AQR is committed to helping our clients achieve their ESG goals. We seek to integrate ESG in both our asset selection and our ownership decisions. 

Investment Process and Research

Across the firm, E, S, and/or G-related signals are actively traded in the majority of our portfolios. We also offer dedicated ESG solutions. These include Sustainable strategies that incorporate negative screens and positive tilts, portfolios customized with our clients to address specific ESG priorities, and, in support of the goals of the Paris agreement, portfolios targeting substantial carbon reduction.

 

 

To learn more about ESG investing, visit our Learning Center here

Our ESG Research

ESG is an important part of our research agenda. Explore our published research and insights in this area:

Supply Chain Climate Exposure
To manage climate risks, investors need reliable climate exposure metrics, but such risks may be difficult to measure, particularly along the supply chain. Using broadly accessible data, we propose an intuitive metric that quantifies the exposure a company has to customers and suppliers. Our metric is related to scope 3 emissions and captures the strength of economic linkages as well as the overall climate exposure of a firm’s customers and suppliers.

Looking Forward with Historical Carbon Data
Increasingly many allocators are interested in computing their portfolio’s carbon footprint. We show that historical emissions data are useful despite a substantial 1-2 years’ lag typically to when investment portfolios are built.

(Car)Bon Voyage: The Road to Low Carbon Investment Portfolios
We discuss how an investment portfolio could dramatically reduce its carbon footprint, potentially even achieving a ‘net zero’ carbon footprint. We discuss the pros and cons of techniques to achieve carbon reduction goals, including security selection, shorting high carbon footprint companies, and trading instruments such as carbon offsets and carbon permits.

 ESG Ratings: A Compass without Direction
We examine the recent concerns about the reliability of the assessments of ESG ratings providers. We review the demand for ESG information, the stated objectives of ESG ratings providers, how ratings are determined, the evidence of what they achieve, and structural aspects of the industry that potentially influence ratings. We find that while ESG ratings providers may convey important insights into the nonfinancial impact of companies, significant shortcomings exist in their objectives, methodologies, and incentives which detract from the informativeness of their assessments.

Responsible Ownership

AQR pursues stewardship with the aim of promoting greater transparency and disclosure. Where clients have delegated proxy voting to AQR, we seek to align our voting with long-term value creation, including on ESG issues. We vote using a Sustainable policy including proprietary analysis of certain votes in all of our commingled funds and can customize proxy voting in separate accounts to meet client needs.  Furthermore, we engage with portfolio companies on a number of issues including important proxy votes and engage with our top firmwide holdings which exhibit ESG issues.  Collaboration is also critical to our stewardship approach. We partner with peers and clients directly as well as through industry organizations such as CDP. In fact, as part of CDP’s 2021 and 2022 Non-Disclosure Campaigns, we volunteered to actively lead 300+ engagements with non-disclosers on behalf of the signatory group. Both years, approximately 25% of the companies that AQR engaged via the CDP Non-Disclosure Campaign successfully disclosed their environmental-related data to the market

 

Industry Engagement

AQR has been a UN PRI signatory since 2014. We are close collaborators, creating a framework for Responsible Investing together and with AQR colleagues participating in several PRI working groups and committees. AQR is also a member of several other industry working groups and committees, including the Institutional Investors Group on Climate Change (IIGCC), Investment Association, Managed Funds Association (MFA), and ICI Global. Finally, AQR has been a supporter of the Task Force on Climate-related Financial Disclosures (TCFD) since 2018, a CDP signatory since 2020, and as of 2021 is a founding member of the MIT Aggregate Confusion Project, an initiative which aims to improve ESG measurement.

Through speaking engagements and research, we have contributed to the broad discourse on various ESG topics. Notable highlights include computing the ESG-Efficient Frontier and conducting risk analyses to understand the costs and benefits of socially responsible investing, as well as researching the interaction between machine learning/AI and ESG (specifically climate change).

The AQR Asset Management Institute at London Business School hosts a flagship event each year. In November 2021, the Insight Summit focused on ESG investing, decentralized finance, and climate financial risks. The event brought together the best of academic and practitioner insights on the topic featuring presentations by industry experts, including AQR’s Head of ESG Research, who presented on ESG in Alternatives for an audience of over 600 attendees.

Our Policies & Reports


ESG Annual Report

As part of our commitment to ESG, we release an annual report that details our yearly ESG developments and progress, as well as outlining our ESG approach, governance structure, and dedicated resources. View our 2021 ESG Annual Report here

Philosophy & Practices

Learn more about our Stewardship Philosophy, which details how we aim to integrate our core values and Responsible Investment objectives with our focus on seeking to maximize long-term value for our clients.

For commingled client assets, AQR takes a sustainable approach to proxy voting in order to promote sustainable practices in portfolio companies. Review our procedures for and approach to proxy voting.

Explore our Engagement Policy, which is grounded in our fundamental belief in open dialogue and transparency, as well as our conviction that improvements in corporate governance are paramount in well-functioning capital markets.

Corporate Sustainability 

AQR is committed to promoting sustainability and social responsibility, and we have a number of initiatives supporting these efforts within our operations and in our community. We invest in our people, aim to foster an inclusive environment where all of our employees can thrive, and give back to the communities where we work and live.

ESG in the Office

We strive to create a more sustainable workplace through education, conservation, and innovation. Our ESG in the Office Committee began as an employee-originated initiative, bringing together colleagues from across the firm to enhance the management of ESG in our own business practices. This initiative has several areas of focus, including reducing the consumption of single-use non-recyclable material, organizing environmental volunteer projects for employees, reducing our carbon footprint, and offsetting what we cannot eliminate. These efforts helped the firm offset 100% of our global carbon footprint internally. 

People and Culture

Our people are our most valuable asset. We strive to give our employees an exceptional experience driven by intellectual curiosity, constant improvement, and collaboration. Our approach to fostering a diverse and inclusive environment is multi-faceted across recruiting, community-building activities, leadership development programs, policies and training. We also invest significantly in our employees’ careers, leadership skills, and development through Quanta Academy, which includes hundreds of programs each year to help our people reach their potential as leaders.

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Diversity and Inclusion Initiatives

At AQR, we offer a supportive, inclusive environment where the contributions of all of our team members are recognized and valued. Our diversity initiatives and networks seek to attract the best and brightest talent to our firm, create a true sense of belonging, and give all of our employees the opportunity to excel and thrive in their careers. The firm has established a Diversity & Inclusion Committee, comprised of senior members of AQR, which serves as a central point of governance and accountability for our diversity efforts and supports our progress across all of our diversity and inclusion initiatives. 

Diverse Recruiting Efforts

Our recruiting strategies are comprehensive and aimed at attracting diverse talent to our firm through active outreach.  Our programs include the AQR Early Engagement Women’s Summit for high potential female second-year college students, which provides a unique opportunity for students to learn about careers in quantitative finance, as well as the Early Engagement Diversity Summit, a two-day event that offers students a deeper understanding of quantitative finance, the asset management industry and the internship process at AQR. 

Communities at AQR

Communities, such as AQR PRIDE, our community of LGBTQ employees and allies, and the AQR Women’s Initiative Network, play an important role in fostering an inclusive environment. Our communities welcome and engage our employees, provide a supportive network, and help to advance recruiting and retention.

Community Partnerships

The firm is a proud sponsor of BLK Capital Management, a 100% black-owned and student run nonprofit focused on educating members by exposing them to the field of investment management, and has also partnered with #Talkaboutblack in support of The Catalyst After School Program, a new pilot program in London to help students in socio-economically disadvantaged areas. 

Philanthropy

As a firm, we strive to make a positive impact in the communities in which we work and live, through employee engagement and financial support. In response to the COVID-19 crisis, we focused on organizations that were alleviating hunger for the underserved, supporting those on the frontlines, and helping communities most impacted by the pandemic. We have also focused our giving to several not-for-profit organizations that align with our priorities of social justice, education, and local community partnerships where we believe we can make a difference.

Awards & Recognition

Pension and Investments’ Best Place to Work

AQR has been named one of Pension and Investments’ Best Places to Work in Money Management for 2021 and ranked first in our category. This is the fifth year in a row that AQR has received this distinction. The firm was recognized for its collaborative and collegial environment, commitment to learning, generous benefits program, and differentiated employee experiences. Read the profile of the firm here.

Human Rights Campaign’s Corporate Equality Index

In 2022, AQR received a score of 100% in the Human Rights Campaign’s Corporate Equality Index (CEI) for the fourth year in a row, once again making the firm one of the “Best Places to Work for LGBTQ Equality.” The CEI is a national benchmarking survey measuring LGBTQ workplace equality. The requirements to achieve a perfect score in the survey are comprehensive and extend across benefits, policies, training, education, community involvement, and senior sponsorship.

Certified Carbon Neutral

We are proud to announce that as of 2021, AQR is a CarbonNeutral® certified company through Natural Capital Partners, a third-party climate specialist. Our carbon neutral commitment spans all offices globally and includes business travel and homeworker related emissions. In 2022, we started getting our offset calculations externally assessed by a third-party consultant. 

 

*As of September 30, 2022, ~80% of AQR’s assets under management integrated ESG-related alpha or risk signals. We include ESG-related signals in our multi-factor security selection models as standard, and have since AQR’s inception; in all portfolios, we will incorporate ESG to the extent that we believe it improves the risk/return profile, consistent with our research on the ESG-efficient frontier. As of the same date, AQR managed ~$18 billion in dedicated ESG solutions, designed in service of our clients’ ESG-related objectives. Portfolios managed according to our standard ESG process target significant carbon reductions in long-only and relaxed constraint accounts and net negative carbon exposure in long-short portfolios, avoid companies with the largest ESG risk exposures by imposing static and dynamic exclusions, and target an improvement in portfolio ESG profile. In relaxed constraint and alternatives portfolios, we may actively short the worst ESG offenders. We currently offer this process for equity, multi-strategy absolute return, and total return portfolios. 


*As of 6/30/2022, AQR managed ~$20 billion in dedicated ESG solutions, designed in service of our clients’ ESG related objectives.
The Human Rights Campaign named AQR a Best Place to Work for LGBTQ Equality from 2019-2022 as a result of receiving a score of 100 on the annual Corporate Equality Index. AQR was named one of Pensions and Investment’s Best Places to Work in Money Management from 2017- 2021 as a result of an annual survey that ranks firms based on responses to employer and employee questionnaires.

Learn more about ESG Investing at AQR

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This document has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The factual information set forth herein has been obtained or derived from sources believed by the author and AQR Capital Management, LLC (“AQR”) to be reliable but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision. This document is intended exclusively for the use of the person to whom it has been delivered by AQR, and it is not to be reproduced or redistributed to any other person. The information set forth herein has been provided to you as secondary information and should not be the primary source for any investment or allocation decision. Past performance is not a guarantee of future performance. 

This material is not research and should not be treated as research. This paper does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of AQR. The views expressed reflect the current views as of the date hereof and neither the author nor AQR undertakes to advise you of any changes in the views expressed herein. 

The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Charts and graphs provided herein are for illustrative purposes only. The information in this presentation has been developed internally and/or obtained from sources believed to be reliable; however, neither AQR nor the author guarantees the accuracy, adequacy or completeness of such information. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such. 

The information in this paper may contain projections or other forward-looking statements regarding future events, targets, forecasts or expectations regarding the strategies described herein, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be significantly different from that shown here. The information in this document, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. 

 

Sustainable investing is qualitative and subjective by nature, and there is no guarantee that the environmental, social and governance (“ESG”) criteria utilized, judgment exercised, or techniques employed, by AQR will be successful, or that they will reflect the beliefs or values of any one particular investor. Certain information used to evaluate ESG factors or a company’s commitment to, or implementation of, responsible practices is obtained through voluntary or third-party reporting, which may not be accurate or complete. ESG investing can limit the investment opportunities available to a portfolio, such as the exclusion of certain securities or issuers for nonfinancial reasons and, therefore, the portfolio may perform differently than or underperform other similar portfolios that do not apply ESG factors.

The information set forth herein has been obtained or derived from sources believed by AQR Capital Management, LLC (“AQR”) to be reliable. However, AQR does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does AQR recommend that the attached information serve as the basis of any investment decision. This document has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. This document is intended exclusively for the use of the person to whom it has been delivered by AQR and it is not to be reproduced or redistributed to any other person.Past performance is not a guarantee of future performance. 

There can be no assurance that an investment strategy will be successful.

The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation.

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