Investors now have a way to invest in companies with strong ESG practices without sacrificing their need to realize solid returns.
- Starts with the U.S. large-cap stocks that are represented in the S&P 500 Index.
- Invests only in companies that rank in the top half of ESG scores, as determined by Sustainalytics, an award-winning global research firm that specializes in ESG research and analysis.
- Excludes any company embroiled in a major ESG controversy.
This screening generally results in a portfolio of about 230 U.S. large-cap companies with strong ESG practices.
The Fund also employs the proprietary revenue-weighting methodology developed by OppenheimerFunds’ Revenue Weighted Strategy Team. While most passive indices are weighted by stocks’ market capitalization, the potential advantages of employing a Smart Beta strategy that weights by companies’ revenues are:
- Avoiding overexposure to trendy, overpriced stocks.
- Having favorable exposure to the factors academic researchers have demonstrated drive stock returns―such as company size and value, with smaller-sized companies and those whose stocks are available at inexpensive prices delivering potentially better long-term returns.
- Gaining broad exposure to the market, given that revenue-weighting itself won’t exclude any companies because almost every company generates sales.
Overall, the Fund can enable investors to bring their values to investing without sacrificing the performance they may need to pursue their long-term financial goals.
The OFI Revenue Weighted ESG Index (the Index) is the property of VTL Associates, Inc., which has contracted with S&P Opco, LLC, a subsidiary of S&P Dow Jones Indices LLC (S&P Dow Jones Indices) to calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices or its affiliates. Neither S&P Dow Jones Indices, SPFS, nor any of their affiliates will be liable for any errors or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s) are service marks of Standard & Poor’s Financial Services LLC (SPFS) and have been licensed for use by S&P Dow Jones Indices and sublicensed for certain purposes by VTL Associates, Inc.
The S&P 500 Index is a capitalization-weighted index of 500 stocks intended to be a representative sample of leading companies in leading industries within the U.S. economy. The index includes reinvestment of dividends but does not include fees, expenses, or taxes. The index is unmanaged and cannot be purchased directly by investors. Past performance does not guarantee future results.
An investment in the fund is subject to investment risk, including the possible loss of the principal amount invested. The stocks of companies with favorable ESG practices may underperform the stock market as a whole. Fund returns may not match the return of its respective index, known as non-correlation risk, due to operating expenses incurred by the fund. The alternate weighting approach employed by the fund (i.e., using revenues as a weighting measure), while designed to enhance potential returns, may not produce the desired results. Because the fund is rebalanced quarterly, portfolio turnover may exceed 100%. The greater the portfolio turnover, the greater the transaction costs, which could have an adverse effect on fund performance.
These views represent the opinions of the Portfolio Managers and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.