New financial index developed by Santa Barbara-based firm and UCLA Professor integrates financial and ESG factors to select US stocks that outperform the broad market while creating positive social change.
(June 12, 2023) Santa Barbara, CA – Omega Financial Group and its Chief Strategist and CIO, Dylan B. Minor, have announced the Argos AlphaEsg Index™ – A New Approach to Sustainable Investing. This new financial index has been designed to integrate financial and ESG (Environmental, Social, and Governance) factors in order to select a basket of US stocks that outperform the broad stock market while also creating positive social change.
The Argos index consists of 200 of the approximately 1,000 largest US public companies, chosen monthly based on combining financial and ESG factors. Specifically, all 1,000 stocks are scored with equal weighting to financial and ESG prospects, and the top 200 scoring stocks are held for one month before the process is repeated. The financial factors are chosen to forecast future profitability, while the ESG factors are chosen to forecast future improved ESG performance.
The ESG factors are obtained through artificial intelligence methods, specifically natural language processing. The technology is used to scour over 100,000 sources of articles and blogs to generate millions of data points for analysis. From this data, a company’s ESG performance prospects can be captured through Minor’s proprietary 3Ms™ process to forecast future ESG performance. The 3 M’s stand for ESG materiality, movement, and momentum. These factors together help forecast future ESG and financial performance based on Dylan Minor’s past decade of research as a professor at Harvard, Northwestern, and UCLA.
The index has historical data back to 2007 and has been shown to deliver consistent and significant outperformance compared to other indices since inception.
“We are very pleased to launch the Argos AlphaEsg Index™ , which we believe will allow investors to achieve superior financial returns while also having a positive impact on society and the environment,” said Professor Dylan B. Minor. “By combining financial and ESG factors in a systematic and disciplined way, we can create a portfolio that delivers both strong financial returns and social change.”
The launch of the Argos index has already garnered significant attention from institutional investors, with BNP Paribas launching an offering for its institutional clients to be able to access this index. Omega Financial Group is also using it for its clients.
“We are delighted to offer our clients access to the Argos AlphaEsg Index™ , which we believe will be a valuable addition to our Market-Linked Warrants Program,” said Nathalie Texier-Guillot, Co-head of Equities Sales, Americas at BNP Paribas. “The index’s focus on both financial and ESG factors aligns with our commitment to providing sustainable investing solutions for our clients, and we look forward to seeing the positive impact it can have on society and the environment.”
The Argos index represents a major step forward in the integration of financial and ESG factors in investment decision-making, and has the potential to become a leading benchmark for sustainable investing.