Last week, we reiterated our view that the investment community is uniquely positioned to effect positive change by deploying capital in companies that score well on Environmental, Social, and Governance factors. To that end, we walked through the framework of a high quality ESG dataset, courtesy of our partners at OWL Analytics (shown again below).
Using the Russell 1000 as our universe, we created a market and GICS 1 sector neutral Human Rights portfolio, where the long book is comprised of names that, leveraging OWL’s criteria for Human Rights, score well (have positive exposure), and the short book contains companies that score the worst (have negative exposure).
Human Rights: Cumulative Performance (1/1/15 - 6/20/19)
Human Rights: Total Performance Contribution at the Industry Group (GICS 2) level (1/1/15 - 6/20/19):
Since the portfolio is constructed to be GICS1 sector neutral, we observe whether some sub-industry tilts contributed to the alpha of this portfolio:
Human Rights: Style Factor Exposures
Now, let’s take a look at the Human Rights portfolio’s exposure to Style factors found in a traditional risk model. This will allow us to better understand what other exposure an investor is taking on when tilting towards companies that score well on Human Rights.
Human Rights: Top 5 ESG Factor Exposures (1/1/15 - 6/20/19)
The last piece to consider here is, what other ESG factor exposures this portfolio carries, which is helpful insight for any investor looking to increase his or her exposure to companies that score well on Human Rights.
US & Global Market Summary
US Market: 6/08/20 - 6/12/20
Factor Update: Axioma US Equity Risk Model (AXUS4-MH)
Please let us know if you’d like more info on the Human Rights factor, ESG data, or would like to analyze your investment process through this lens or that of any other factor.