Schroders’ sustainable investing models
Our suite of research-based and quantitative ESG investment models and frameworks.How do we measure sustainability?
At Schroders, we understand that different asset classes require different methods to integrate ESG into their investment processes effectively. That's why we've developed a suite of research-based and quantitative ESG investment tools spanning both public and private markets to provide insights that empower our investors to make decisions.
Informed decisions
Proprietary research reveals forward-looking insights beyond past performance.
Competitive edge
Unique lenses help identify future market leaders through scalable, systematic modelling.
Risk mitigation
Early sustainability analysis helps spot and manage potential risks.
Our proprietary models and frameworks
SustainEx™
SustainEx™ estimates the net costs or benefits that a company or country creates for society, expressed as a percentage of company sales or a country’s GDP. In other words, if a company or country were presented with a year-end bill or credit reflecting its net impact on society, SustainEx™ estimates what that figure would be. These externalities range from the benefits brought from innovation, sanitation and avoided carbon emissions to the costs from nuclear waste, alcohol and corruption.
NatCapEx™
Building on our flagship proprietary model - SustainEx™, NatCapEx quantifies both negative and positive externalities, with a specific focus on corporate impacts on nature and ecosystems, and how management actions and products mitigate them. As with SustainEx™, it captures impacts not yet priced by society. The model highlights natural capital hotspots at both company and portfolio level, helping us target engagement where it can make the greatest difference.
CONTEXT™
CONTEXT provides structured, logical, and wide-ranging data to support our analysts' views. It uses a selection of data to assess a company's relationship with its stakeholders such as customers, suppliers, regulators and employees. This tool is interactive and customisable, enabling our investment analysts to select and weigh material sustainability trends for each sector and select the most relevant metrics for assessment in any given case.
Climate Transition Model
Our Climate Transition Model provides a holistic view of how companies and portfolios align with the global transition to a low-carbon economy. The model assesses company alignment across three key pillars of ambition towards net zero, credibility in their transition actions and actual progress towards net zero. It goes beyond just looking at company commitments, incorporating factors like changes in grid intensity due to a shifting energy mix to determine the extent of the free ride effect from reductions in Scope 2 emissions as regions transition to greener energy sources.
Impact Framework
Building on BlueOrchard’s renowned B.ImpactTM framework, our Impact Framework enables us to assess impact and monitor impact progress over time for our investments. Every company and asset within our impact portfolios across both public and private assets is assessed through our proprietary impact scorecard.
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Note: Our proprietary ESG tools are designed to enhance the research and evaluation process but do not guarantee favorable investment results or the identification of all risk. Schroders uses SustainEx™ to estimate the net social and environmental “cost” or “benefit” of an investment portfolio having regard to certain sustainability measures in comparison to a product’s benchmark where relevant. It does this using third party data as well as Schroders own estimates and assumptions and the outcome may differ from other sustainability tools and measures. CONTEXTTM is a proprietary tool used by Schroders to support the analysis of companies’ and issuers’ management of the environmental, social and governance trends, challenges and opportunities that Schroders believes to be most relevant to that company’s or issuer’s industry. It provides access to a wide range of data sources chosen by Schroders. Any views or conclusions integrated into Schroders’ investment-decision making or research by fund managers or analysts through the use of CONTEXT™ will reflect their judgement of the sustainability of one or more aspects of the relevant company’s or issuer’s business model rather than a systematic and data-driven score of the company or issuer in question. ThemExTM analyses the thematic alignment of individual companies and portfolios to the UN SDGs. The alignment score is derived from proprietary qualitative analysis across themes, sectors, regions, and stocks. The mapping of business activities to SDG’s utilizes third party categorization of companies’ divisional revenues. ThemExTM alignment score for a given company is limited by the granularity of the underlying data and that company’s market capitalization, sector, or region. Like any model, ThemExTM will evolve and develop over time as Schroders receives feedback on the model and continues to seek ways to systematically enrich the insights captured through the tool.
Schroders’ proprietary sustainability tools including SustainEx™ may not cover all of a fund/portfolio’s holdings from time to time, in which case Schroders may use a range of alternative methods to assess the relevant holding. In addition, certain types of assets (such as cash and certain equivalent securities) are treated as neutral and are therefore not considered by our proprietary tools. Other types of assets such as equity indices and index derivatives may not be considered by our proprietary tools and in such case would be excluded from a product’s sustainability score.