AQR is committed to helping our clients achieve their ESG goals. We seek to integrate ESG in both our asset selection and our ownership decisions.

Investment Process and Research

Across the firm, Governance signals are actively traded in the majority of our equity and fixed income portfolios.

We also offer dedicated ESG solutions. These include sustainable strategies that focus on broad ESG implications (incorporating both negative screens and positive tilts) and portfolios customized for other client-specific ESG priorities.  To support the goals of the Paris Agreement, we also offer low-carbon portfolios and carbon credit portfolios.

We strive to help inform an educated conversation about ESG investing. To learn more about the basics of ESG investing and our approach, visit our ESG Learning Center:

Visit our ESG Learning Center


ESG is an important part of our research agenda. Explore our published research and insights in this area:

Clearing the Air: Responsible Investment 
What is ESG? AQR and the UN PRI collaborated to propose a framework of the approaches and terms necessary to have an informed discussion and investment policy on Responsible Investment, grounded in both responsible asset selection and responsible ownership.

(Car)Bon Voyage: The Road to Low Carbon Investment Portfolios
We discuss how an investment portfolio could dramatically reduce its carbon footprint, potentially even achieving a ‘net zero’ carbon footprint. We discuss the pros and cons of techniques to achieve carbon reduction goals, including security selection, shorting high carbon footprint companies, and trading instruments such as carbon offsets and carbon permits.

Responsible Asset Selection: ESG in Portfolio Decisions
We discuss how Environmental, Social, and Governance (ESG) considerations may be incorporated in a portfolio and how they may affect risk and return outcomes.

Responsible Investing: The ESG-Efficient Frontier
Combining several large data sets, we compute the empirical ESG-efficient frontier and show the costs and benefits of responsible investing. 

Hedging Climate Change News
We propose and implement a procedure to dynamically hedge climate change risk and discuss multiple directions for future research on financial approaches to managing climate risk.

Assessing Risk Through Environmental, Social and Governance Exposures
ESG investing may have a role in portfolios that extends beyond ethical considerations, particularly for investors interested in tilting toward safer stocks, and in a way that complements what is captured by traditional statistical risk models.

ESG: The Good, the Bad, and the Fuzzy (podcast)
Is "doing good" good, bad or neutral for an investor’s portfolio? Three experts explain how they approach ESG investing, or the consideration of environmental, social, and governance issues.

Virtue Is its Own Reward: Or, One Man's Ceiling Is Another Man's Floor
We examine negative screening in ESG investing, often promoted as virtuous because it avoids “sin stocks” and other assets deemed undesirable. But does it also enhance expected returns?

Hit 'Em Where it Hurts: ESG Investing 2.0
We suggest a new approach to ESG investing that we believe may be more effective in making negative investor views known to management — while at the same time potentially improving portfolio expected returns.

A Framework for Identifying Environmental, Social, and Governance Considerations in Portfolio Design
We propose a simple framework to consider the impacts of ESG issues with respect to their role in investment decisions.

 

Explore over 20 years of AQR's ESG-related insights:

 

 

Active Ownership

AQR pursues corporate engagement with the aim of promoting greater transparency and disclosure. We vote using a Sustainable policy including proprietary analysis of certain votes in all of our commingled funds and can customize proxy voting in separate accounts to meet client needs.  Furthermore, we engage with portfolio companies on a number of issues including important proxy votes and engage with our top firmwide holdings which exhibit ESG issues.  We partner with peers or clients on issues that we feel are best addressed through collaborative engagement and pursue research into other areas where our active ownership may exert positive influence on corporate transparency and disclosure of ESG issues.

 

Industry Engagement

AQR has been a UN PRI signatory since 2014. We are close collaborators, creating a framework for Responsible Investing together and with AQR colleagues participating in several PRI working groups and committees. AQR is also a supporter of the Task Force on Climate-related Financial Disclosures (TCFD).

Through speaking engagements and research, we have contributed to the broad discourse on various ESG topics. Notable highlights include computing the ESG-Efficient Frontier and conducting risk analyses to understand the costs and benefits of socially responsible investing, as well as researching on the interaction between machine learning/AI and ESG (specifically climate change).

The AQR Asset Management Institute at London Business School hosts a flagship event each year. In November 2019, the Insight Summit focused on the impact and implications of ESG investing. The event brought together the best of academic and practitioner insights on the topic, featuring presentations by industry experts for an audience of over 300 attendees. 


 

ESG Annual Report

As part of our commitment to ESG, we release an annual report that details our yearly ESG developments and progress, as well as outlining our ESG approach, governance structure, and dedicated resources. View our 2020 ESG Annual Report here

Philosophy & Practices

AQR Stewardship Philosophy 
Learn more about our Stewardship Philosophy, which details how we aim to integrate our core values and Responsible Investment objectives with our focus on seeking to maximize long-term value for our clients.

AQR Proxy Voting Policy 
For commingled client assets, AQR takes a sustainable approach to proxy voting in order to promote sustainable practices in portfolio companies. Review our procedures for and approach to proxy voting.

AQR Engagement Policy 
Explore our Engagement Policy, which is grounded in our fundamental belief in open dialogue and transparency, as well as our conviction that improvements in corporate governance are paramount in well-functioning capital markets.

ESG at AQR

AQR is committed to fostering an engaged, responsible community both in and out of the office. Our internal initiatives include active and vibrant employee clubs, networks and resource groups. We support professional and personal growth through Quanta Academy, which includes hundreds of programs each year to help our people reach their potential as leaders. Additionally, AQR’s Philanthropy program strives to make a positive impact in the communities in which we work and live, through employee volunteering and financial support.

Our ESG in the Office Initiative engages all employees in our sustainability efforts. Our programs focus on education, energy use and reduction, waste management and recycling, transportation, and community engagement.

We are proud to announce that as of 2021, AQR is a CarbonNeutral® certified company through Natural Capital Partners, a third-party climate specialist. Our carbon neutral commitment spans all offices globally and includes business travel related emissions.


Awards and Recognition

  • Pension and Investments’ Best Place to Work: AQR has been named one of Pension and Investments’ Best Places to Work in Money Management for 2020. This is the fourth year in a row that AQR has received this distinction. The firm was recognized for its collaborative and collegial environment, commitment to learning, generous benefits program, and differentiated employee experiences. Read the profile of the firm here.
  • Human Rights Campaign’s Corporate Equality Index: In 2019, AQR received a 100% in the Human Rights Campaign’s Corporate Equality Index (CEI), a national benchmarking survey measuring LGBTQ workplace equality, making our firm one of the “Best Places to Work for LGBTQ Equality.”
  • Diverse Recruiting Efforts: AQR partners with various organizations to reach a broader, diverse candidate base and expose them to opportunities at AQR. Recent efforts include partnerships with Disability: IN and Student Veterans of America. Additionally, our own signature recruiting initiatives include our Early Engagement Women’s Summit and our AQR Return-To-Work Program.

 

    

*As of March 31, 2021, ~90% of AQR’s assets under management were ESG-related. We include ESG-related signals in our multi-factor security selection models as standard, and have since AQR’s inception; in all portfolios, we will incorporate ESG to the extent that we believe it improves the risk/return profile, consistent with our research on the ESG-efficient frontier.

**As of the same date, AQR managed ~$25 billion in dedicated ESG solutions, designed in service of our clients’ non-financial objectives. These include ~$20 billion in carbon-aware portfolios (customized to have lower carbon intensity than a given benchmark, for example) and over $9 billion in our Sustainable strategies, two processes which may also be combined. The Sustainable process seeks to avoid companies with the largest ESG risk exposures by imposing static and dynamic exclusions, while targeting an improvement in portfolio ESG profile; in relaxed constraint and alternatives portfolios, we may actively short the worst ESG offenders.

This material is intended for informational purposes only and should not be construed as legal or tax advice, nor is it intended to replace the advice of a qualified attorney or tax advisor. This material is not intended to be marketing. The recipient should conduct his or her own analysis and consult with professional advisors prior to making any investment decisions.

Risks of Tax Aware Strategies (Not Exhaustive)

1. Underperformance of pre-tax returns: tax aware strategies are investment strategies with the associated risk of pre-tax returns meaningfully underperforming expectations.

2. Adverse variation in tax benefits: deductible losses and expenses allocated by the strategy may be less than expected.

3. Lower marginal tax rates: the value of losses and expenses depends on an individual investor’s marginal tax rate, which may be lower than expected for reasons including low Adjusted Gross Income (AGI) due to unexpected losses and the Alternative Minimum Tax (AMT).

4. Inefficient use of allocated losses and expenses: the tax benefit of the strategy may be lower than expected if an investor cannot use the full value of losses and expenses allocated by the strategy to offset gains and income of the same character from other sources. This may occur for a variety of reasons including variation in gains and income realized by other investments, at-risk rules, limitation on excess business losses and/or net interest expense, or insufficient outside cost basis in a partnership.

5. Larger tax on redemption or lesser benefit of gifting: gain deferral and net tax losses may result in large recognized gains on redemption, even in the event of pre-tax losses. Allocation of liabilities should be considered when calculating the tax benefit of gifting. 6. Adverse changes in tax law or IRS challenge: the potential tax benefit of the strategy may be lessened or eliminated prospectively by changes in tax law, or retrospectively by an IRS challenge under current law if conceded or upheld by a court. In the case of an IRS challenge, penalties may apply.

Disclosures
The information set forth herein has been obtained or derived from sources believed by AQR Capital Management, LLC (“AQR”) to be reliable. However, AQR does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does AQR recommend that the attached information serve as the basis of any investment decision. This document has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. This document is intended exclusively for the use of the person to whom it has been delivered by AQR and it is not to be reproduced or redistributed to any other person.Past performance is not a guarantee of future performance.

There can be no assurance that an investment strategy will be successful.

The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation.

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