White Paper: Performance Tests of Truvalue Labs ESG Scores

Initial U.S. large cap results for the S&P 500 Stock Universe, 2013-2017

This white paper tests the effectiveness of timely Environmental, Social, and Governance (ESG) signals as screening tools and quantitative “alpha” factors for large-cap U.S. stocks included in the S&P 500 benchmark over the past five years. Truvalue Labs’ timely signals scored by artificial intelligence constitute a new tool for the investment industry.

Companies with strong information flow, good overall ESG scores (the TVL Insight Score), and positive ESG momentum (the TVL Momentum Score) outperform the S&P 500 benchmark over a five-year period, adding notable alpha annually.

 

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The signals also show low enough correlation to traditional quant signals, such as value, momentum, quality, and low volatility to be additive in a multi-factor combination. These results show the signals are effective tools for stock picking purposes and portfolio construction. ESG alpha findings also serve to suggest longer term, fundamental value adds for ESG factors.

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