Cliff Asness’s AQR Plans ESG Fund With a Short-Selling Twist

Quant powerhouse AQR Capital Management LLC is planning a new ESG-focused mutual fund that will not only favor the best-behaved companies, but also punish the worst by betting against them.

The AQR Sustainable Long-Short Equity Carbon Aware Fund (ticker QNZNX) will build a long-short portfolio of U.S. and foreign stocks based on ESG criteria, according to a Tuesday filing. The product will also pursue a “net zero” carbon positioning target, it said.

The offering appears to be the first of its kind. Historically funds targeting investments with higher environmental, social and governance standards have tended to exclude bad actors, ...