Marty Flanagan. President and CEO of Invesco Ltd.In this edition of Risk & Reward, we present two examples of how our quantitative analysts help us achieve two goals: striving to deliver strong performance to clients while supporting the ongoing transition to sustainable energy.
In this edition’s feature article, we look at Natural Language Processing (NLP) in the context of Energy Transition. Three of my colleagues have developed a systematic investment approach based on the analysis of company news reports.
Applying a sophisticated methodology, they let computers search first for relevant keywords and then for companies mentioned in connection with them. Further filtering and human input ultimately results in a portfolio of companies that are likely to be key players in the ongoing transition to sustainable energy.
In the words of one author: “Our systematic approach is the reason why we are pioneers in ESG.” I think this summarizes quite succinctly our values when it comes to sustainable investing. You can read the full interview in this edition.
Another study deals with low volatility and low carbon: conventional wisdom claims that it is impossible to construct a portfolio that fulfils both goals. However, with the appropriate quantitative techniques, portfolio stability can indeed be achieved without the need to invest in carbonintensive utilities.
Finally, we discuss the role of fixed income ETFs at the height of the pandemic-related market stress in March 2020. We argue that they provided at least some stability in the midst of the storm. Find out why and what this means for investors in the future.
We hope you enjoy the new edition of Risk & Reward.
Sustainable investing meets Natural Language Processing – a systematic framework for building customized theme portfolios
We lay out a systematic investment process for sustainable theme portfolios, presenting an Energy Transition portfolio as a case study.
Low carbon portfolios – why defensive is not always dirty
Limiting portfolio volatility while pursuing environmental goals is broadly seen as difficult. We have developed a new and flexible approach that successfully combines low volatility with low carbon exposure.
Fixed income ETFs: guiding light in market stress
In the extraordinary situation of March 2020, fixed income ETFs provided at least some stability. Find out why and what this means for their future.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Data as at 31 July 2020, unless otherwise stated.
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Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.
