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The robotic route to ESG investment


2013 saw the launch of index provider ROBO Global, the first firm to launch an index series based on robotics, automation, and artificial intelligence (AI).

Since then, the ROBO Global Robotics & Automation Index has grown to underpin some USD3.7 billion in ETF assets.

ROBO Global European CEO Richard Lightbound (pictured) says: “The whole robotics and automation theme brings benefits and efficiencies to society. Look at strained healthcare systems and natural resource sources. Look at pollution and safety concerns – robotics and automation impact all of those challenges.”

Robotics and automation get a lot of bad press, Lightbound observes, as people take the perspective that developments in the sector will take away their jobs.

“But it’s much broader than robots in factories,” he says. “Robotics and AI are used in space, underwater, in fields and assisting in surgery. AI is rapidly becoming the best global oncologist with its ability to spot cancer patterns early. This is phenomenally powerful and is going to assist surgeons but never replace them.”

Lightbound also notes that most parents want their children to be safe and have better lives. Robotics and AI reduce traffic accident rates, he says.

“Yearly, 1.2 million people are killed in car accidents and 95 per cent of those are caused by human error. So, don’t worry about autonomous vehicles – even semi-autonomous vehicles can bring those figures down and the cost of what happens after an accident in terms of hospital bills and insurance and cars themselves is billions of dollars.”

Lightbound also believes that robotics and AI can help meet the challenges in agriculture. “There are a lot more mouths to feed as the population is growing and we can’t continue to cut down forests to create more land.

“We must improve productivity and we don’t want more water, fertilisers and chemicals. Enter precision ag which is a good example of taking the same technology used in the robotics and automation theme and bringing it into real products that can be used by farmers.”

One of the index members is tractor maker John Deere which incorporates a great deal of technology in its machines.

“There is a piece of hardware which can be towed behind a tractor with facial recognition type software sensors and a delivery system which is capable of identifying and assessing the water density in plants, giving the exact amount of water needed in the right place.”

The index is advised by its advisory boards and has just added its seventh PhD into the team. The index performance last year was up 46 per cent and the median EPS growth went to 30 per cent, with top line sales growth of 11 per cent for the first quarter of this year.

“We are a research driven index provider, and we continue to strengthen our advisory team. We are thrilled with how it’s grown – we have managed to attract this talented group of strategic advisers and they like us because as a group they get to interact and help us understand where we want to look for the companies that should be in the index.”

The firm formally introduced an ESG policy last year, recognising it was important to investors, and removed two companies from the index as a result.

The principles are: to ensure there is no risk of human rights’ violations; there is nothing that could lead to severe environmental damage and to make sure that the companies in the index aren’t in breach of any fundamental ethical norms.

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