Abstract
In <b><i>The Sustainability Conundrum</i></b>, from the March 2020 issue of <b><i>The Journal of Portfolio Management</i></b>, authors <b>Mark Anson, Deborah Spalding, Kristofer Kwait</b>, and <b>John Delano</b> (all of <b>Commonfund</b>) examine the portfolio construction process in environmental, social, and governance (ESG) investing. Inconsistent findings from studies attempting to empirically evaluate the value of ESG portfolios likely result in part from the lack of consistent definitions and standards associated with ESG. The authors therefore create an empirical model to calculate sustainable investing’s value, which indicates that sustainable investing produces a negative alpha relative to portfolios unconstrained by sustainable mandates. Then, they derive an “E” factor that is effective for screening both companies and asset managers as green, or environmentally sensitive. This provides an important component of an eventual factor model for sustainable investing. <b>TOPICS:</b>ESG investing, factor-based models
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