ESG attribution

 

ESG ATTRIBUTION: MEASURING THE CONTRIBUTION OF ESG STRATEGIES

 

AMINDIS INSIGHTS

Estimated reading time: 4 min.

 

Understanding the impact of ESG strategies on portfolio performance is key for asset owners. Our ESG Attribution methodology provides a clear framework to measure how ESG investment approaches contribute to returns. It applies to any ESG strategy, including Screening (positive or negative), Impact Investing, and Best Effort approaches.

The methodology was developed by Philippe Grégoire and presented in the article "Measuring the Contributions of SRI/ESG Investment Strategies", published in the Journal of Performance Measurement, volume 23-4.

 


KEY INSIGHTS FROM THIS ARTICLE

 

    SUCCESSIVE INDICES APPROACH

    The model is based on an “on the fly” creation of successive ESG indices that represent each step of the ESG Strategy, thus, avoiding the need for specialized ESG indices.

    ISOLATING ESG CONTRIBUTION

    Performance method clearly identifies the part of performance attributable specifically to the ESG strategy.

    APPLICABLE TO ANY ESG STRATEGY

    Works across different approaches such as Best in Class, Screening, and Impact Investing.

    ACADEMIC FOUNDATION

    Developed by Philippe Grégoire and published in the peer-reviewed Journal of Performance Measurement.

 

FROM ESG STRATEGY TO MEASURABLE PERFORMANCE

The ESG attribution methodology allows asset owners to evaluate the effectiveness of their ESG strategies in a transparent, measurable way. By isolating the ESG contribution, it supports informed decision-making and reporting.

Explore the complete methodology and insights presented in the article:

 

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COMMON QUESTIONS ABOUT THIS TOPIC


ESG attribution is a methodology that isolates the portion of portfolio performance which is attributable to the implementation of ESG strategies (e.g., screening, best-in-class), separate from traditional allocation and selection effects.


It uses a “successive benchmarks” approach: start from a standard benchmark, build an intermediate ESG-constrained benchmark, then decompose active return into the ESG effect plus allocation and selection effects relative to that ESG benchmark.


The model is applicable to any ESG-related approach such as negative screening (exclusions), positive screening / best-in-class, thematic or impact investing — essentially any strategy that alters the investment universe via ESG criteria.


Because it provides transparent, measurable insight into how ESG decisions contribute (positively or negatively) to performance, thereby supporting strategic decisions, stewardship, reporting and compliance.


Key challenges include: constructing appropriate ESG-benchmarks, dealing with data inconsistencies in ESG ratings, and correctly isolating the ESG effect from allocation/selection effects in the presence of complex investment mandates.