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 integrated 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 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 Reports & Policies
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 2022 ESG Annual Report here.
Stewardship Policies
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.
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 2022 and ranked first in our category. This is the sixth 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.
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 efforts span all offices globally and include business travel and homeworker related emissions. In 2022, we started getting our offset calculations externally assessed by a third-party consultant.
*As of December 31, 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 ~$17billion 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 zero 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.
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- 2022 as a result of an annual survey that ranks firms based on responses to employer and employee questionnaires.