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Hedge Funds & ESG

Shorts take the long view

July 9, 2021

An old saying, ascribed to the Iroquois, suggests considering the effects that any decision you make will have on the seventh generation to come. That's pretty much ESG investing's whole value prop. So it would appear that hedge managers can take the long view even when they're selling short.

The higher a company ranks on its ESG rating, the less likely it is to be shorted compared to the broader array of stocks. This is based on a comparison of the Novus Short Portfolio European index and the iShares Core MSCI Europe ETF. The discussion is confined to Europe because of short-interest disclosure requirements that are part of the regulatory framework there, but absent in most other markets. We'd be surprised, though, if the trend didn't hold worldwide.