A journey to sustainable investing at Arabesque: A perspective from a former KCL student
The following interview represents Ms. Min Low’s own experience and is paraphrased for this article.
May you give us an introduction to Arabesque?
Arabesque is a global asset management firm which uses quantitative models to assess the performance and sustainability of companies. It consists of three key divisions. The first one is the asset management division which manages Arabesque’s investment funds through Arabesque’s proprietary S-Ray solution. The second is the S-Ray division which provides sustainability data about investable firms. It is the key driver of how Arabesque’s “universe of sustainability” is constructed. S-Ray currently provides four complementary models which corporates and investors can use to evaluate companies’ sustainability. The third is Arabesque AI, which utilises the power of artificial intelligence to develop quant-based investment strategies.
May you tell us about your journey to Arabesque and what you are doing now?
I first heard of Arabesque while I was a member at the King’s Impact Investing Society. There, we had an event that introduced us to Arabesque. I was very impressed with the work they were doing and their vision of sustainability. A few people in the King’s Impact Investing Society actually joined Arabesque after the event which was when I also decided to apply and was accepted. I initially began with a short internship in Frankfurt after my second year at university where I helped with some of the ESG data analytics work, which I continued doing part time throughout my 3rd year of university. After graduating, I entered the Product Office team, which sits between the Sales and Research teams. The Product Office team manages the current product demands and supports the development of future products, serving as a sort of bridge between the Research team and clients. We provide guidance to clients on how our scores can be used and also communicate what the client wants to the Research team. Some of the topics which we deal with when talking to clients includes presenting our products and their methodologies, discussing newly developed features, understanding client use cases and addressing concerns regarding data quality. A question which might come up includes why a certain company’s score dropped or increased where we would explain how the data is driving the change.
May you tell us about Arabesque S-Ray?
As an overview, S-Ray focuses on ESG data and scoring products which feed into how a company’s sustainability is evaluated. There are different lenses of sustainability through which any company can be analysed in, which might differ in importance based on investor preference. For example, one company might have a high ESG score, but specifically in terms of human rights, another company might be more sustainable. Arabesque tries to offer as many scores to aid investors in understanding the sustainability profile of a company such as the UN Global Compact score (which gives a score based on how well companies are following the UN Global Compact principles), a Temperature Score (which gives a score based upon companies’ climate contributions), and an ESG score. We also offer filters for value-based investing where investors can choose companies to invest in based on own preferences, such as how some might choose to exclude companies involved in pork, alcohol, stem cells or GMOs. More scores such as a TCFD score (which assesses the alignment of companies’ disclosures with the TCFD framework) and a Climate Transition Score (which assesses the financial risks and opportunities related to the low-carbon transition) are also currently being developed. Big changes are coming to Arabesque with new partners, directors and a new CEO for Arabesque S-Ray. The company is rapidly expanding, where the addition of more senior team members will provide valuable guidance and structure in our teams and work processes. The next big thing for Arabesque S-Ray will be the launch of our independent raw data efforts, which will allow us to provide greater granularity to clients to understand a company’s scores, as well as accommodate greater client use cases. Currently, these are limited as most of our scores are powered by 3rd party data. We are currently in the process of collecting and verifying corporate sustainability data which is a huge task spanning many months but will allow our firm to be more independent in terms of data and product offering.
How will artificial intelligence influence the sustainable investing field?
New regulations are coming out which will require greater sustainability disclosure for companies. This is good and bad at the same time for Arabesque because we will have a lot more data that we will have to analyse. AI will be a massive help in terms of collecting, sorting and even analysing this data. It could help pinpoint which sources have which data as it could quickly scan over hundreds of documents at once. Human analysts will then be able to check whether the data is accurate instead of spending time on finding data sources. AI technologies can also be leveraged to develop a variety of investment strategies to suit various use cases and preferences, as is the focus of Arabesque AI. It is a really good thing for the sustainable investing industry!
Are there other technologies which will influence sustainable investing?
Yes, not in sense of direct influence, but in terms of verifying sustainability data. Big data technologies will improve data analytics. Satellite technology, for example, will also allow for the analysis of how crops at any given agricultural firm are doing, providing new avenues for data verification. At the moment, data disclosure is mostly up to the firm which allows them to simply not disclose certain points which they might not be doing very well in, but the next leap in sustainable investing will be the verification and assessment of sustainability data.
What advice would you give to a student interested in sustainable investing?
Definitely go to sustainable investing events where you can meet and talk to different people. Networking is helpful and more focused as the field is still fairly small. It is good to have a general understanding of the sustainable investing field as well as broaden your understanding of the industry beyond the more known applications of sustainable investing, such as asset management and retail investing. When applying to a position, it is good to talk to people at the firm so as to know what drives them, what works for them, and what they expect from interns. In my experience, even if you do not have an extensive finance or sustainability background, as long as you are interested and can show this interest, it is possible to get into the industry. Being involved in relevant societies and taking courses related to sustainable investing can also bring major advantages towards getting into the field.