A framework for ESG considerations in portfolio design

The inherent breadth and ambiguity of environmental, social and governance issues has resulted in the integration of ESG considerations into portfolio design remaining largely a philosophical push, without clarity on the direct and indirect impacts on shareholder value. In this working paper, AQR Capital Management’s Jeff Dunn, outlines a simple framework for considering the impact of ESG issues with respect to their role in investment decisions, with the aim of providing a clearer path for further investigation of the impact of ESG policies on shareholder value and how they can be appropriately included in the investment decisions of both investors and fiduciaries.