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ESG Header Art (3K px)

ESG Investing at Research Affiliates

Research Affiliates and our affiliated entities support investors who wish to promote responsible environmental management, active social engagement, and good governance practices (ESG) with their investment choices. We define the elements of ESG as practiced by an entity as follows:

Responsible Environmental Management

Performing as a good steward of the natural environment, measured using a broad array of environmental metrics.

Active Social Engagement

Managing relationships with employees, suppliers, customers, and the community with respect and with appreciation of diverse viewpoints.

Good Governance Practices

Focusing on long-term value creation and appropriately balancing the interests of a company’s many stakeholders.

We are committed to putting responsible practices to work in our own day-to-day operations, as well as to collaborating on ESG investing with our partners—data providers, index calculators, asset managers, and industry groups, for example—to offer well-designed ESG strategies for investors. As a research-centric firm, we are also committed to ongoing research activities that will extend our understanding—and the investment industry’s—of the benefits and challenges associated with ESG adoption, in order to help improve ESG practices both within and outside the financial industry.

Research Affiliates is a signatory of

Download our position statement to learn more

Memo on US DOL Bulletin Regarding ESG Investing

Our Research Into ESG

Given the fiduciary responsibilities faced by institutional investors, we recognize that the risk and return consequences of various ESG strategies are extremely important as it relates to investment outcomes. Thus, we are particularly interested in the research related to this issue. Both our own research as well as research by others has led us to conclude that certain measures closely related to ESG tenets can be additive to returns and company performance, particularly as it relates to governance and diversity.

 

We have found that financial metrics related to corporate governance are associated with better investment performance as measured by low accounting accruals; conservative issuance and dilution practices; high profitability; and conservative investment. These metrics have been incorporated in multiple Research Affiliates product suites since 2005 as well as in our dedicated ESG products.

 

At Research Affiliates, diversity has long been an important topic in our research and in the management of our own business. Diversity in background, education, culture, frame of reference, and experience leads to diversity in thinking and ideas, and strengthens the foundation of our firm. A growing body of literature documents a positive relation between greater diversity and outcomes measured as a level of collective intelligence and firm financial performance.

 

Whereas an academic consensus on the investment benefits of other ESG factors has not emerged, Research Affiliates believes that thoughtfully designed systematic ESG strategies can improve performance and/or reduce risk while delivering on the objectives of ESG investing.

ESG Publication Series

Challenges of Diversity Picture
The Challenges of Diversity Investing

The business case for diversity is compelling, but the investment case for diversity is less clear-cut. We suggest, therefore, that investors who seek to promote diversity and its business benefits combine diversity with known drivers of excess returns.

Unlocking the Performance Potential in ESG Investing

 

By combining a tilt toward companies that display financial discipline and that embrace corporate diversity with the return engine of a fundamentally weighted portfolio, we believe investors in environmental, social, and governance (ESG)–related strategies have the opportunity to earn superior long-term risk-adjusted returns.

 

winning formula graphic
The Winning Formula: Mission + Culture + Team

CEO transitions are a great time to focus on refining the enduring formula of a firm’s success. At Research Affiliates that formula has three equally important elements: mission, culture, and team. The result are win-win-win outcomes—that is, a win for our end investors, a win for our distribution partners, and a win for ourselves