Environmental, Social, and Corporate Governance for Investment

Analyze the issue of using ESG to create an investment style and analyze profitability.

You have traditional investment styles, such as e.g., momentum, contrarian, value, growth, etc. Can ESG be used to build an ad hoc investment style? Can stocks, e.g., be selected based on their ESG ranking and traded based on that ranking – and can this be profitable? Also, can ESG be used as a control variable to condition existing styles, e.g., can we condition momentum trading on ESG? In momentum trading, for instance (I am just using momentum as an example – there are many such styles), we go long on recent winners and short on recent losers. Can momentum be more profitable if we filter stocks based on ESG sentiment, their ESG ranking, etc.?