Investors weigh merits of ESG hedging

Opinion divided over proposed tool for transferring risk of non-sustainable activities

For the green motorist, hybrid vehicles offer an ideal compromise. The electric motor reduces carbon emissions, and the back-up petrol engine extends the car’s range.

Some believe green derivatives could perform a similar role for investors.

In October, the chief investment officer of the US’s second-largest pension fund mooted a swap that would isolate the undesirable activity of a company and transfer the risk to another party.

The instrument would prevent investors from having to make