ESG Trading Strategies: Backtest, Example, and Insights

ESG has really gone mainstream, as the framework is becoming an increasingly important consideration in the investment community. With ESG data becoming more prevalent, investors now have ESG trading strategies. But what are ESG trading strategies?

ESG trading strategies are an abbreviation for Environmental, Social, and Governance, which are a framework for understanding and measuring how sustainably an organization is operating with reference to environmental, social, and governance factors.

Those criteria help stakeholders understand how an organization is managing risks and opportunities related to environmental, social, and governance criteria.

In this post, we take a look at how to apply ESG criteria in investing, and we end the article by looking at the performance of ESG trading and investing (backtests).

What is ESG?

ESG is an abbreviation for Environmental, Social, and Governance, which are a framework for understanding and measuring how sustainably an organization is operating with reference to environmental, social, and governance factors. It helps stakeholders understand how an organization is managing risks and opportunities related to environmental, social, and governance criteria.

• Environmental criteria: These are used to assess how a company safeguards the environment, including its corporate policies and risk management practices. Factors here include a company’s policy regarding climate change, flooding, and fires; its direct and indirect greenhouse gas emissio