Dear readers, when I started this Substack in May 2023, I was a confused student navigating the world of ESG investing. With a data science background, I thought writing about these topics would be the best way to learn more about quantitative ESG investing.
We covered topics from analyzing ESG ETF performance, building your own ESG chatbot (one of the most popular posts on this Substack — coinciding perfectly with the rise of AI), portfolio construction, shareholder engagement, climate scenarios, geospatial analysis, and many more.
Writing on these diverse topics made me realize that there isn’t a definitive answer to questions like “Does ESG investing outperform?” — as the answer often depends on the timeframe and market conditions. Ultimately, the choice to embrace sustainability is down to investor’s preference. What’s truly important is having the analytical tools to understand the nuances, which is one of the goals of this Substack.
While growing the subscriber count has never been a goal, I am heartened and genuinely grateful to share this learning experience with every single one of you here. Feel free to reach out if there is a particular topic that you’d like covered in 2025.
For the last post of 2024, we will look at some of the more popular posts this year.
Let’s begin!
Investing in Gender Diversity in Japan
Gender diversity is a big topic in ESG. I recall a colleague once mentioned to me it is the ‘low-hanging fruit’ in improving corporate governance and research has shown that a more diverse group of employees generally leads to better company performance
This post takes a page from the playbook of one of the world’s largest asset owners on how they approach this topic. We examined how Japan’s GPIF invests in the gender diversity theme in the country, which is known to be a laggard among developed countries.
GPIF’s investment approach is worth studying because:
Its investment in gender diversity is sizeable;
It takes a diverse approach by investing in two different ETFs;
It sends a strong signal to corporates to improve their gender diversity without sacrificing returns too much (due to a low tracking error).
Measuring the 'S' in ESG
It is probably not an exaggeration to say that among the key categories of ESG, S or Social receives the least attention.
This post looks at a few data vendors’ methodology documents to see how they measure the Social aspect of ESG. Across the three major ESG data providers (MSCI, Sustainalytics and Refinitiv), there appears to be significant overlap in themes for this issue, particularly regarding a company's workforce, community relations, human rights, and product safety.
China Bets Big on BOTH Coal and Renewables
Dear readers, first off, apologies for the hiatus as my last post has been almost two months ago. This week, we explore the energy transition theme using data from Global Energy Monitor, an excellent resource to track data on energy infrastructure, resources and uses
China presents a fascinating paradox in the global energy transition. While dominating global coal power plant growth, it simultaneously leads the world in low-carbon power generation deployment. For years, China’s reliance on coal — a major contributor to emissions — casts it as the villain in the energy transition story, yet its massive investment in renewables tells a more nuanced story.
Polluters Outperform Non-Polluters, But Why?
Inspired by this Alpha Architect’s blog post, this week we will look at a paper titled “Do Polluters Outperform Non-Polluters?” by Yigit Atilgan, K. Ozgur Demirtas, and A. Doruk Gunaydin.
The reason has to do with two dimensions: risk and valuation. Firms with poor environmental track record are subject to higher regulatory and policy risks, which would cause investors to demand higher returns. On the valuation side, this is similar to what drives higher returns in sin stocks: sustainable investors tend to shun these names, which lead to more attractive valuations and higher expected future returns.
My Experience with CFA's Certificate in ESG Investing
Dear readers, so you have been following Quantifying ESG for a while and hopefully you have learnt a thing or two here about ESG investing.
If you are keen to take up an official certification in ESG investing, this might be one of the most recognized ones out there.
Honorable mentions
There were some topics this year that I personally find interesting but did not make it to the most-read list.
The Curious Case of Phantom Carbon Credits: This is a story of how Shell netted $200 million from selling phantom credits.
Do ESG funds outperform? Yes, but ...: Arguably the most-asked question in ESG investing.
A Primer on Climate Scenarios: I have always wanted to learn more about the acronyms behind all these scenarios, so I consider it a success now to know the difference between RCPs and SSPs.
Thank you once again for accompanying me on this exciting learning journey. I look forward to continuing to explore and learn about ESG investing with each of you in the upcoming year.
Wishing you all joyful holidays and a fantastic year ahead!
Your posts have been very succint and refreshing to read. Best wishes for the new year !
Insightful summary