ESG Integration – No Silver Bullet - Man Group

Using tools available – exclusion lists, constraints and signal combinations – Man Numeric analyses how one can effectively integrate responsible investment in a portfolio.

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Integrating responsible investment (‘RI’) into a portfolio is, let’s be honest, not without its challenges. There are certainly grey areas when it comes to RI: there may be differing views as to what constitutes a ‘good’ company. How should a portfolio manager invest if a company is strong on ‘E’, but poor on ‘S’ on the ESG scale? Does engaging with a ‘bad’ company make it investible?

In this paper, Man Group review the various RI integration approaches – exclusion lists, constraint-based and combined (where an ESG signal is mixed with other factors) – that can be used to incorporate ESG data into the investment process, and explain why, unlike the Lone Ranger’s silver bullet, there is no direct or effortless solution to this challenge.

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