ESG Reporting in Long-Short Portfolios
Research Paper
April 19, 2022
Preview
MSCI ESG Research draws on our consultation with owners and managers of long-short portfolios to recommend best practices for fund-level ESG and climate reporting.
The topic is of considerable interest to market participants and observers, yet there is currently no clear global consensus or regulatory guidance for market participants to follow. MSCI's analysis, concludes that:
- Reporting just net ESG and climate metrics for long-short portfolios potentially conflates, and may obscure, investors' intent, impact, ownership and risk management.
- Investors may therefore wish to separate the ESG and climate disclosures for the long and short portions of their portfolios, to be as transparent as possible.
- In theory, it is possible to create ESG risk-neutral strategies, but the involvement, impact and emission attributes of such strategies would not be considered as neutral in the real-world sense.
- Reporting for ESG and climate transparency should be treated differently from reporting for ESG and climate risk exposure, but both are important requirements.
- There is limited evidence that shorting is similar to or a better tool than divestment, for ESG purposes. MSCI research suggests that, on average, stocks with high short-selling demand have not had a higher cost of capital, and so short selling has had limited influence on companies' management to adopt ESG and climate-related best practices.
Read the full paper
Read the full paper
Provide your information for instant access to our research papers.
ESG Reporting in Long-Short Portfolios
In this webinar, our speakers will provide an assessment of fund reporting approaches for ESG & climate metrics for long-short portfolios, with recommendations on best practice for ensuring the greatest level of transparency for ESG fund reporting.
Reported Emission Footprints: The Challenge is Real
Investors' ability to make comprehensive assessments of companies' climate profiles relies on being able to analyze trustworthy corporate disclosures of greenhouse-gas emissions. Yet the current state of disclosures remains challenging.
Is There a Short Interest Factor?
A global and multi-dimensional analysis of short interest and the cross section of stock returns.
The content of this page is for informational purposes only and is intended for institutional professionals with the analytical resources and tools necessary to interpret any performance information. Nothing herein is intended to recommend any product, tool or service. For all references to laws, rules or regulations, please note that the information is provided “as is” and does not constitute legal advice or any binding interpretation. Any approach to comply with regulatory or policy initiatives should be discussed with your own legal counsel and/or the relevant competent authority, as needed.