Security Analysis Report: ESG and Portfolio Management

This report provides a detailed security analysis of investment strategies, with a particular emphasis on the role of Environmental, Social, and Governance (ESG) factors in portfolio management. It examines the construction of portfolios, the significance of the ESG factors, and the importance of evaluating the performance of the financial instruments. The report discusses the empirical evidence of the positive impact of ESG factors on financial performance, particularly in the context of risk management. It highlights the relevance of the ESG factors in investment strategies to mitigate risk and maximize returns. The report provides key points for investment strategies, and how to evaluate the strategies. The report is based on the research and the literature review.

Running head: SECURITY ANALYSIS
Security Analysis
Name of the Student
Name of the University
Author Note

1SECURITY ANALYSIS
Portfolio Construction with Identified Security and Portfolio Weights:
To develop the smart beta ESG strategy with the identified securities and portfolio
weight, the optimized exclusion strategy is the best option (Kocmanová & Dočekalová,
2013). This selected strategy is the best strategy because firstly it omits all the securities
which are unwanted for the organization. The main identified security for the ESG are the
exchange traded funds. To build a portfolio with the exchange traded funds three easy steps
can be followed. The steps are discussed below.
 Determining the right allocation is essential for building the portfolio with the
exchange traded funds. In this case it is suggested that the high risk tolerance
investors should allocate significant share of the portfolio to the smaller caps and
value oriented equities.
 Implanting the strategy is very much important and the implemented strategy is the
smart beta ESG strategy.
 The last step is the monitoring and accessing. Thus it is suggested to check the
portfolio on a specific time interval for managing the performance. The performance
of the exchange traded funds assessed on the benchmark index.
For constructing the portfolio with the portfolio weights of the exchange traded funds
the SPDR S&P 500 is suggested. It works by holding the weight of exchange traded funds
stock with the respect of each of the stock’s market capitalization. The weight of the
exchange traded funds can be calculated according to the investment strategy. The S&P
works by dividing each stock’s total market capitalization with the capitalization of the
total market.

2SECURITY ANALYSIS
Empirical Evidence:
It has been found that the organizations with high ESG is having a much lower risk.
The empirical evidence of the ESG can be shown in the sector of the pension and insurance
organizations (Friede, Busch & Bassen, 2015). These organizations are using the benchmarks
policies of the ESG to their portfolios. This ESG is acting as the risk screening tool for the
investments which are made by those organizations. Strong evidence has been found that
these organizations are so much better in the management of the risks and the opportunities.
This evidence are supported by the factor that ESG help to push the social, environmental and
the governance consideration into the main stream further.

3SECURITY ANALYSIS
References:
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: aggregated
evidence from more than 2000 empirical studies. Journal of Sustainable Finance &
Investment, 5(4), 210-233.
Kocmanová, A., & Dočekalová, M. (2013). Construction of the economic indicators of
performance in relation to environmental, social and corporate governance (ESG)
factors. Acta Universitatis Agriculturae et Silviculturae Mendelianae
Brunensis, 60(4), 195-206.