Tuning Trend-Following Strategies with Macro ESG Data

Christian Morgenstern, Guillaume Coqueret () and James N. Kelly
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Guillaume Coqueret: EM - EMLyon Business School

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Abstract: This article seeks to tilt traditional macro trend-following strategies toward countries with high Environmental, Social, and Governance (ESG) scores. The integration incorporates both ESG levels and changes (improvements or deteriorations in sustainability). Notably, the authors find that the international ESG exposure of the macro portfolios can be substantially increased without any cost in performance for both long-only and long–short portfolios. In some cases, transaction cost–adjusted Sharpe ratios can even benefit from a minor shift toward more ESG exposure.

Date: 2021-12-01
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Published in Journal of Impact and ESG Investing, 2021, 2 (2), pp.117 - 136. ⟨10.3905/jesg.2021.1.032⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05721857

DOI: 10.3905/jesg.2021.1.032

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