LEV DYNKIN, PHD is the founder and Global Head of the Quantitative Portfolio Strategy (QPS) Group at Barclays Research. Lev and QPS joined Barclays in 2008 from Lehman Brothers, where they had been a part of Global Research since 1987 and helped launch the Lehman fixed income indices. QPS was ranked #1 in its category in the US and Europe in the 2023 Institutional Investor Global Fixed Income Research survey and was top-ranked for the past 15 years. Lev and QPS co-authored 4 books: Systematic Investing in Credit, Wiley, 2021; A Decade of Duration Times Spread (DTS), Barclays, 2015; Quantitative Credit Portfolio Management, Wiley, 2011; Quantitative Management of Bond Portfolios, Princeton Univ. Press, 2007. ARIK BEN DOR, PHD is a Managing Director and a QPS member since 2004. In addition to originating innovative fixed income research for over two decades, he initiated and oversaw QPS extension into equity markets, and the development of cross-market signals between equity and credit markets. Arik co-authored 3 QPS books on quantitative investing, 30 articles in leading industry journals, and is a member of the Journal of Portfolio Management and Journal of Fixed Income editorial boards. He holds a PhD in Finance from the Kellogg Business School at Northwestern University, and worked at Lehman Brothers and Morgan Stanley prior to Barclays. ALBERT DESCLÉE is a Managing Director in Barclays QPS based in London, and is responsible for its European activities. He advises investors on all aspects of portfolio construction. He was ranked 1st in Institutional Investor European Fixed Income Research Survey in the Quantitative Analysis Category from 2019 to 2023. He joined Barclays in 2008 from Lehman Brothers. He graduated from the Catholic University of Louvain (Belgium) and obtained an MBA from INSEAD. JINGLING GUAN, PHD is a Director in Barclays QPS. She works on research related to systematic investing in both equities and credit, including signal development (especially cross-asset-class signals), portfolio construction, and risk hedging. She joined Barclays in 2015. Jingling holds a PhD in Finance from Kellogg School of Management, Northwestern University. JAY HYMAN, PHD is a Managing Director in Barclays QPS. He advises investors and publishes research on all aspects of portfolio structuring and risk management, across multiple asset classes. He has co-authored four books with QPS colleagues. Jay joined Barclays in 2008 from Lehman Brothers, where he worked on quantitative portfolio strategies since 1991. Jay holds a PhD in Electrical Engineering from Columbia University. SIMON POLBENNIKOV, PHD is a Managing Director in Barclays QPS. He is responsible for empirical research of all quantitative aspects of the investment process including systematic strategies and investment styles in fixed income, benchmark customization, tactical allocation, and hedging. Simon joined Barclays in 2008 from Lehman Brothers. Simon holds a PhD in Empirical Finance from Tilburg University, Netherlands.

• Foreword xiiiC.S. Venkatakrishnan, Group Chief Executive Officer, BarclaysPreface xvJeff Meli, Global Head of Research, BarclaysAcknowledgements xviiIntroduction xixLev Dynkin, Global Head of Quantitative Portfolio Strategy, Barclays ResearchPart One: Effect of ESG Constraints on Portfolio Performance and ValuationIntroduction to Part I 1Chapter 1 How Do ESG Criteria Relate to Other Portfolio Attributes? 5Chapter 2 Measuring the ESG Risk Premium: Credit Markets 19Chapter 3 Measuring the ESG Risk Premium: Equity Markets 43Chapter 4 Performance Impact of an ESG Tilt in Sovereign Bond Markets 77Chapter 5 Effect of SRI-Motivated Exclusion on Performance of Credit Portfolios 115Part Two: Systematic Strategies and Factors Subject to ESG ConstraintsIntroduction to Part II 133Chapter 6 Effect of ESG Constraints on Credit Active Returns 137Chapter 7 Incorporating ESG Considerations in Equity Factor Construction 169Part Three: Performance Implications of Companies’ ESG PoliciesIntroduction to Part III 203Chapter 8 ESG Rating Improvement and Subsequent Portfolio Performance 205Chapter 9 Predicting Companies’ ESG Rating Changes Using Job-posting Data 237Chapter 10 The Relationship Between Corporate Governance and Profitability 271Part Four: the Lack of Uniformity in ESG Definitions—Investment ImplicationsIntroduction to Part IV 283Chapter 11 ESG Equity Funds: Looking Beyond the Label 285Chapter 12 Combining Scores from Multiple ESG Ratings Providers 321Chapter 13 The Informational Content of Dispersion in Firms’ ESG Ratings across Providers 337Index 373

LEV DYNKIN, PHD is the founder and Global Head of the Quantitative Portfolio Strategy (QPS) Group at Barclays Research. Lev and QPS joined Barclays in 2008 from Lehman Brothers, where they had been a part of Global Research since 1987 and helped launch the Lehman fixed income indices. QPS was ranked #1 in its category in the US and Europe in the 2023 Institutional Investor Global Fixed Income Research survey and was top-ranked for the past 15 years. Lev and QPS co-authored 4 books: Systematic Investing in Credit, Wiley, 2021; A Decade of Duration Times Spread (DTS), Barclays, 2015; Quantitative Credit Portfolio Management, Wiley, 2011; Quantitative Management of Bond Portfolios, Princeton Univ. Press, 2007. ARIK BEN DOR, PHD is a Managing Director and a QPS member since 2004. In addition to originating innovative fixed income research for over two decades, he initiated and oversaw QPS extension into equity markets, and the development of cross-market signals between equity and credit markets. Arik co-authored 3 QPS books on quantitative investing, 30 articles in leading industry journals, and is a member of the Journal of Portfolio Management and Journal of Fixed Income editorial boards. He holds a PhD in Finance from the Kellogg Business School at Northwestern University, and worked at Lehman Brothers and Morgan Stanley prior to Barclays. ALBERT DESCLÉE is a Managing Director in Barclays QPS based in London, and is responsible for its European activities. He advises investors on all aspects of portfolio construction. He was ranked 1st in Institutional Investor European Fixed Income Research Survey in the Quantitative Analysis Category from 2019 to 2023. He joined Barclays in 2008 from Lehman Brothers. He graduated from the Catholic University of Louvain (Belgium) and obtained an MBA from INSEAD. JINGLING GUAN, PHD is a Director in Barclays QPS. She works on research related to systematic investing in both equities and credit, including signal development (especially cross-asset-class signals), portfolio construction, and risk hedging. She joined Barclays in 2015. Jingling holds a PhD in Finance from Kellogg School of Management, Northwestern University. JAY HYMAN, PHD is a Managing Director in Barclays QPS. He advises investors and publishes research on all aspects of portfolio structuring and risk management, across multiple asset classes. He has co-authored four books with QPS colleagues. Jay joined Barclays in 2008 from Lehman Brothers, where he worked on quantitative portfolio strategies since 1991. Jay holds a PhD in Electrical Engineering from Columbia University. SIMON POLBENNIKOV, PHD is a Managing Director in Barclays QPS. He is responsible for empirical research of all quantitative aspects of the investment process including systematic strategies and investment styles in fixed income, benchmark customization, tactical allocation, and hedging. Simon joined Barclays in 2008 from Lehman Brothers. Simon holds a PhD in Empirical Finance from Tilburg University, Netherlands.

• Foreword xiiiC.S. Venkatakrishnan, Group Chief Executive Officer, BarclaysPreface xvJeff Meli, Global Head of Research, BarclaysAcknowledgements xviiIntroduction xixLev Dynkin, Global Head of Quantitative Portfolio Strategy, Barclays ResearchPart One: Effect of ESG Constraints on Portfolio Performance and ValuationIntroduction to Part I 1Chapter 1 How Do ESG Criteria Relate to Other Portfolio Attributes? 5Chapter 2 Measuring the ESG Risk Premium: Credit Markets 19Chapter 3 Measuring the ESG Risk Premium: Equity Markets 43Chapter 4 Performance Impact of an ESG Tilt in Sovereign Bond Markets 77Chapter 5 Effect of SRI-Motivated Exclusion on Performance of Credit Portfolios 115Part Two: Systematic Strategies and Factors Subject to ESG ConstraintsIntroduction to Part II 133Chapter 6 Effect of ESG Constraints on Credit Active Returns 137Chapter 7 Incorporating ESG Considerations in Equity Factor Construction 169Part Three: Performance Implications of Companies’ ESG PoliciesIntroduction to Part III 203Chapter 8 ESG Rating Improvement and Subsequent Portfolio Performance 205Chapter 9 Predicting Companies’ ESG Rating Changes Using Job-posting Data 237Chapter 10 The Relationship Between Corporate Governance and Profitability 271Part Four: the Lack of Uniformity in ESG Definitions—Investment ImplicationsIntroduction to Part IV 283Chapter 11 ESG Equity Funds: Looking Beyond the Label 285Chapter 12 Combining Scores from Multiple ESG Ratings Providers 321Chapter 13 The Informational Content of Dispersion in Firms’ ESG Ratings across Providers 337Index 373

LEV DYNKIN, PHD is the founder and Global Head of the Quantitative Portfolio Strategy (QPS) Group at Barclays Research. Lev and QPS joined Barclays in 2008 from Lehman Brothers, where they had been a part of Global Research since 1987 and helped launch the Lehman fixed income indices. QPS was ranked #1 in its category in the US and Europe in the 2023 Institutional Investor Global Fixed Income Research survey and was top-ranked for the past 15 years. Lev and QPS co-authored 4 books: Systematic Investing in Credit, Wiley, 2021; A Decade of Duration Times Spread (DTS), Barclays, 2015; Quantitative Credit Portfolio Management, Wiley, 2011; Quantitative Management of Bond Portfolios, Princeton Univ. Press, 2007. ARIK BEN DOR, PHD is a Managing Director and a QPS member since 2004. In addition to originating innovative fixed income research for over two decades, he initiated and oversaw QPS extension into equity markets, and the development of cross-market signals between equity and credit markets. Arik co-authored 3 QPS books on quantitative investing, 30 articles in leading industry journals, and is a member of the Journal of Portfolio Management and Journal of Fixed Income editorial boards. He holds a PhD in Finance from the Kellogg Business School at Northwestern University, and worked at Lehman Brothers and Morgan Stanley prior to Barclays. ALBERT DESCLÉE is a Managing Director in Barclays QPS based in London, and is responsible for its European activities. He advises investors on all aspects of portfolio construction. He was ranked 1st in Institutional Investor European Fixed Income Research Survey in the Quantitative Analysis Category from 2019 to 2023. He joined Barclays in 2008 from Lehman Brothers. He graduated from the Catholic University of Louvain (Belgium) and obtained an MBA from INSEAD. JINGLING GUAN, PHD is a Director in Barclays QPS. She works on research related to systematic investing in both equities and credit, including signal development (especially cross-asset-class signals), portfolio construction, and risk hedging. She joined Barclays in 2015. Jingling holds a PhD in Finance from Kellogg School of Management, Northwestern University. JAY HYMAN, PHD is a Managing Director in Barclays QPS. He advises investors and publishes research on all aspects of portfolio structuring and risk management, across multiple asset classes. He has co-authored four books with QPS colleagues. Jay joined Barclays in 2008 from Lehman Brothers, where he worked on quantitative portfolio strategies since 1991. Jay holds a PhD in Electrical Engineering from Columbia University. SIMON POLBENNIKOV, PHD is a Managing Director in Barclays QPS. He is responsible for empirical research of all quantitative aspects of the investment process including systematic strategies and investment styles in fixed income, benchmark customization, tactical allocation, and hedging. Simon joined Barclays in 2008 from Lehman Brothers. Simon holds a PhD in Empirical Finance from Tilburg University, Netherlands.

• Foreword xiiiC.S. Venkatakrishnan, Group Chief Executive Officer, BarclaysPreface xvJeff Meli, Global Head of Research, BarclaysAcknowledgements xviiIntroduction xixLev Dynkin, Global Head of Quantitative Portfolio Strategy, Barclays ResearchPart One: Effect of ESG Constraints on Portfolio Performance and ValuationIntroduction to Part I 1Chapter 1 How Do ESG Criteria Relate to Other Portfolio Attributes? 5Chapter 2 Measuring the ESG Risk Premium: Credit Markets 19Chapter 3 Measuring the ESG Risk Premium: Equity Markets 43Chapter 4 Performance Impact of an ESG Tilt in Sovereign Bond Markets 77Chapter 5 Effect of SRI-Motivated Exclusion on Performance of Credit Portfolios 115Part Two: Systematic Strategies and Factors Subject to ESG ConstraintsIntroduction to Part II 133Chapter 6 Effect of ESG Constraints on Credit Active Returns 137Chapter 7 Incorporating ESG Considerations in Equity Factor Construction 169Part Three: Performance Implications of Companies’ ESG PoliciesIntroduction to Part III 203Chapter 8 ESG Rating Improvement and Subsequent Portfolio Performance 205Chapter 9 Predicting Companies’ ESG Rating Changes Using Job-posting Data 237Chapter 10 The Relationship Between Corporate Governance and Profitability 271Part Four: the Lack of Uniformity in ESG Definitions—Investment ImplicationsIntroduction to Part IV 283Chapter 11 ESG Equity Funds: Looking Beyond the Label 285Chapter 12 Combining Scores from Multiple ESG Ratings Providers 321Chapter 13 The Informational Content of Dispersion in Firms’ ESG Ratings across Providers 337Index 373