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Portfolio Construction and Optimization Employing Orenda's Dataset

Updated: Jun 22, 2022

Orenda Software Solutions

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In this paper, we demonstrate that Orenda’s ESG (Environmental, Social and Governance) dataset can be employed quantitatively for security selection and portfolio optimization. By holding these assets in an equally weighted, quarterly rebalanced investment strategy, we outperformed the underlying benchmark. We further validated Orenda’s unique dataset by optimizing the portfolio in an ESG mean variance approach, which led to improved empirical alpha, Sharpe ratio and portfolio absolute performance. To investigate our hypothesis, we solely employed Orenda’s ESG scores as a way to select securities within the S&P 500 from the period of December 2015 to March 2020.

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