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SRI > Class 1&2: SRI History, Concepts and Principles > Flashcards

Class 1&2: SRI History, Concepts and Principles Flashcards

1
Q

What is SRI?

A

Any investment process / strategy
combines investors’ financial objectives
with concerns about ESG issues

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2
Q

What is the SRI Agenda?

A

You can create sustainable markets by making the corporations themselves more sustainable.
Incorporate ESG in fund management
Encourage active investment to promote good governance

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3
Q

What are common governance issues to consider?

A
  • Business ethics
  • Ownership composition
  • Board diversity
  • Labour practises
  • Supply chain standards
  • Human capital development & compensation
  • Health & Safety
  • Product safety & quality
  • Accounting Standards
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4
Q

What is the current investment gap in key SDG sectors

A

2.5 trillion

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5
Q

Who are the major players in responsible investing?

A
  1. Asset owners (HNWI, institutional investors, retail investors)
  2. Asset Managers (Responsible investment specialists, mainstream financial firms, financial advisors & consultants)
  3. Providers of support service (research firms, engagement services, RI associations & think-tanks)
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6
Q

What are 5 types of institutional investors?

A
  1. Pension funds
  2. Insurance Reserves
  3. Mutual funds / collective investment scheme / unit trust
  4. Sovereign Wealth Fund
  5. Endowments
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7
Q

What is the preamble of the Regulation 28 (March 2011)?

A
  1. a fund has a FIDUCIARY DUTY to act in the
  2. best interest of members who depend on RESPONSIBLE MANAGEMENT of fund assets
  3. Investment should take into account ANY ESG FACTORS that influence long-term performance of assets
  4. and should promote the interest of a fund in a STABLE & TRANSPARENT environment.
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8
Q

What are the 6 spectrums of fund manager strategies?

A
  1. Traditional
  2. Responsible
  3. Sustainable
  4. Thematic
  5. Impact-First
  6. Philanthropy
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9
Q

What are the 5 RI strategies used in SSA

A
  1. ESG integration
  2. Investor Engagement
  3. Screening
  4. Sustainability Themed Investment
  5. Impact Investment
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10
Q

What is ESG integration?

A

The Systematic integration of Environmental, Social and
Governance (ESG) factors into investment analysis, valuation and decision-making based on appropriate research sources and metrics.

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11
Q

What is Investor Engagement?

A

Influence company behavior by active ownership through

proxy voting, governing body participation and/or engagement with companies on ESG matters.

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12
Q

What is Screening?

A

Inclusion or exclusion of an investment based on ESG or ethical screening. The screening may be positive, negative, norms-based or best-in-sector screening.

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13
Q

What is Sustainability Themed Investment?

A

Investments made along the themes of environmental sustainability and sustainable development.

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14
Q

What is Impact Investing?

A

Intentionally aimed generating measurable positive E and/or S impact alongside a financial return.

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15
Q

What are the 7 global approaches to SRI?

A
  1. Negative/exclusionary screening,
  2. Integration of ESG factors,
  3. Corporate engagement and investor activism
  4. Positive/best-in-class screening,
  5. Norms-based screening,
  6. Sustainability-themed investing,
  7. Impact/community investing,
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16
Q

Negative Exclusionary screening is the largest strategy in Europe and USA, and the second largest strategy in Africa. What are examples of negative screening?

A
  • Weapons banned by international convention
  • product specific, ie. Tobacco
  • anti-Sudan regime
  • Shariah compliant funds
  • IFC performance standards
17
Q

What is the second largest strategy in Europe, USA, and Canada, and the largest in Australia in Africa?

A

ESG Integration

The systematic and explicit inclusion by investment managers of ESG factors into traditional financial analysis

18
Q

What are the approaches to engagement?

A
  1. Proxy voting
  2. Private engagement
  3. Public Engagement
  4. Collaborative Engagement
  5. Hostile Engagement
19
Q

What is positive and best in class screening?

A

Investment in sectors, companies or projects selected for positive ESG performance relative to industry peers

20
Q

What are some of the Market initiatives in African markets to promote SRI

A

Initiatives/Stewardship Codes
1. PRI African network
2. SA: Code for Responsible Investment South Africa since 2011
3. Kenya : Kenya Stewardship code for institutional Investors in 2017
4. Zimbabwe:Developing code for Responsible and Sustainable Investing in Zimbabwe
(CRESIZ)

21
Q

The PRI was launched in 2009 with support from GEPF, what are some of the current working groups in South Arica?

A
  1. Engagement Working Group : Focused on the regulatory challenges currently facing collaborative shareholder engagement in South Africa.
  2. Awareness and Recruitment Working Group Focused on raising awareness about the materiality of ESG issues to investment processes and recruiting new signatories
22
Q

What are the 5 principles of CRISA?

A
  1. An institutional investor (II) should incorporate sustainability considerations, including ESG into its investment analysis as part of superior risk-adjusted returns
  2. An II should demonstrate acceptance of ownership responsibilities in its investments
  3. I I should consider collaborative approach to CRISA where possible
  4. Proactively manage conflict of interst
  5. Transparent policies & how CRISA is applied
23
Q

What are the 7 key components of the Kenya Stewardship code?

A
  1. Stewardship/Responsible Investment Policies
  2. Monitoring Investee Companies
  3. Active and Informed Voting Policies and Practices
  4. Engagement, Escalation and Collaboration with Other Investors
  5. Conflicts of Interest
  6. Public Disclosure and Client Reporting
  7. Focus on Sustainability Issues, Including Environmental, Social and Ethical Factors
24
Q

How do stock exchanges influence SRI?

A

Stock Exchanges are active in the SRI field through the launch of Sustainability related investment indexes which rely on transparent disclosure of CSR and Sustainability information to build the indices

Johannesburg Stock Exchange became the first exchange in the world to require listed companies to move towards integrated reporting as required in King Code on Corporate Governance IV.

25
Q

What are the 4 SRI Index categories?

A
  1. Broad-based
  2. Sector Based
  3. Sustainable Sector-based
  4. Sustainability Issue-based
26
Q

Name 4 initiatives trying to improve and promote sustainability reporting?

A
  1. Sustainability Reporting: UN Global Compact
  2. Global Reporting Initiative
  3. International Integrating Reporting Council
  4. King IV

SRI (3 decks)

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