RT Journal Article
SR Electronic
T1 Thematic Indexing, Meet Smart Beta! <em>Merging ESG into Factor Portfolios</em>
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 89
OP 101
DO 10.3905/jii.2017.8.3.089
VO 8
IS 3
A1 Jennifer Bender
A1 Xiaole Sun
A1 Taie Wang
YR 2017
UL https://pm-research.com/content/8/3/89.abstract
AB Many investors are starting to explore ways to integrate environmental, social, and governance (ESG) considerations into their portfolios. Factor portfolios and indexes that integrate ESG allow investors to capture both the long-term durable factor premiums while allowing them to invest in companies with attractive ESG attributes. Traditional factors and ESG both have strong investment rationale for investors with long horizons, but how should blended ESG-factor portfolios be constructed? This article discusses several ways to integrate ESG into factor portfolios. The authors show that the approach chosen depends on the investor’s investment rationale behind integrating ESG, desired exposure, performance expectations, and preference for conceptual consistency.TOPICS: Analysis of individual factors/risk premia, ESG investing