Continuing our “Summer of Sustainability,” we’ll be examining the KPIs that have driven returns for the Social portion of “Environmental, Social, & Governance” over the past 5 years. We’ll also provide an update on market and factor (US & Worldwide) trends over the past week. Of particular note, we’ve seen recent strength in Profitability and Earnings Yield, while Size has taken a dive in both models. The risk-on factors of Market Sensitivity/Volatility have also sold off in the past few days as risk has started to tick backup in the US and worldwide.

Since the kickoff of our “Summer of Sustainability,” we’ve been truly encouraged by the feedback we’ve received from our readers. It’s apparent that not only has interest in ESG among investors been growing over time, but that allocators are increasingly demanding that money managers incorporate an ESG framework in their strategies. Because ESG is such a potentially nebulous concept, it’s vital that we establish a measurable and rigorous approach to finding a way to invest in ESG. This week we’ll take a look at the individual pillars of ESG by measuring performance of our individual Environmental, Social, and Governance portfolios.

The past few years have seen the emergence of ESG (Environmental, Social, & Governance) investing. The trend has taken hold as fund managers, allocators, and the general public now place increasing levels of import on sustainable investment. The difficulty with any new investing framework is being able to separate signal from noise, and to that end we’re happy to introduce our ESG factor framework - courtesy of our data partner OWL Analytics. Today, we’ll show how we can empirically demonstrate how these factors have performed via an aggregate ESG portfolio that we’ve constructed.