ESG Risk-Scaling
Portfolios

Windham recognizes the shift to sustainable investing and has developed strategies that apply its risk scaling process to ESG assets. Windham’s ESG Risk-Scaling Portfolios are designed to deliver meaningful protection to an ESG oriented portfolio during significant market drawdowns while providing competitive returns in less adverse environments.

Invest responsibly with dynamic risk control.

The ESG portfolios shift among three components that are allocated to global ESG assets.
Each component is designed to deliver optimal performance for a fragile, neutral, or resilient risk environment.

Investment Process

Select

Select eligible ETFs based on third-party sustainability ratings, liquidity, and performance criteria.

Construct

Construct a blend of the ESG growth component and the defensive component that is specifically designed for
each risk environment.

Identify

Identify risk environments based on proprietary signals of risk concentration and threatening market conditions.

Monitor

Monitor risk signals to identify transition points from one risk environment to another and rebalance to the target allocation when a
transition occurs.

Risk Environments

Fragile

Characterized by conditions that historically coincided with periods in which there were significant drawdowns to growth assets and a state in which
risk is highly concentrated.

Neutral

Characterized by conditions that historically coincided with periods of average returns to growth assets and a state in which risk is driven by more
than a few factors.

Resilient

Characterized by conditions that historically coincided with periods of above-average returns to growth assets and a state in which risk is driven by many unrelated factors.

Risk Signals

Windham measures risk concentration using a statistic called the Absorption Ratio, which gives the fraction of variability across equity sector returns explained by a group of key factors. A high Absorption Ratio implies that markets are tightly coupled. When markets are in this state, shocks travel quickly and broadly. A low Absorption Ratio indicates that risk is spread broadly across many separate sources, in which case markets are relatively resilient to shocks.

Risk Concentration

Windham measures risk similarity to threatening market conditions by estimating the statistical distance of current conditions to past periods in which equities suffered significant losses. Windham’s measure of statistical distance considers the magnitude of returns as well as their co-occurrence.

Risk Similarity

Contact us to learn more about our ESG Risk-Scaling Portfolios.

617.419.3900 | inquiries@windhamcapital.com

Investing involves risk, including possible loss of principal.

Important information about Windham's investment advisory fees and other information is described in Windham's Form ADV.