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Press Releases — November 3, 2021

Qontigo extends sustainability offering by adding carbon price factor to global macro projection equity risk model

NEW YORK, November 3, 2021 – Qontigo, a leading provider of innovative risk, analytics and index solutions, has introduced a Carbon Emission Price factor within the Axioma Worldwide Macroeconomic Projection Equity Factor Risk Model (“Macro Projection Model”). Designed to capture the investment risk of a global, regional or single-country portfolio through the lens of macroeconomic risk factors, the Macro Projection Model also decomposes risks driven by interest rate, inflation and commodities.

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“As more institutional investors turn to sustainable investing, it’s critical for them to be able to get a clearer picture of the distribution of their risk based on macroeconomic exposures, including those driven by ESG-related factors. What we have found in our analysis is that the Carbon Emission Price factor is not significantly correlated with the other macro factors that exist in the Macro Projection Model, thereby giving investors more power to explain the contribution of risk from the Carbon Emission Price factor.”

Melissa Brown, Global Head of Applied Research, Qontigo

The Carbon Emission Price factor is calculated by using the 1Y node from the Axioma Constant Maturity Futures Curve based on the European Carbon Emission Allowances (EUA) futures traded on the European Energy Exchange (EEX). EEX is the leading European auction platform within the EU ETS, supporting the energy transition and decarbonization with a broad range of environmental products.

“The EU Emissions Trading Scheme, the oldest and most traded carbon allowance market, has rapidly evolved in recent years in stability and liquidity, now attracting a broad global investor base. Given the sufficient maturity of the market, we thought now is the right time to support inclusion of a macroeconomic factor in our model.”

Alessandro Michelini, Head of Portfolio Solutions, Qontigo

Launched earlier in the year, the Macro Projection Model uses the same framework as the Axioma Worldwide Fundamental Equity Factor Model (“Fundamental Model”) which has clear efficiencies for the end user. With one model, risk managers and portfolio managers can avoid misalignment across their macroeconomic and fundamental models, access a holistic view of total risk, and capture additional insight beyond fundamental factor exposures and risks.

The full list of factors in the Macro Projection Model include:

  • Term Spreads
  • Credit Spreads
  • Inflation
  • Broad Commodity Index ex-Energy
  • Gold
  • Oil
  • Carbon Emission Price

The Macro Projection Model is available directly within Axioma Portfolio Optimizer, Axioma Portfolio Analytics and Axioma Risk. Through Qontigo’s open architecture approach, clients can also use APIs or flat files to integrate the data into their own third-party portfolio construction, performance analytics and risk management solutions.