Research
Climate Change, ESG Investing, ESG Data with implications for CRE and CMBS
I recently presented at the DBRS Morningstar webinar (panel discussion) on “Climate Change, ESG Investing, ESG Data with implications for CRE and CMBS”. It was a well-rounded discussion on ESG factors impacting CRE and implications for CMBS, with perspectives on trends in quantifying climate change data, how and why it matters to investors in fixed income and real assets, the growth of investor interest in sustainable investing, DBRS Morningstar’s ESG initiatives and criteria, and the CMBS credit rating process incorporating these critical issues.
ESG Investing Part 3: ESG Across Asset Classes and in Asset Allocation
The changing nature of corporations with intangibles driving a greater proportion of enterprise value is a key reason for ESG being an increasingly important data point. ESG has varied impact on return and risk across different asset classes. The use of ESG data started in equities and given the asymmetric return emphasis between equities and bonds (upside capture for equities and preventing downside risk in bonds), is rapidly becoming important in different parts of fixed income given its predictive value over and above the information in credit ratings. This research analyzes recent empirical studies to document the predictive ability of ESG across asset classes (equity, different parts of fixed income, credit, and real assets), how and why it can be used in security selection and asset allocation to design optimal risk-adjusted portfolios.
ESG Investing Part 2: Firms with Controversies - One Time Event or a Trend?
An issue that is often discussed in ESG investing is whether a firm mired in a controversy is having a one-off event, or is it part of a trend pointing to underlying ESG issues? This question has important implications for the performance of its equity and debt securities. This is a meta-analysis piece based on published research papers.
ESG Investing Part 1: Multiple Ratings Cause Confusion
There is unprecedented interest in ESG (Environment, Social, Governance) investing, also known as sustainable or responsible investing. However, the top concern among investors looking to integrate ESG into their investment process is the issue of multiple ESG rating providers, and the fact that the same corporate may get vastly different ESG ratings from different ESG raters. Why does that happen? What to do about it?
ESG and Resilience in Corporate Performance
ESG investing, stakeholder capitalism, economic intuition (that which makes a company operationally succeed, in turn makes it a potential for equity investment or credit lending) – I have always written that they are different names for the same thing.