Chapter 2 - The ESG Market

Question 1

What are the drivers associated with the growth in ESG assets?

Answer 1

Growing demand from institutional asset owners and individual retail investors.
Increased government policy and regulation relevant to ESG.
Pressure from Non Government organisations (NGOs) and other members of civil society.

Question 2

Who runs the most comprehensive market review regarding responsible investment?

Answer 2

Global Sustainable Investment Alliance (GSIA)

Question 3

What is the GSIA market review?

Answer 3

It researches the five major markets for responsible investment (Europe, USA, Japan, Canada, Australia/ New Zealand) every 2 years, reviewing the growth in each region.
The USA and Europe continue to manage the highest proportions.

Question 4

Which country has most of their total AUM in responsible investing?

Answer 4

Canada

Question 5

What is the largest sustainable ESG strategy as at 2020?

Answer 5

ESG integration

Question 6

Institutional Investors Group on Climate Change (IIGC)

Answer 6

European membership body for investor collaboration on Climate Change. 240 members, working to support and help define the public policies, investment practices and corporate behaviours that address long term risks and opportunities associated with Climate Change.

Question 7

Roundtable on sustainable palm oil (RSPO)

Answer 7

International non profit organisation that promotes the use of sustainable palm oil and the end of deforestation and social conflict associated with palm oil production.

Question 8

What is a circular economy

Answer 8

An economic model based inter alia on sharing, leasing, reuse, repair, refurbishment and recycling, in an (almost) closed loop that aims to retain the highest utility and value of products, components and materials at all times.

Question 9

Forest Stewardship Council (FSC)

Answer 9

International non-profit that promotes responsible forest management worldwide

Question 10

What are greenhouse gasses (GHGs)

Answer 10

Includes C02, water vapour, methane, and nitrous oxide that interact with infrared radiation and when present in the atmosphere have the effect of warming the climate.
Without naturally occuring GHGs the earth would be 10 degrees cooler and life would not have evolved as it has.

Question 11

What are the three drivers/players of pension funds as institutions

Answer 11

Executives running day to day function
Trustees who hold the fiduciary duty, act separately from the employer and hold assets in trust for beneficiaries
Beneficiaries (members) who pay into the fund and are pensioners benefitting from the assets

Question 12

What are the three drivers/players of pension funds as institutions

Answer 12

Executives running day to day function
Trustees who hold the fiduciary duty, act separately from the employer and hold assets in trust for beneficiaries
Beneficiaries (members) who pay into the fund and are pensioners benefitting from the assets

Question 13

What can pension funds do to integrate ESG?

Answer 13

Sell out of funds that are environmentally unfriendly - advocating long term views

Embed climate tilts

Thematic investing / screening approaches

Question 14

What can pension funds do to integrate ESG?

Answer 14

Sell out of funds that are environmentally unfriendly - advocating long term views

Embed climate tilts

Thematic investing / screening approaches

Question 15

What is a ‘tilt’ in investing

Answer 15

A characteristic based portfolio strategy that requires relatively low annual turnover.

Question 16

Who are the PRI and what is their aim?

Answer 16

The Principles for Responsible investment. Started in 2006 when Kofi Annan invited group of investors from 12 countries to join.
Aim for consultants and advisers to understand the investment implications of ESG issues and turn them into investment recommendations because their advice is often accepted with little hesitation.

Question 17

How many principles does the PRI have?

Answer 17

7. Incorporate ESG issues into investment analysis and decision making process
8. We will be active owners and incorporate ESG issues into ownership policies and practices
9. We will seek appropriate disclosure on ESG issues by the entities in which we invest
10. Promote acceptance and implementation of the principles within the investment industry.
11. We will work together to enhance our effectiveness in implementing the principles.
12. We will each report on our activities and progress towards implementing the principles. (Annual reporting)