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ESG investment strategies have experienced massive inflows in recent years, but investors need better tools to evaluate performance. This paper provides guidance on key challenges and proposes a performance evaluation and attribution framework.

ESG Investment Outcomes, Performance Evaluation, and Attribution

Read the Brief (PDF)


ESG strategies have experienced a massive inflow of capital over the past decade despite investors having little concrete evidence that ESG investing accomplishes its purported goals. It has also happened without investors having the information, tools, and methods needed to evaluate and communicate their specific ESG values, objectives, and preferences. Without evidence of efficacy and clearly articulated investment objectives, it is impossible for investors with ESG intent to know if they are getting what they are paying for, to distinguish between investment managers based on non-financial objectives, or to improve the likelihood of achieving positive ESG investing outcomes. This paper highlights key challenges faced by ESG investors and portfolio managers implementing ESG investment mandates. It then addresses these challenges focusing on relevant fund reporting, provides guidance on the information required to make informed ESG investing decisions, and proposes a performance evaluation and attribution framework to support the ESG investment management process.

About the Author(s)

Stephen Horan professional photograph
Stephen M. Horan PhD, CAIA, CFA, CIPM

As managing director of the Americas region, Stephen M. Horan, PhD, CAIA, CFA, CIPM, leads a team focused on fulfilling the organization’s mission in the region with 92 societies and more than 90,000 members across the United States, Canada, Latin America, and the Atlantic Islands. Mr. Horan is responsible for strengthening relationships with CFA member societies, financial institutions, universities and regulators in the region. He is also responsible for delivering to members a world-class post-charter learning experience that allows CFA Institute members to be the best professionals they can be. He previously led the design, development, and delivery of CFA Institute designation and certificate programs, including the CFA Program and the CIPM Program as the managing director of Credentialing. He also serves as leadership sponsor for the organization’s internal diversity and inclusion council.

Mr. Horan brings a unique combination of buy-side and sell-side industry experience as well as academic experience to CFA Institute. He previously served as an expert witness in securities litigation, a forensic economist in private practice preparing economic impact studies, a principal of a financial advisory firm, a financial analyst, and as a buy-side account manager and sell-side stockbroker.

On the academic side, Mr. Horan served as a professor of finance and is a recognized researcher in wealth management, tax efficient investing, and derivatives. He has received numerous research grants and awards, including the 2012 Graham and Dodd Readers’ Choice Award, and his research has been profiled in leading publications. Mr. Horan has authored or co-authored several books, including the highly regarded book Strategic Value Investing (which has been on Warren Buffet’s Recommended Reading five consecutive years) and The New Wealth Management: A Financial Advisers Guide to Managing and Investing Client Assets. His work has been cited in the Wall Street Journal, New York Times, Financial Times, and the Financial Analysts Journal. He has been a frequent invited speaker at professional, academic, and CFA Institute events. Before joining CFA Institute, Mr. Horan was an active volunteer both locally and globally with CFA Institute.

Mr. Horan holds a PhD in finance at the State University of New York/Buffalo and a BBA degree in finance at St. Bonaventure University. He earned the CFA charter in 1993, the CIPM designation in 2011, and the CAIA designation in 2018.

Elroy Dimson
Elroy Dimson FSIP, PhD

Elroy Dimson is chair of the Centre for Endowment Asset Management at Cambridge Judge Business School. His research focus is long-horizon investing and responsible investing, and his publications are on active ownership; investment management; endowment strategy; environmental, social, and governance investing; and financial market history. Professor Dimson’s books include Triumph of the Optimists, Global Investment Returns Yearbook 2020, Financial Market History, and Endowment Asset Management. His recent articles are on art investment, active ownership, real assets, financial history, endowment strategy, factor investing, fossil-fuel divestment, and asset management. Professor Dimson is chair of the advisory and policy boards of FTSE Russell and serves on the Supervisory Council of the Geneva Finance Research Institute, the Review Board of CFA Institute Research Foundation, and the Investment Committee of Gonville & Caius College, University of Cambridge. Previously, he served as chair of the Strategy Council of the Norwegian Government Pension Fund Global and as a professor and governor at London Business School. Professor Dimson is a fellow or honorary fellow of CFA UK, the Institute of Actuaries, the Royal Historical Society, the Risk Institute at Ohio State University, and Gonville & Caius College. He is emeritus professor of finance at London Business School, where he earned his PhD.

Clive Emery

Clive Emery is Head of Multi Asset Strategies at Invesco, where he focuses on sustainable multi-asset solutions, and he is one of two Net Zero investment champions at the firm. He launched the Summit Responsible Range, five risk-targeted responsible multi-asset funds, for which he pioneered Responsible Asset Allocation (RAA), a separate and additional step to the traditional tactical and strategic asset allocation processes. He is a member of the Sustainability and Responsible Investment (SRI) committee of the Investment Association, a contributor to the UK Sustainable Investment and Finance Association’s policy vision, a member of TISA’s SRI committee, and a member of the Disclosure & Labelling Advisory Group developing sustainable disclosure regulation for the UK fund industry with the Financial Conduct Authority and Her Majesty’s Treasury.

Kenneth A Blay

Kenneth Blay is Head of Research for Global Thought Leadership at Invesco. In this role, he leads the development of original research through collaborations with investment teams and industry researchers. Previously, he served as advisory research manager at State Street Associates and director of research at 1st Global. He has collaborated extensively with Nobel Laureate Harry Markowitz on advancing asset allocation methods and has focused his research efforts on practical asset management, including tax-efficient investing, retirement/liability planning, and systematic and factor investing. His research has been published in various peer-reviewed journals and books, including Risk-Return Analysis: The Theory and Practice of Rational Investing (Volume 1), which he co-authored with Markowitz. He serves on the advisory boards of the Journal of Portfolio Management and the Journal of Investment Management conference series, as well as on the prize committee for the Q Group (the Institute for Quantitative Research in Finance). He earned a BBA degree in finance from the University of Texas.

Glen Yelton

Glen K. Yelton is Invesco’s Head of ESG Client Strategies for EMEA & North America. In this role, he oversees the client-facing ESG activities of the Global ESG team and works with investment teams on ESG product development. Prior to this role, Glen served as the Director of ESG & Impact Investing at Oppenheimer Funds. Additionally, he has managed the research program for an ESG ratings agency, overseen ESG programs at a regional RIA, provided competitive intelligence research consulting, and served as an interrogator for the US Army. He holds a BS from East Tennessee State University.

Ankit Agarwal CFA

Ankit Agarwal, CFA, is Director, Research and Analytics, with the Invesco Investment Solutions team. He is responsible for working with clients and internal stakeholders to research and build multi-asset solutions and strategies. He is also deeply involved in analytical research focusing on systematic factor models and ESG. Prior to joining Invesco, he was Director, LDI and Solutions, at Loomis, Sayles & Company, where he led firm-wide efforts to research, design, and implement custom pension solutions. He has 15 years of investment industry experience and is a CFA charterholder. He earned an undergraduate degree from the Indian Institute of Technology, Delhi, and an MS in financial mathematics from the University of Chicago.