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Problem Statement
The client needed to perform quantitative investing for ESG, combining the Carhart four-factor model and traditional investment variables to improve portfolio performance.
Solution Approach
- Harmonize and normalize ESG KPI metrics from multiple vendors and factor data such as market return, SMB, HML, momentum and creation of portfolio.
- Select the best ESG metric (BESGM) for the portfolio-sector based on Acceptance Score Table (AST) at KPI portfolio-level, using the Carhart model.
- Calculate a combined indicator for same-theme metrics using BESGM.
- Benchmark and test intrinsic portfolio-based assumptions.
- Prepare a report with recommendations of the Best ESG metric that will lead to better investment return performance at alpha level.
Client Impact
- Improved portfolio performance through targeted ESG metrics.
- Enhanced investment returns at the alpha level.
- Provided a comprehensive report with recommendations.
Case Studies
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