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FTSE EDHEC-Risk ERAFP SRI Index
Combining SRI and state-of-the art portfolio construction

The integration of socially responsible investment (SRI) criteria in portfolios through an SRI screening leads to a reduction of the investment universe. As such screens are solely concerned with the individual qualities of securities, they do not take into account how the different stocks interact in a portfolio in terms of contributing to its risk/return efficiency. Such SRI portfolios thus require a portfolio construction process that takes the securities' financial risk parameters into account, notably their volatility and correlation.

The goal of the FTSE EDHEC-Risk ERAFP Eurobloc SRI Index is to reconcile a qualitative security selection approach with state-of-the-art portfolio construction. The index combines SRI analysis with quantitative financial analysis to incorporate both extra-financial information and financial risk management.

Combining the expertise of three partners

  • ERAFP provides a screening of stocks based on SRI criteria. ERAFP is the public service additional pension scheme in France with almost 4.6 million beneficiaries. ERAFP has won several high level awards for its ISR policy.

  • EDHEC-Risk's efficient weighting scheme is applied to the set of screened constituents. EDHEC-Risk Indices & Benchmarks is an entity created by EDHEC Business School to promote applications of the research results of EDHEC-Risk Institute, a leading global research institute for investment management.

  • FTSE, a leading index provider, calculates and maintains the index. The index constituents are made up of an SRI-screened version of the large and mid cap equities in the FTSE Eurobloc index.

FTSE EDHEC-RISK ERAFP SRI INDEX
The FTSE EDHEC-Risk Efficient Eurobloc ERAFP SRI Large Cap Custom Index aims to efficiently capture the performance available within an SRI screened universe of large and mid cap stocks in the Eurobloc. While the SRI screen allows addressing non-financial objectives, the efficient weighting scheme seeks to improve return-to-risk efficiency by improving portfolio diversification. While the screen relies on qualitative information on companies' SRI compliance, the weighting method uses robust estimates of a stock’s risk and return as inputs.