on the plans: ‘We are convinced sustainable indices are the right answer for the integration of ESG criteria because we are able to offer a replicable process and a solution that reduces market biases.'
He continued: ‘Because we are niche player, we are able to collaborate with the biggest and best partners that would have not worked directly together for reasons of competition.’
Two years in the making, 1875 Sustainable equity indices are set to be market neutral in terms of sector and country while the 1875 Sustainable bond indices are market neutral in terms of duration, currency and credit categories.
Offering a new solution
According to Crestin-Billet, it was the inefficiency of sustainable asset management that led investors to underperformance because of market and sector biases.
In light of this, 1875 Finance searched for the integration of the ESG criteria with a robust and replicable process.
He said: ‘I am convinced that economic growth will come from sustainability but you need to have the right process.'
Slow economic growth and in turn low productivity gains are the major problems that we face according to Crestin-Billet, he said: ‘This means we need a catalyst to improve the productivity and I think one of the catalysts will be sustainability.’
He added: ‘You can’t invest efficiently without taking into consideration the environmental, social and governance criteria anymore.'
‘If you don’t integrate now, you will underperform.
Replicability at the forefront
‘If you accept that the valuation of the company comes from the intangible, it means the replicability of your process in terms of selection is less replicable,’ he said.
He continued to explain that it is for this reason a lot of investors have been disappointed with the performance of their active management in developed markets over the last five to 10 years.