Hörter, Mader, and Menzinger (2011)

Hörter, Steffen, Wolfgang Mader, and Barbara Menzinger.  “E.S.G. Factors in a Portfolio Context.”  Working paper (risklab GmBH, Munich), June, 2011.

In our research study, we quantify long-term and forward looking Environmental-, Social- and (Corporate-) Governance investment risks (E.S.G.) in a portfolio context – addressing selected risk factors to each of the E.S.G. acronyms. Specifically, the study aims to determine

a) to what degree E.S.G. factors influence investment risk of growth assets (global developed equities, emerging market equities and global developed corporate bonds)

b) how E.S.G. risk optimized investments can contribute to portfolio optimization e.g. portfolio risk reduction at given levels of expected return and vice versa.

The study results provide sound evidence that E.S.G. risk factors have a strong impact on the extreme risk profile of growth asset classes and that these risk factors could change the risk profile of portfolios significantly. Or conversely, E.S.G. factors offer the chance to optimize investments and minimize risks.