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Monthly ESG Momentum Ranking for Global Equities

Code Awesome Systematic Trading

Summary

This strategy ranks stocks in the MSCI World universe by the change in their ESG rating deciles over a roughly twelve-month interval. It goes long the strongest ESG improvers and short the weakest, rebalancing monthly. The implementation selects about 700 stocks with available ESG data and offers equal-weighted or market-cap-weighted positions. It queues trades and holds each cohort for three periods, so positions from multiple rebalances can overlap.

The document describes the signal and implementation choices, but it gives no performance results or comparison with a benchmark. Its notes say the original research used MSCI ESG ratings and a Barra portfolio construction model with constraints; this implementation does not reproduce those construction details. The code also depends on an external ESG data feed and applies leverage. The approach is therefore a simplified illustration of ESG momentum rather than evidence that the signal is profitable or a complete account of its portfolio and risk controls.

Key ideas

  • The strategy measures ESG momentum as the relative change in a company’s ESG decile over about twelve months.
  • It buys the highest-ranked improvers and shorts the lowest-ranked decliners.
  • The portfolio is rebalanced monthly, with three overlapping holding periods.
  • Weights can be equal across selected stocks or proportional to market capitalization.
  • The implementation omits the original paper’s portfolio constraints and reports no performance evidence.

Tags

EquitiesMomentumFactor investingPortfolio constructionRisk management

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.