Scientific Beta

FS Sustainability: "Scientific Beta head of investment solutions for Australia and New Zealand Warwick Schneller says he is now observing most clients move away from "generic off-the-shelf" exclusions list towards very intentional thought-out criteria."

FS Sustainability 18/06/2026

"(...) Scientific Beta head of investment solutions for Australia and New Zealand Warwick Schneller says he is now observing most clients move away from "generic off-the-shelf" exclusions list towards very intentional thought-out criteria.

He notes the MSCI World Defence Index outperformed the broad market by around 50% in 2025, and excluding defence stocks could introduce a tracking error of anywhere between 0.1% and 0.5% into a fund's risk budget, a range that has become increasingly meaningful for investors.

Schneller adds funds are defining weapon classes carefully so they don't accidentally exclude a Magnificent-7 stock when that is not the intention.

Another risk Schneller mentions is many products in the space are now dual-purpose. He gives the example of Caterpillar, which was excluded from the Norway's sovereign wealth fund portfolio over how its bulldozers were being used in Gaza. (...)"