Dr Nicolas Gaussel, ESG risk rating of alternative strategies скачать в хорошем качестве

Dr Nicolas Gaussel, ESG risk rating of alternative strategies

February 2021’s Frontiers in Quantitative Finance seminar was given by Dr Nicolas Gaussel, Metori Capital Management. He discussed Environmental, Social and Governance (ESG) investing at a portfolio level, resulting from joint research with Laurent Le Saint, with a talk titled, “ESG risk rating of alternative strategies”. Firstly, Dr Gaussel gave some background of ESG investing, its recent growth, how it is measured and giving examples of ratings. He then stressed the need for a methodology to aggregate ESG ratings at a portfolio level, since the common approach of using a formula based on the weighted average of the scores for individual ratings, was meaningless for hedge funds, who may have leveraged or short positions in an asset. Dr Gaussel then considered the problem of ESG ratings on long/short and leveraged positions, proposing several interpretations of ESG risk and ESG rating. He showed that the risk of a short position is similar to that of a long position. He proposed that the ESG correlation can be inferred from the correlation of returns on a portfolio, which can then be used to define the overall and ESG specific risk. The ESG rating is then calculated as the ratio of the ESG specific risk to the total risk. Finally, Dr Gaussel gave an example of applying this methodology to a fund which included futures on stock indices, bonds, currencies and short-term interest rates. Dr Gaussel concluded the talk by reiterating that it is necessary to consider how to produce an ESG rating at a portfolio level and the methodology that he proposed using a risk score based on the ESG ratings of its constituents.