The Practical Implications of Incorporating ESG into Systematic Global Macro

Presenters

Martin Emery

 

Overview

GMO’s Systematic Global Macro team, like many other investors, is on a journey to better understand the implications of ESG incorporation on investment portfolios. The team has a long history of deep research, and we apply that thoughtful approach to the question of ESG in systematic macro by looking at different ways in which ESG data could be used in a systematic process.

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Key Points

  • ESG data can provide a better understanding of earnings and risk of different companies, industries, and countries. Further, it can give us an insight into how to fairly price different assets.
  • Using these insights can come with different costs and benefits to the portfolio. While the data can create clear outputs, help to model valuation, and directly address ESG concerns some options may also create unintended biases, result in holding names outside principles, or create trade-offs on liquidity, cost, or counterparty risk.
  • Ultimately, an alignment of ESG views and objectives between client and manager is key. We encourage any of you who are on your own ESG journeys to reach out and share your views with us, as we believe sharing these objectives and viewpoints is key to success for all parties.

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Disclaimer: The views expressed are through the period ending November 2021, and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.
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