The problem
An endowment fund was sensitive to any direct involvement in fossil fuels as part of its investment programme, but no off-the-shelf solution met all three of its requirements simultaneously: zero fossil fuel exposure, yield no lower than the benchmark, and tracking error tight enough to remain recognisable as broad market exposure.
The challenges
Every existing sustainable index either compromised on yield, took on meaningful tracking error, or applied exclusions inconsistently.
The endowment needed a solution built precisely around its constraints, not fitted to the nearest available product.
What we built
A bespoke mandate with a 1.5% tracking error target, yield maintained at benchmark level, and 100% removal of fossil fuel exposure, removing approximately 270 stocks from the Solactive Developed Index based on ownership, involvement, and revenue thresholds.
Firm-wide exclusions applied for tobacco, controversial weapons, and UN Global Compact violators.
Proprietary tilting applied to overweight companies improving carbon intensity and underweight those with higher carbon risk and brown revenues.
The outcome
A mandate that met every constraint the client brought, without compromising on any of them. Built in 12 weeks. Delivered with full transparency on every construction decision.