ESG Quant
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ESG Quant (or ESG Quantitative) is an investment strategy, developed by Arabesque Partners, which involves quantitative equity investing while utilizing ESG (environmental, social, and corporate governance) information, often referred to as "non-financial" information. ESG Quant strategies are implemented within systematic trading or quantitative trading approaches that leverage a large and growing collection of commercial ESG, alternative and non-profit or academic datasets. As such, there is no human judgment or discretionary buy-sell decision making; rather, “in a pure quant model the final decision to buy or sell is made by the model” or through the “utilization of an expert system that replicates previously captured actions of real traders.”
ESG Quant (or ESG Quantitative) is an investment strategy, developed by Arabesque Partners, which involves quantitative equity investing while utilizing ESG (environmental, social, and corporate governance) information, often referred to as "non-financial" information. ESG Quant strategies are implemented within systematic trading or quantitative trading approaches that leverage a large and growing collection of commercial ESG, alternative and non-profit or academic datasets. As such, there is no human judgment or discretionary buy-sell decision making; rather, “in a pure quant model the final decision to buy or sell is made by the model” or through the “utilization of an expert system that replicates previously captured actions of real traders.”
ESG as a risk factor
ESG information captures many risk drivers not captured through traditional financial metrics. Quant ESG strategists, for example, can scrape and analyze social media content to help inform and assign value to company intangibles, such as customer and employee reputation. ESG information can be considered as a risk factor that is an investment theme that has stable cross-sectional correlations to returns, thereby rewarding stocks that have an exposure to them. ESG factors can be included with traditional thematic factors such as momentum, value, quality, growth, and volatility. ESG factors may also provide diversification benefits due to their low correlation to traditional factors.
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