Los Angeles Capital's investment philosophy is rooted in the belief that markets are dynamic and Investor Preferences for stock characteristics evolve continuously. The Firm's investment technology is adaptive and well-suited to capture insights into how non-traditional financial metrics, related to ESG, influence a stock's expected return. The Firm believes that incorporating ESG data into a multi-factor framework has the potential to improve forward-looking expected risks and returns over short, medium, and long time horizons. Los Angeles Capital believes that companies with improving governance characteristics will outperform over time, and that the management of a company's human capital and natural resources plays an important role in creating long-term value for shareholders. ESG criteria is integrated across all client portfolios through proprietary factors within the Firm’s quantitative stock selection Model. Through the Firm’s innovative factor modeling, portfolio construction techniques, risk management considerations, and active ownership the Firm takes a comprehensive approach to Responsible Investing. For investors seeking more targeted ESG objectives, the Firm constructs customized portfolio solutions.
Custom ESG Solutions
Sustainability-focused Objective: Utilizes the Firm’s ESG Model as an explicit input to the portfolio construction process in order to identify high quality companies with attractive risk, return, and sustainability characteristics. This approach emphasizes the long-term value creation prospects for a company through the lens of sustainability and results in an improved ESG profile while harnessing the benefits of the Firm’s adaptive alpha generation strategy.
Climate Considerations: To meet the needs of a client’s carbon budget or de-carbonization objective, Low Carbon optimization techniques are applied to achieve specific carbon emission levels or reduction targets. The Firm is able to provide carbon footprint reporting and scenario testing for various warming scenarios, and is able to implement considerations for forward-looking climate-related risks and opportunities.
Exclusionary Screening: In addition to legally required exclusions that are identified on sanctions lists published by certain regulatory authorities, the Firm is able to employ bespoke screening based on client’s values or beliefs (weapons, alcohol, tobacco, etc.), and screening based on minimum standards of business practices based on international norms. The Firm incorporates bespoke exclusionary screens for investors seeking to restrict specific securities for religious, ethical, environmental, other values based considerations, or for not satisfying minimum ESG criteria. The Firm works closely with clients to understand the impact of restrictions on portfolio risk and performance. The Firm also has tools in place to help monitor compliance with the client’s investment policy.
Custom Benchmarks: The Firm manages mandates against custom benchmarks upon client direction. This may include the omission of certain securities or industries, or the utilization of third party benchmarks with a low carbon or ESG orientation. The Firm’s proprietary portfolio system integrates well with data feeds from third party vendors.
Impact: The Firm is able to employ outcome-focused solutions for client portfolios that allocate capital to securities whose products, services or business operations create a positive impact for the Environment or Society as a whole. The Firm is able to align portfolios with certain Sustainable Development Goals, ensure adherence with the UN Guiding Principles on Business and Human Rights, and help clients achieve their Paris-aligned investment portfolios by employing customized decarbonization strategies and investment in climate opportunities. The Firm works closely with clients to understand their specific objectives as they relate to particular issues such as climate or diversity and is able to provide customized impact-focused reporting upon client request.
Responsible Investing Policy Statement
Please click here to view the Firm's Responsible Investing Policy Statement.
Please click here to view the Firm's Stewardship Policy
Global Investor Initiatives
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PRI Transparency Report
Please click here to view the Firm's PRI Transparency Report.