Accommodating ESG objectives through factor investing

A factor-based approach can accommodate unique ESG objectives without constraining performance and provides flexibility to adapt to any new developments

Jun 20, 2018 | Stephen Quance

Responsible investing (RI) has evolved from a niche consideration to a mainstream focus as investors increasingly set objectives beyond pure returns. However, the understanding of how best to implement it has not yet caught up with the enthusiasm.

For managers pursuing RI, they must strive to fulfill their ESG objectives while minimizing unattractive or unexpected investment consequences.

As interest in this area grows, factor investing should emerge as a preferred approach to implement RI strategies. It enables managers to accommodate unique ESG objectives without constraining performance, provides flexibility to make changes as new information becomes available and facilitates an objective comparison between investment options with clarity and purpose.

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