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Laxman Pai, Opalesque Asia: A study published by the Managed Funds Association indicates that targeted short-selling campaigns could slash up to $140 billion in capital expenditure at the biggest carbon emitters in the S&P 500 Index by pressuring them to clean up their acts.
Incorporating short selling as part of an ESG-focused investment strategy can help shift capital away from high-emissions companies all while limiting losses for investors, said the study.
"ESG is an increasingly important focus for investors of all types. Short selling is an important tool by which investors can have a real-world impact and hedge their portfolios from climate and regulatory risks. Short selling can potentially reallocate $50-$140 billion of investments away from the most heavily polluting companies. But to fully realize this potential, ESG portfolio metrics cannot ignore short positions or incorrectly treat any exposure, be it long or short, the same," the study claimed.
To realize the full potential of short selling as an ESG tool, short positions of a high-emissions company should be counted separately or netted from the long positions when evaluating the ESG risk of a portfolio, it said.
According to the study, short-selling companies with large carbon footprints have the advantage of helping investors reduce their climate risk while also expressing their sustainability goals and values.
Whether it's in energy, transportation, or manufacturing, shorting se...................... To view our full article Click here
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