Advocacy Talking Points 17 August 2021
Responsible Investing: The ESG-Efficient Frontier
Presented by CFA Institute Asia-Pacific Research Exchange, CFA Societies Australia, and CFA Society Singapore.
Webinar PresentationDownload PDF
Investors, especially institutions such as pension funds, increasingly incorporate ESG into their portfolios. They do it with aims to promote good corporate behavior as well as improving investment portfolio performance, though the question of whether ESG improves risk-adjusted returns continues to be debated by academics and practitioners alike.
In this webinar, we have invited Professor Lasse Pedersen, Principal of AQR Capital Management and finance professor at Copenhagen Business School and New York University's Stern School of Business, to share his research into conceptualizing and quantifying the costs and benefits of ESG investing and ESG applications in investment practice. The solution to the investor’s portfolio problem is characterized by an ESG-efficient frontier, showing that the investor's problem can be reduced to a trade-off between ESG and Sharpe ratio, and under this framework equilibrium asset prices satisfy an ESG-adjusted capital asset pricing model, showing when ESG increases or lowers the required return.
- Lasse Pedersen, Principal, AQR Capital Management and Finance Professor, Copenhagen Business School
- Tristen Huupponen, CFA, CFA Society Sydney
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Lasse H. Pedersen is a principal at AQR Capital Management, where his focus is research on global investment strategies. He is also a finance professor at Copenhagen Business School and the NYU Stern School of Business. Professor Pedersen has served on the board of the American Finance Association, the Economic Advisory Boards of NASDAQ OMX and FTSE, and the Federal Reserve Bank of New York’s Monetary Policy Panel. He won the Bernácer Prize for the best European economist under 40, the Banque de France–Toulouse School of Economics Prize in Monetary Economics and Finance, and an Elite Research Prize for outstanding researchers under 45. Professor Pedersen’s research has been published in leading journals and cited by central bank governors. He has served on the editorial boards of several journals, including the Journal of Finance, and served as a research associate at the National Bureau of Economic Research and the Centre for Economic Policy Research. Professor Pedersen is the author of Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined. He earned a BS and an MS in mathematics/economics from the University of Copenhagen and a PhD in finance from Stanford University.
Tristen Huupponen is a vice president within AQR’s Client Solutions group, managing client and consultant relationships within Australia. In this role, he is responsible for developing relationships with investors and communicating AQR’s investment philosophy and process across a range of traditional and alternative investment strategies. Prior to AQR, Tristen was a consultant with Mercer Investments, advising superannuation and endowment clients on asset allocation and investment manager selection. Tristen obtained his Bachelor of Engineering (Mechanical) and Bachelor of Commerce (Quantitative & Investment Finance) from the University of Western Australia. He is a CFA and CAIA charterholder and volunteers at the CFA Society of Sydney.