Shorting For ESG: Could Liquid Alternatives Be Part Of The Next Wave Of Responsible Investments?

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• 7 min read

The Managed Funds Association has said that short selling could help reallocate $50-140bn of capital away from the most heavily polluting companies.
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The Managed Funds Association has said that short selling could help reallocate $50-140bn of capital away from the most heavily polluting companies.

Shorting has not traditionally been thought of as a robust way to meet ESG objectives, with popular methods tending towards divesting from companies with poor ESG ratings or engaging with firms through shareholder activism.

However, at a time where the urgency of issues such as climate change has never been so front-and-centre for investors and regulators, members of the alternative asset management industry are calling for short selling to be considered another tool to address them, which has generated debate and a degree of controversy in the sustainable investment arena. In an environment where rising inflation and interest rates are taking a toll on growth-heavy long-only ESG funds, some industry experts believe that liquid alternatives such as ESG long/short funds could provide climate-conscious invest...

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