Smart Climate® Advisory Services

Smart Climate Advisory Services provides rule based screening and weighting processes or optimization strategies to construct portfolios or indexes that maximize returns as well as climate change fitness.

Smart Climate Advisory Services:  Portfolio Strategy

Our Smart Climate Portfolio Strategy Services offer a rich, complete set of tools to create and maintain index-tracking portfolios. The Smart Climate Portfolio Strategy uses filters including timeframe, geography, security universe, capitalization, sectors/themes, style, and supplemental data elements.

Smart Climate Portfolio Strategies allow asset managers to “do well and do good”, maximizing both returns as well as climate change fitness in their portfolios.

Smart Climate Portfolio Strategy Key Features

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Smart Climate Advisory Services: Indexes

Entelligent provides a suite of financial indexes based upon climate change and varying patterns of energy usage and their effect on publicly traded securities. Our indexes are designed not only to track but to outperform various market benchmarks and can be tailored to individual client needs.

Smart Climate Indexes are rule based and a cost effective way to integrate climate transition risk into investment strategies. The indexes use popular North American and Global indexes as benchmarks and are integrated with these benchmarks using appropriate screening, tilting or optimization approaches.

Entelligent’s Smart Climate Indexes can be used as:

  • Policy benchmarks for strategic asset allocation
  • Fundamental for passive or active investment products such as ETFs and Mutual Funds
  • Benchmarks for managers’ performance evaluation
  • Benchmarks to incentivize companies to make efforts to reduce climate transition risk.

Smart Climate Indexing Methodology

Smart Climate Indexes are based on a proprietary formula, which weights a business' historical and projected financial strength with its projected environmental impact, regulatory costs and risks of business operations.

Smart Climate Indexes are designed to significantly reduce the risk of climate change and to increase investment performance when compared to relevant well-known benchmarks.

Smart Climate Index calculations involve a 3-step process, beginning with En-ROADS, a global integrated resource assessment model that constructs climate and energy simulations based on a system of dynamic equations.

  • In Step One, simulations rely on multiple feedback loops to determine changes in future energy investment, capital expenditure and supply costs impacting global carbon emissions.
  • In Step Two, a separate financial simulation model (or calculator) forecasts the sensitivity of each security to varying carbon emissions scenarios based on historic sensitivity to varying energy input sources, and on the forecasts from Step One, which are updated regularly.
  • In the final step, the optimization process makes adjustments to constituent weightings, over-weighting individual securities that demonstrate the least sensitivity to a baseline carbon emissions scenario, and under-weighting those with high sensitivity.

All Smart Climate financial indexes are rebalanced on a quarterly basis.

Smart Climate® 500 Index - SCLMX 

Historical Performance SCLMX: January 2006 - March 2019 

The SCLMX Index uses SPDR S&P 500 ETF as the parent index.

 

SCLMX Summary Observations

The SCLMX is designed to maximize performance while minimizing the sensitivity to projected high and low carbon emissions scenarios. It achieves this with significantly lower beta (0.73) compared to the benchmark, while also outperforming the benchmark's Treynor and Sharpe Ratios. Treynor Ratios for SCLMX and the benchmark are 11.83 and 6.28 respectively. Sharp ratios for SCLMX and the benchmark are 0.72 and 0.42 respectively. 

Smart Climate® 1000 Index - SCLMK

Historical Performance SCLMK: January 2006 - March 2019 

The SCLMK Index uses the Russell 1000 Index (INDEXRUSSELL: RUI) as the parent index.

 

SCLMK Summary Observations

The SCLMK is designed to maximize performance while minimizing the sensitivity to projected high and low carbon emissions scenarios. It achieves this with significantly lower beta  (0. 92) compared to the benchmark, while also outperforming the benchmark's Treynor and Sharpe Ratios. Treynor Ratios for SCLMK and benchmark are 9.82 and 6.62 respectively. Sharp ratios for SCLMK and benchmark are 0.64 and 0.44 respectively.