Responsible Investing: Considerations for Shorting and Derivatives
Christina Rehnberg, Senior Associate
Summary
Much has been written and many discussions have been held on how Responsible Investment (“RI”) practices fit in the context of short-selling and derivatives. In the past months, numerous industry associations and organisations have published research and opinion pieces on the topic, while the market is waiting for clarified guidance from regulators.
We hope that we in this paper are able to unify some of the thinking – after all, we are all ultimately solving for similar things: transparency, no loopholes, clarity around risk-return, and clarity around impact.
Through this paper, we aim to:
1. Provide context and clarity around the intersection of responsible investment, shorting, and derivatives;
2. Provide real world examples of the different ways in which ESG information can and is being leveraged on a daily basis;
3. Disseminate the current discussions around impact;
4. Present a framework for how investors, asset managers, and regulators alike can think about these nuances and how to assess them in a meaningful way.
This is by no means a small undertaking, and therefore we leverage our experience in working with responsible investment and alternative investment strategies combined with insights from market participants. From our discussions with asset managers, allocators, prime brokers, consultants, and advisers, we have listened to the various sides of the debate and hope to elucidate the discussion here. We do not have any intention to re-invent the wheel with our recommendations, but rather stand on the shoulders of valuable work done by those before us.
