Investors now have a way to globally invest in companies with strong ESG practices without sacrificing their need to realize solid returns.
- Starts with the companies that are in the MSCI ACWI (All Country World Index).
- Invests only in companies that rank in the top half of ESG scores, as determined by MSCI ESG Research, Inc., which specializes in ESG research and analysis.
- Further refines the portfolio by selecting only those companies whose trailing 12-month Sharpe ratios (a measure of risk-adjusted returns) rank in the top half.
This screening generally results in a portfolio of about 660 global 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 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 that may deliver 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 global investing without sacrificing the performance they may need to pursue their long-term financial goals.
The OFI Revenue Weighted Global ESG Index is a custom index that is owned and calculated by MSCI, is based on the MSCI ACWI Index and aims to reflect the performance of an OppenheimerFunds’ strategy. The Fund is not sponsored, endorsed, issued, sold or promoted by or affiliated with MSCI Inc. MSCI Inc. does not make any representation regarding the advisability of investing in the Fund. See the prospectus of the Fund for further information.
The MSCI All Country World Index is a free float-adjusted, market-capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. 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. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. 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.