RT Journal Article
SR Electronic
T1 Demystifying ESG Investing Considerations for Institutional Cash Investors
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 153
OP 156
DO 10.3905/jpm.2020.46.3.153
VO 46
IS 3
A1 Lance Pan
YR 2020
UL https://pm-research.com/content/46/3/153.abstract
AB The popularity of responsible investing has extended to the fixed-income and liquidity-management fields in recent years. Incorporating environmental, social, and governance (ESG) issues in cash investment decisions makes sense as part of overall credit risk management. In addition to challenges related to disclosure, criteria, measure, and verification, liquidity portfolios face unique challenges in the areas of relevance, concentration, short-termism, and transparency. In this article, the author describes ESG considerations for institutional liquidity investors and explains that rather than buying into a strategy with an ESG label, institutional liquidity investors should engage their managers to include ESG issues in general credit evaluation and monitoring to improve risk management.TOPICS: ESG investing, portfolio theory, portfolio constructionKey Findings• The popularity of responsible investing has extended to the fixed-income and liquidity-management fields in recent years. Incorporating environmental, social, and governance (ESG) issues in cash investment decisions makes sense as part of overall credit risk management.• In addition to challenges related to disclosure, criteria, measure, and verification, liquidity portfolios face unique challenges in the areas of relevance, concentration, short-termism, and transparency.• Rather than buying into a strategy with an ESG label, the author explains that institutional liquidity investors should engage their managers to include ESG issues in general credit evaluation and monitoring to improve risk management.