Performance measurement of ESG-themed megatrend investments in global equity markets using pure factor portfolios methodology

Abstract

ESG factors are becoming mainstream in portfolio investment strategies, attracting increasing fund inflows from investors who are aligning their investment values to Sustainable Development Goals (SDG) declared by the United Nations Principles for Responsible Investments. Do investors sacrifice return for pursuing ESG-aligned megatrend goals? The study analyses the risk-adjusted financial performance of ESG-themed megatrend investment strategies in global equity markets. The analysis covers nine themes for the period 2015–2019: environmental megatrends covering energy efficiency, food security, and water scarcity; social megatrends covering ageing, millennials, and urbanisation; governance megatrends covered by cybersecurity, disruptive technologies, and robotics. We construct megatrend factor portfolios based on signalling theory and formulate a novel measure for stock megatrend exposure (MTE), based on the relative fund flows into the corresponding thematic ETFs. We apply pure factor portfolios methodology based on constrained WLS cross-sectional regressions to calculate Fama-French factor returns. Time-series regression rests on the generalised method of moments estimator (GMM) that uses robust distance instruments. Our findings show that each environmental megatrend, as well as the disruptive technologies megatrend, yielded positive and significant alphas relative to the passive strategy, although this outperformance becomes statistically insignificant in the Fama-French 5-factor model context. The important result is that most of the megatrend factor portfolios yielded significant non-negative alphas; which supports our assumption that megatrend investing strategy promotes SDGs while not sacrificing returns, even when accounting for transaction costs up to 50bps/annum. Higher transaction costs, as is the case for some of these ETFs with expense ratios reaching 80-100bps, may be an indication of two things: ESG-themed megatrend investors were willing to sacrifice ca. 30-50bps of annual return to remain aligned with sustainability targets, or that expense ratio may well decline in the future.

The Social Robot in Rehabilitation and Assistance: What Is the Future?

“…This new role is showing high potential in both the direction of rehabilitation and assistance of subjects with disabilities, especially the fragile and handicapped. SRs have particularly demonstrated potential both in the care of the elderly and children with communication disabilities, such as autism [9][10][11][12][13][14][15][16][17][18][19][20][21][22]. Recently, we have also witnessed boosted activity both in the research and clinical applications of SRs caused by the COVID-19 pandemic.…”

“…(f) Support in the rehabilitation therapy of communication disabilities such as autism or others, where the robot can represent a useful tool full of stimuli for children [18,[21][22][23][24][25][26][27][28].…”

ESG-szempontok a klímakockázat előrejelzésében

“…A klímapénzügyek napjaink egyik legújabb irányzata a pénzügy szakirodalmában, mely időben lemaradt a társtudományoktól a klímaváltozás problémájának kutatásában (Naffa & Fain, 2020;Vőneki & Lamanda, 2020). Ezzel szemben a makroközgazdászok már korábban is foglalkoztak fenntarthatósággal és klímakockázattal (Naffa & Fain, 2020;Németh-Durkó, 2020). Az éghajlatváltozásból eredő pénzügyi kockázatok témaköre viszonylag keveset kutatott.…”

Does governance matter? Country-level determinants of operational risk

“…Thus, practically, governance indicators lost their explanatory power since the study of Li and Moosa (2015) covering the period of 1975-2008. Consequently, factors explaining operational losses must have fundamentally changed in the past decades. These changes might be driven by megatrends i.e., large social, economic, political, technological, or environmental changes that are relatively slow to form but influence all human activities deeply (Naffa À Fain 2020). Related to operational losses, we identify three important megatrends: (i) economic development and technological advancement; (ii) globalization; and (iii) sustainability.…”