Responsible Investment for Corporates: PES Framework

The client needed to perform quantitative investing for ESG, combining the Carhart four-factor model and traditional investment variables to improve portfolio performance.

1. Harmonize and normalize ESG KPI metrics from multiple vendors and factor data such as market return, SMB, HML, momentum and creation of portfolio.
2. Select the best ESG metric (BESGM) for the portfolio-sector based on Acceptance Score Table (AST) at KPI portfolio-level, using the Carhart model.
3. Calculate a combined indicator for same-theme metrics using BESGM.
4. Benchmark and test intrinsic portfolio-based assumptions.
5. Prepare a report with recommendations of the Best ESG metric that will lead to better investment return performance at alpha level.

• Improved portfolio performance through targeted ESG metrics.
• Enhanced investment returns at the alpha level.
• Provided a comprehensive report with recommendations.