Strategies · Core
ESG Level Factor Investing
Long high-ESG-score names and short low-ESG names — a levels sort whose premium is disputed and vendor-dependent.
Definition
Sort on a vendor ESG score, long high, short low, yearly. Score disagreement across vendors is large. The ‘factor’ may be quality, region, or sector in costume.
Why it matters
Mandates ask for it. As alpha it needs a residual after quality, sector, and region. As a constraint it is a different product.
Case
A high-ESG book that is underweight energy and overweight US quality. 2022 underperformance was the sector, not a morality print.
How to read it
Vendor, sector-neutral, and whether you are measuring levels or changes (momentum of ESG is a different strategy).
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