United States
Vice President, Portfolio Manager
- 14 years of investing experience
- BA, Harvard University
- MS in Investment Management, Boston University
Q&A with the new Portfolio Manager of four systematic strategies
Christine Cappabianca joined the Impax team in June as a Portfolio Manager of the firm’s systematic strategies, including the Pax Ellevate Global Women’s Leadership Fund, the Pax Global Sustainable Infrastructure Fund, the Pax US Sustainable Economy Fund and the Pax International Sustainable Economy Fund. In this Q&A, Christine shares her views on the benefits of systematic portfolio management, trends in sustainability data and future innovations in quantitative investing.
Q: How did you become interested in quantitative investing?
Two of my passions growing up included computer programming and volunteering. I remember being obsessed with DOS and VBA programming languages at about age seven. In high school, I became involved with volunteering for youth and the homeless. I explored both these areas at Harvard, while also gaining an interest in economics, which I found appealing with its blend of math and solving societal needs and dilemmas. These three areas of interest ultimately set the path for my career today. After spending my first two post-college years working with the elderly homeless in Greater Boston, I joined an asset manager as a quantitative analyst, where I was instinctively drawn to any and all environmental, social and governance (ESG) data sets.
Q: What led you to Impax?
I found it attractive to join a firm with sustainability at the core of its culture and its investment offerings. At my prior employer I carved out an opportunity to be involved with sustainable investing and found it to be a perfect fit for my values and interests. I proactively stepped into ESG projects and offered my quantitative skills to help build universes and analyze risk. More recently I was involved in developing proprietary ESG scores and managing thematic portfolios.
At Impax, I have been able to put all of this experience to work immediately and help build portfolios that reflect our sustainability views. I’ve been really impressed with the level of detail and thoughtfulness that went into developing the tools that I now leverage, such as the Impax Sustainability Lens.
Q: What do you find attractive about a systematic approach to investing?
Systematic investing is a more structured approach to portfolio management that appeals to those seeking an efficient, repeatable process with well-defined investment targets, which, in our case, can include several sustainability targets. This approach is efficient because we can simultaneously look at many moving factors in the market and “control the dials” so to speak.
Depending on the strategy, we can target gender factors, areas of sustainable infrastructure, or what we see as high opportunity areas of the market that are poised to benefit from the transition to a more sustainable economy. If we want one dial turned up, we have the ability to do so, and at the same time we can understand the effect on other portfolio exposures.
Q: Why is data so important when considering sustainability issues?
As investors focused on the transition to a sustainable economy, we take a big picture view of a company’s performance, not only on traditional financial metrics but also on a myriad of sustainability issues. While a lot of the alphaƒ has been captured from traditional quantitative financial factors, I believe the more nascent status of sustainability data provides the opportunity to exploit market inefficiencies. Impax’s deep and experienced sustainability research team helps us stay on top of developments in these “frontier” days. The quality and quantity of sustainability data is improving, and our research team will strive to evaluate the materiality of the latest metrics.
Also, I believe in the adage “what gets measured, gets managed.” There is value to ESG disclosures, not only to us as investors as we attempt to evaluate companies, but to companies, themselves, as they manage sustainability risks and pursue sustainability opportunities.
Q: What is driving growth in ESG data?
Data in general has been going through a period of exponential growth and is an asset to those who know how to use it. All stakeholders, from investors to governments to special interest and research groups, are increasingly requesting data of companies, but the industry is still in a phase where there is not agreement over what data is wanted or even needed. That said, standards are beginning to converge, and we expect to have more comparable sustainability data sets in the near future.
The underlying growth driver in ESG data is that society is putting more pressure on companies to be sustainable. As more capital is directed toward companies that are able to demonstrate improving sustainability performance data, it encourages more companies to disclose. There is a form of penalty for not disclosing ESG data, and there is less leniency on companies than in the past. Especially for larger organizations that are disclosing less than their peers, it begs the question — do you really care about this issue? If companies are not transparent, they risk investors putting capital to work elsewhere. With improved data standardization on the horizon, we expect the tolerance for non-disclosure to decrease significantly.
Q: What innovative new areas do you see developing in quantitative investing?
In the relatively near future, especially while we are waiting for better standardization and disclosures, I think there is exciting potential in alternative data sources and natural language processing (NLP). NLP can be used in a variety of ways, from identifying corporate culture and sentiment to identifying niche sustainable thematic exposures. In the same vein, alternative data provides additional color and perhaps an investment edge on top of what will become more sterile and standardized fields over time.
ESG data is still an emerging frontier and I believe we are still in the early stages of many iterations to follow. It is important that we continue to capture and incorporate the most meaningful data into our quantitative ESG research and sustainability frameworks. Fortunately, Impax has many resources to help keep us on the cutting edge of where the economy is going and which sustainability issues are trending. I feel very fortunate to be in this space at such a pivotal and exciting time.
Q: What do you enjoy doing in your free time?
Some of the ways that I incorporate sustainability into my everyday life is through a passion for volunteering and adopting old animals and old houses. I am also passionate about running and I enjoy getting some fresh air and catching an ocean sunrise as much as possible. I am currently gearing up for the Chicago Marathon, but my days spending so much time training might be numbered because my three young children are starting to turn into athletes in their own right.
ƒAlpha is a coefficient measuring risk-adjusted performance, considering the risk due to the specific security, rather than the overall market. A positive alpha reflects relative risk-adjusted performance of a fund versus its benchmark.
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