Styles through a convergent/divergent lens: the curious case of ESG

We look at a technique of classification, based on convergent and divergent patterns of returns that has been applied to hedge funds and alternative investments, and apply it to US equity investment styles with a particular interest in ESG. We extend the technique by looking at the impact of price changes on factor-mimicking portfolio weights. This analysis leads to powerful insights into style return dynamics. In particular, an ESG-ranked long-short portfolio looks more like momentum than value.