May 12, 2011
A new study from Allianz Global Investors provides further evidence that ESG factors offer the chance to optimise investments and minimise risks – in emerging markets up to 40 per cent according to analysis of risk ratings from e.g. GES Investment Services.
The report “Responsible Investing reloaded” was produced by risklab, a specialist investment and risk advisor of Allianz Global Investors. It follows a wider study published last year on the implications of integrating Environmental, Social and Corporate Governance (ESG) factors into overall investment portfolios, which proved to be of significant importance. While the new report merely focuses on investments in emerging markets and corporate debt, the results point in the same direction and even more decisively:
“From a bottom-up perspective, ESG factors should be integrated into investment research in order to minimize extreme risks, particularly in emerging market equity. ESG factors have a higher impact on the extreme risks of this asset class compared to others.”
The study shows, for example, that the tail risk of an ESG risk-neutral emerging market equity strategy, as defined by the MSCI Emerging Markets index, could be reduced from -64.5 per cent per annum to -38.8 per cent by optimising ESG risk factor exposure. This corresponds to a risk reduction of approximately 40 per cent.
The analysis was based on specialist ESG risk ratings from Trucost (E), GES Investment Services (S) and RiskMetrics (G).
For more information, please contact:
Magnus Furugård, President and Managing Director, GES International