WideAlpha’s Newsletter

Share this post
A quick note on the ESG characteristics of the index
widealpha.substack.com

A quick note on the ESG characteristics of the index

WideAlpha
Jan 28
Share this post
A quick note on the ESG characteristics of the index
widealpha.substack.com

AlphaPilot, our Machine Learning AI that chooses which companies to add to the index makes it selection from a reduced number of companies with high ESG score. Now, high ESG scores is subjective and different people will give different weights to different elements. This post is to give an idea on what constitutes a high ESG company, and we’ll also share which sectors are avoided. The sectors avoided are:

  • Alcohol

  • Confectionary

  • Gambling

  • Tobacco

  • Oil and Natural Gas

We try to have a good representation of all economic sectors, but in general we have seen that technology and services companies tend to score higher in ESG. When filtering we look for companies that treat their employees and customers right, that make significant efforts to reduce their environmental footprint, that make sure their supply chain is responsible as well, and that are transparent with their ESG metrics (meaning that they should produce a sustainability report). To give an example of a company that scores well, and is part of the WideAlpha AI-Selected Index, let’s look at Mercado Libre. It has an exceptionally high employee rating on Glassdoor, meaning employees are in general happy working for the company:

Source: Glassdoor.com

It also has good reviews from its customers, for example its PlayStore rating is 4.6, which is much higher than average.

Source: Google PlayStore

It also publishes a sustainability report, and has an above average grade from sustainability information aggregator CSRhub:

Source: CSRhub.com

Given all of the above Mercado Libre is added to the pool of companies from which AlphaPilot can choose to add to the index. It is important to note that the ESG criteria is only used to add the companies to the pool of options, but does not play a role on whether it is actually in the index at a given moment nor its allocation. If you have any questions about the ESG criteria used to construct the index don’t hesitate to ask in the comments below. Until next time!

Disclaimer: All material presented in this newsletter is not to be regarded as investment advice, but for general informational purposes only. We cannot guarantee profits or freedom from loss. You assume the entire cost and risk of any trading you choose to undertake. You are solely responsible for making your own investment decisions. Owners of this newsletter, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission or with any securities regulatory authority. We recommend consulting with a registered investment advisor, broker-dealer, and/or financial advisor. If you choose to invest with or without seeking advice from such an advisor or entity, then any consequences resulting from your investments are your sole responsibility. Reading and using this newsletter or using our content on the web/server, you are indicating your consent and agreement to our disclaimer.

Share this post
A quick note on the ESG characteristics of the index
widealpha.substack.com
Comments

Create your profile

0 subscriptions will be displayed on your profile (edit)

Skip for now

Only paid subscribers can comment on this post

Already a paid subscriber? Sign in

Check your email

For your security, we need to re-authenticate you.

Click the link we sent to , or click here to sign in.

TopNew

No posts

Ready for more?

© 2022 WideAlpha
Privacy ∙ Terms ∙ Collection notice
Publish on Substack Get the app
Substack is the home for great writing