Funds Group: Arabesque Funds (FundVantage Trust)
Management Company: Arabesque Investment Management Ltd
Affected Funds: Arabesque Systematic USA Fund and Arabesque Systematic International Fund
Principal Sustainable Investment Strategy: ESG Integration, Exclusions
The funds’ rules-based investment strategy combines a proprietary analysis of relevant non-financial issues, such as environmental, social and governance (ESG) risks, with a rules-based fundamental security analysis and a systematic asset allocation and risk management
The funds combine Arabesque’s proprietary assessment of non-financial risk factors such as environmental, social and governance issues, Arabesque’s proprietary assessment of alignment with the principles of the UN Global Compact, liquidity parameters such as market capitalization, daily turnover and free float to identify the investment universe of eligible equity securities. The funds use ESG factors to screen out companies that generate more than 5% of their revenues from weapons, gambling or tobacco.
Arabesque has developed a proprietary tool that relies on machine learning and big data, to systematically combine over 200 environmental, social and governance metrics with news signals from over 50,000 sources across 15 languages. According to Arabesque’s website, this is the first tool of its kind to rate companies on the normative principles of the United Nations Global Compact: Human Rights, Labor Rights, the Environment, and Anti-Corruption (GC Score). Additionally Arabesque’s tool provides an industry-specific assessment of companies’ performance on financially material sustainability criteria (ESG Score).