PT - JOURNAL ARTICLE AU - Mike Chen AU - George Mussalli TI - Practical Applications of An Integrated Approach to Quantitative ESG Investing AID - 10.3905/pa.8.2.413 DP - 2020 Oct 31 TA - Practical Applications PG - 1--6 VI - 8 IP - 2 4099 - https://pm-research.com/content/8/2/1.28.short 4100 - https://pm-research.com/content/8/2/1.28.full AB - In An Integrated Approach to Quantitative ESG Investing, from the February 2020 issue of The Journal of Portfolio Management, authors Mike Chen and George Mussalli (both of PanAgora Asset Management) propose a novel quantitative framework for optimizing both alpha and the environmental, social, and corporate governance (ESG) aspects of a portfolio. Although investors, especially those in the millennial generation, have become increasingly interested in the ESG aspects of the companies within their portfolios, there has not yet been a well-defined process for constructing portfolios that factors ESG principles into a strictly return-oriented model.Chen and Mussalli’s approach is based on three pillars: ESG factors that may also be alpha factors, a unique materiality value that links ESG considerations to alpha, and a portfolio construction framework that is informed by an investor’s ESG preferences. The key strengths of this integrated ESG modeling framework are its flexibility, relevancy, and dynamic nature. TOPICS: Portfolio theory, portfolio construction, ESG investing