ESG: the new risk factor in your portfolio

Environmental, social and governance (ESG) is big business. Total investments in global sustainable assets ballooned from $5 billion in 2018 to $2.5 trillion by mid-2022. 
But what if, instead of viewing ESG merely as a tool to screen undesirable investments from a portfolio, it became a risk factor in its own right, alongside traditional factors such as size, value, momentum, quality, low volatility and low beta? 

This white paper charts the progress made in this endeavour and reveals how risk officers, managers and quants at leading buy-side firms are experimenting with ESG as an ‘alpha enhancement’ to day-to-day risk management, to stay ahead of the pack and boost profit-and-loss margins.