Like stocks and bonds, derivatives investments have a measurable ESG impact. The paper provides a rationale and a simple framework for applying ESG screens to portfolios that include derivatives.
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Abstract
Like stocks and bonds, derivatives investments have a measurable environmental, social, and governance (ESG) impact. This paper provides a rationale and a simple framework for applying ESG screens to portfolios that include derivatives, with a particular application to commodity futures. Commodities are ranked based on their top-down ESG scores, and we evaluate the impact of two hypothetical ESG screens for a diversified commodity futures portfolio.