Measuring the implied risk tolerance of SDG-optimized portfolios

In an article last November, Melissa Brown of our global distributor Qontigo showed that an investor willing to take on more active risk can gain higher exposure to the Sustainable Development Goals (SDGs), but the level of exposure varies by SDG. Additionally, one could achieve meaningful exposure even at a relatively low level of active risk. 

Her follow-up white paper digs deeper into the sources of risk driving portfolios that have been optimized to ‘load’ on specific SDGs at a given point in time. Here, Melissa used end-2021 data from the Sustainable Development Investments Asset Owner Platform (SDI-AOP) to run simple optimizations.

In latest article Qontigo’s Olivier d'Assier, takes the analysis further and put the same optimized SDG portfolios through the ROOF methodology. Qontigo’s ROOF (Risk-On/Risk-OFF) scores were created to quantify investors’ risk appetite, using investor behavior to determine whether they are risk-tolerant (bullish), neutral or risk-averse (bearish).

Read the full Qontigo article here.