Tag Archives: sustainability

Exploring the G in ESG: E & S and Performance – Part 3

In a previous blog, we explored the relationship between corporate governance and stock performance. The results show a wide variance between the top quintile and the bottom quintile, particularly over a long-term horizon (17 years). We applied the same analysis to the RobecoSAM environment (E) and social (S) scores. To do so, we formed hypothetical, Read more […]

Exploring the G in ESG: The Relationship Between Good Corporate Governance and Stock Performance – Part 2

Year-to-date, Facebook (FB) was down 7.13% as of April 12, 2018, compared to its 53% total return in 2017. What started as a data breach issue has expanded to encompass management structure, procedures, and safeguard concerns—issues that are all related to corporate governance. Market participants have a tendency to only care about corporate governance when Read more […]

Water Risk: Looking Back and Looking Ahead

Water scarcity risk has been in the spotlight recently with Cape Town’s efforts to avert “Day Zero” and the risk of taps running dry. Although this risk appears to be receding through radical conservation measures, including wholesale elimination of abstraction rights in some cases, it underlines the common global challenge of increasing fresh water scarcity. Read more […]

Carbon-Efficient Portfolio Construction Part 2: Sector-Relative Improves Efficiency

In a prior blog, we demonstrated that unconstrained carbon-efficient portfolios have significant unintended (and unfavorable) sector and risk factor tilts that can drag down performance. In this follow-up blog, we explore potential ways sector-relative, carbon-efficient portfolios can address the drawbacks of sector-unconstrained, carbon-efficient portfolios. To form sector-relative, carbon-efficient quintile portfolios, we ranked and grouped securities Read more […]

Carbon-Efficient Portfolio Construction Part 1: Unconstrained Versus Sector Relative

As more institutions start to adopt low-carbon investing into their investment processes, it’s important to understand portfolio implications of incorporating carbon risk. We recently published a research paper in which we demonstrated how carbon efficiency can be integrated into factor portfolios. In a series of blog posts, we will be discussing our findings. We evaluated Read more […]

Carbon Risk Integration: Interaction Between Carbon Risk and Traditional Risk Factors

The discussions on the merits of carbon awareness investing are evolving, and in a previous blog, we discussed how investors are interested in progressing from the current data-driven carbon emission framework to a risk-analysis-driven, two-degree pathway paradigm. The shift has been largely spurred by the Financial Stability Board (FSB) and recommendations from its Task Force Read more […]

ESG and Supply Chain: Why Both Matter

There has been a rapid shift in the world of corporate disclosure. In the past 12 months, we have seen investment giants writing to CEOs urging them to report on their long-term strategies and socio-environmental goals and the world’s first gender pay gap reporting regulation coming into effect. Companies are responding to the growing need Read more […]

ESG Meets Behavioral Finance – Part 3

Black Swans and Green Elephants: Time Inconsistency, Salience, and the Tragedy of the Horizon “When the well is dry, we know the worth of water.”[1] These were Benjamin Franklin’s cautionary words over 250 years ago. March 22, 2018, is World Water Day, and this year the residents of Cape Town will be feeling the poignancy Read more […]

ESG Meets Behavioral Finance – Part 2

Behavioral economics has had a transformational effect on the fortunes of millions of people saving for retirement through the introduction of auto-enrollment, default plans, and “save more tomorrow” schemes. In a series of blogs, I explore how insights from behavioral economics could be used to revolutionize ESG investing and facilitate critical finance flows to a Read more […]

Exploring the G in ESG: Governance in Greater Detail – Part I

There is increasing evidence of the link between ESG and financial outperformance as better data quality, standardized data, longer data history, and heightened interest in assessing the materiality of ESG drives continued research. However, there is already substantial empirical evidence to suggest that the “G” aspect of ESG ultimately yields better corporate returns. Governance data, Read more […]