Record Currency Management is planning to offer a new strategy, which tilts its current multi-strategy currency product, using ESG factors.
The group has been working with Oxford-based researchers as part of its drive to incorporate ESG factors into its active currency products, while preserving their return profile.
Its new process looks at the relationship between productivity and exchange rates, based on 30 years of data from the company’s existing products. From this, it has been able to develop a range of currency-relevant ESG factors relating to the SDGs. These factors include child mortality, education, water scarcity and the enforcement of legal contracts.
“From our existing investment strategies, we know that there are links between currency returns and productivity gains”, said James Wood-Collins, chief executive at Record. The company said it would be seeding the strategy with its own money and offering it to clients “in due course.”
Wood-Collins said that the company believes that well-managed countries can take advantage of currency inflows, via lower cost of capital, to make investments that increase their productivity.
He added: “We have focused on those ESG factors most clearly related to economic productivity and, as there is more ESG variability between the emerging markets (EM) economies than the developed ones, designed an ESG process which tilts the EM currency strand of the Multi-Strategy product towards ESG currencies.”
In the announcement, the company said its database includes around 200 countries, with more than 1,600 separate series, dating in some cases as far back as 1960, and has been derived from multiple sources.