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, Governance signals are actively traded in the majority of our equity and fixed income portfolios.
We also offer dedicated ESG solutions. These include sustainable strategies that focus on broad ESG implications (incorporating both negative screens and positive tilts) and portfolios customized for other client-specific ESG priorities. To support the goals of the Paris Agreement, we also offer low-carbon portfolios and carbon credit portfolios.
We strive to help inform an educated conversation about ESG investing. To learn more about the basics of ESG investing and our approach, visit our ESG Learning Center:Visit our ESG Learning Center
ESG is an important part of our research agenda. Explore our published research and insights in this area:
Clearing the Air: Responsible Investment
What is ESG? AQR and the UN PRI collaborated to propose a framework of the approaches and terms necessary to have an informed discussion and investment policy on Responsible Investment, grounded in both responsible asset selection and responsible ownership.
(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.
Responsible Asset Selection: ESG in Portfolio Decisions
We discuss how Environmental, Social, and Governance (ESG) considerations may be incorporated in a portfolio and how they may affect risk and return outcomes.
Responsible Investing: The ESG-Efficient Frontier
Combining several large data sets, we compute the empirical ESG-efficient frontier and show the costs and benefits of responsible investing.
Hedging Climate Change News
We propose and implement a procedure to dynamically hedge climate change risk and discuss multiple directions for future research on financial approaches to managing climate risk.
Assessing Risk Through Environmental, Social and Governance Exposures
ESG investing may have a role in portfolios that extends beyond ethical considerations, particularly for investors interested in tilting toward safer stocks, and in a way that complements what is captured by traditional statistical risk models.
ESG: The Good, the Bad, and the Fuzzy (podcast)
Is "doing good" good, bad or neutral for an investor’s portfolio? Three experts explain how they approach ESG investing, or the consideration of environmental, social, and governance issues.
Virtue Is its Own Reward: Or, One Man's Ceiling Is Another Man's Floor
We examine negative screening in ESG investing, often promoted as virtuous because it avoids “sin stocks” and other assets deemed undesirable. But does it also enhance expected returns?
Hit 'Em Where it Hurts: ESG Investing 2.0
We suggest a new approach to ESG investing that we believe may be more effective in making negative investor views known to management — while at the same time potentially improving portfolio expected returns.
A Framework for Identifying Environmental, Social, and Governance Considerations in Portfolio Design
We propose a simple framework to consider the impacts of ESG issues with respect to their role in investment decisions.
Explore over 20 years of AQR's ESG-related insights:
AQR pursues corporate engagement with the aim of promoting greater transparency and disclosure. 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. We partner with peers or clients on issues that we feel are best addressed through collaborative engagement and pursue research into other areas where our active ownership may exert positive influence on corporate transparency and disclosure of ESG issues.
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 supporter of the Task Force on Climate-related Financial Disclosures (TCFD).
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 on 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 2019, the Insight Summit focused on the impact and implications of ESG investing. The event brought together the best of academic and practitioner insights on the topic, featuring presentations by industry experts for an audience of over 300 attendees.
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 2020 ESG Annual Report here.
Philosophy & Practices
AQR Stewardship Philosophy
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.
AQR Proxy Voting Policy
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.
AQR Engagement Policy
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.
ESG at AQR
AQR is committed to fostering an engaged, responsible community both in and out of the office. Our internal initiatives include active and vibrant employee clubs, networks and resource groups. We support professional and personal growth through Quanta Academy, which includes hundreds of programs each year to help our people reach their potential as leaders. Additionally, AQR’s Philanthropy program strives to make a positive impact in the communities in which we work and live, through employee volunteering and financial support.
Our ESG in the Office Initiative engages all employees in our sustainability efforts. Our programs focus on education, energy use and reduction, waste management and recycling, transportation, and community engagement.
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 related emissions.
Awards and 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 2020. This is the fourth 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 2019, AQR received a 100% in the Human Rights Campaign’s Corporate Equality Index (CEI), a national benchmarking survey measuring LGBTQ workplace equality, making our firm one of the “Best Places to Work for LGBTQ Equality.”
- Diverse Recruiting Efforts: AQR partners with various organizations to reach a broader, diverse candidate base and expose them to opportunities at AQR. Recent efforts include partnerships with Disability: IN and Student Veterans of America. Additionally, our own signature recruiting initiatives include our Early Engagement Women’s Summit and our AQR Return-To-Work Program.
*As of March 31, 2021, ~90% of AQR’s assets under management were ESG-related. 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 ~$25 billion in dedicated ESG solutions, designed in service of our clients’ non-financial objectives. These include ~$20 billion in carbon-aware portfolios (customized to have lower carbon intensity than a given benchmark, for example) and over $9 billion in our Sustainable strategies, two processes which may also be combined. The Sustainable process seeks to avoid companies with the largest ESG risk exposures by imposing static and dynamic exclusions, while targeting an improvement in portfolio ESG profile; in relaxed constraint and alternatives portfolios, we may actively short the worst ESG offenders.