Portfolio managers and analysts are increasingly incorporating environmental, social, and governance (ESG) factors in their investment analyses and processes.
By Justin Sloggett, Head of ESG Investment Research, the PRI and Matt Orsagh, Director of Capital Markets Policy, CFA Institute
Portfolio managers and analysts are increasingly incorporating ESG factors in their investment analyses and processes. However, ESG integration remains in its relative infancy, with investors and analysts calling for more guidance on exactly “how” they can “do ESG” and integrate ESG data into their analysis
In June 2017, BofA Merrill Lynch Global Research released follow-on research to a December 2016 study that evaluated the reliability of ESG data (based on Thomson Reuters’ scoring system) as a signal of future volatility and directional trends in equity market valuations.
The PRI recently conducted a study based on portfolio analytics and ESG data provided by MSCI ESG Research to evaluate the efficacy of optimal mean-variance equities portfolios optimized with assets that had improving ESG scores (momentum strategy) versus high absolute ESG scores (tilt strategy) across the world and geographic regions, ...
Transparency is a key component of active ownership and it forms part of many stewardship codes and principles (i.e. Principle 6, the ICGN Global Stewardship Principles, the OECD Responsible Business Conduct for Institutional Investor and several national stewardship codes).