Unlocking Value With Long-Term Stakeholder Value

Portfolio Construction
Factor Investing
Insights

Long-Term Stakeholder Value (LTSV) is a systematic investment approach that enables institutional investors to capture persistent sources of returns by investing in companies that create value for all stakeholders. LTSV is designed to complement Sustainable Investing (SI) frameworks, allowing investors to achieve broader investment objectives by layering targeted signals alongside SI strategies. By embedding stakeholder value signals into portfolio construction, LTSV positions investors for growth amid constantly evolving investor preferences with respect to stakeholder value.

This paper provides practical implementation guidance, summarising the findings and framework detailed in the LTSV Research Insights Report January 2026 (de Lange et al., 2025), which offers the theoretical foundation and empirical evidence for LTSV.

Potential Benefits of Embedding LTSV

LTSV complements SI frameworks: SI encompasses a broad range of approaches - including exclusionary screens, best-in-class selection, ESG integration, and thematic investing - primarily focused on risk management, avoiding negative outcomes and pursuing broad sustainability objectives. LTSV leverages targeted stakeholder-related themes to directly pursue returns.

LTSV leverages theme-specific, measurable signals constructed from alternative data sources and advanced analytical techniques, capturing intangible and sometimes overlooked drivers of performance such as Green Innovation, Corporate Culture, Circular Economy & Green Revenue Leaders, and Resource Efficiency.

LTSV can deliver consistent, uncorrelated returns. The signals are designed to be orthogonal to traditional style factors (value, momentum, quality), providing additive returns and diversification. By focusing on stakeholder-related themes, LTSV taps sources of return not captured by standard factor exposures. Embedding LTSV systematically quantifies stakeholder alignment as an economically material attribute, enhancing risk-adjusted returns and improving portfolio resilience to reputational, regulatory, and operational risks.

LTSV supports SI-optimised solutions. LTSV empowers investors to align portfolios with sustainability objectives without sacrificing financial rigor. Material sustainability factors within SI-frameworks can provide valuable insights into risks that may affect a company’s future financial viability and clients’ long-term risk-adjusted investment returns. By targeting companies based on stakeholder engagement, innovation, and resource efficiency, LTSV supports solutions designed to complement Sustainable Investing - balancing return, risk, and sustainability profiles. Its transparent, data-driven methodology enables tailored strategies for clients seeking sustainable performance, particularly when combined with risk-focused ESG ratings.

Empirical evidence. Combining the various LTSV signals discussed in the Research Insights Report provides a multi-dimensional view of a company’s stakeholder alignment and long-term value orientation. The signals have low correlation by design; for example, the correlation between the combined LTSV score and the MSCI ESG rating is -0.01 based on returns and 0.04 based on signal scores, underscoring LTSV’s complementarity to ESG ratings. In a backtest of MSCI World Investible Market Index stocks¹, after removing all effects attributable to dimensions of risk included on the Barra GEMLT model, the long-short risk-adjusted excess return (IR) of the combined LTSV score is 0.72 over the period 1995 – 2025, which increases to 0.82 over the period since July 2017 when all four signals are available.

Integration Into Adaptive Equity, Enhanced Index, And Factor Strategies

LTSV is fully integrated into NTAM’s Adaptive Equity strategy, serving as a core alpha pillar. Adaptive Equity leverages LTSV signals to select companies with superior stakeholder alignment, driving both potential excess returns and making portfolios less exposed to controversies, regulatory sanctions, or reputational damage.

When integrated into Factor strategies, LTSV signals provide complementary exposures that diversify risk and potentially enhance long-term performance. This flexibility enables institutional clients to tailor LTSV integration according to their specific investment objectives and constraints.

The modular nature of LTSV allows seamless integration into Enhanced Index portfolios as well. For Enhanced Index, LTSV can be used as an overlay to potentially improve sustainability and alpha characteristics while maintaining benchmark alignment.

In summary, LTSV offers institutional investors a robust, research-driven framework for capturing sustainable alpha and supporting SI-optimised solutions. By systematically quantifying stakeholder alignment and layering targeted signals alongside SI strategies, LTSV positions portfolios for resilience, growth, and differentiated performance in a stakeholder-driven economy.

[1] Source: NTAM; long-short positions are sized proportional to the (z-scored) signal multiplied by the square root of market cap and rescaled to be 100% long and 100% short. No trading costs or shorting fees are considered.

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