Intro ESG Flashcards
ESG investing
an approach to manage assets where investors explicitly incorporate
environmental, social and governance factors
in their investment decisions with the long-term return of an investment portfolio in mind.
aim to correctly identify, evaluate and price, social, environmental and economic risks and opportunities.
Environmental
climate change resource depletion waste pollution deforestation
natural world
use and interaction with
renewable and non-renewable resources
Social
human rights modern slavery child labour working conditions employee relations
factors that affect the lives of humans
mgmt of human capital, non-human animals, local communities and clients
Government factors
Bribery and corruption executive pay board diversity and structure trade association, lobbying and donations tax strategy
Involve issues tied to countries/ or jurisdictions or are common practice in an industry
interest of broader stakeholder groups
Tripe bottom line TBL
generation of long-term sustainable returns is dependent on stable, well-functioning and well-governed social, environmental and economic systems.
Dynamic inter-relationship in ESG
ESG may impact risk, volatility and long-term return of securities
Investments can have both a positive and negative impact on society and environment.
Corporate sustainability
an approach aiming to create long-term stakeholder value through the implementation of a business strategy that focuses on the
ethical, social, environmental, cultural and economic dimensions of doing business.
corporate social responsibility CSR
company’s commitment to conduct business in an ethical way
led to theory of TBL
TPL: people, planet, profit
TBL accounting theory 3Ps
people
planet
profit
effective sustainability can
reaffirm the company’s license to operate in the eye of gov’t and civil society
increase efficiency
attend to increasing regulatory requirements
reduce the prob. of fines
improve employee satisfaction and productivity
drive innovation and introduce new product lines
Responsible investment
All but engagement related to portfolio construction.
combine financial and non-financial outcomes
complements traditional financial analysis and portfolio construction techniques
Engagement by equity and bond holders
concern whether and how an investor tries to encourage and influence and an issuer’s behavior on ESG matters.
Social investing
Social impact investing
with a focus on social and/or environmental outcome and some expected financial returns
Return: social return and sub-market financial return
Impact investment
Social impact investing
with an intent to have a measurable environmental and/or social return
return: social return and adequate financial market rate
ESG investing
Sustainable and responsible investing
enhance lt value by using ESG factors to mitigate risks and identify growth opportunities
return: financial market return focused on long-term value
Social responsible investment (SRI)
approaches that apply social and environmental criteria in evaluating companies
best-in-class investment
not all are considered to be responsible investment
all-sector approach - try to maintain certain characteristics of an index.
select only the companies that Overcome a Defined Ranking hurdle, established using ESG criteria within each sector or industry.
Sustainable investment
may include best-in-class and/or ESG integration
companies with positive impact or companies that will benefit from sustainable macro-trends
selection of assets that contribute in some way to a sustainable economy.
thematic investment
not all are responsible investments or best-in-class
select companies that fall under a sustainability-related theme, such as clean-tech, sustainable agriculture, health care or climate change mitigation.
Green Investment - a broad sub-category of thematic/impact investing
green bond - raise money for climate and environmental project
allocating capital to assets that mitigate: climate change biodiversity loss resource inefficiency other environmental challenges
Social investment
address the bottom of the pyramid (BOP)
allocating capital to assets that address social challenges
BOP bottom of the pyramid
market-based model of economic development that seeks to simultaneously alleviate poverty while providing growth and profits for businesses serving these communities.
the poorest 2/3 of the economic human pyramid
>4 billion people living in poverty
micro-finance/insurance
access to basic telecommunication
access to improved nutrition and healthcare
access to (clean) energy
Impact investment
measurement and tracking of the agreed-upon impact
have diverse financial return expectations
Global impact investing network (GIIN)
investments made with specific intent of generating positive, measurable social and/or environmental impact alongside a financial return.
associated with direct investment
- private debt
- private equity
- real estate
Ethical (value driven ) and faith-based investment
avoid the negative
invest in line with certain principles, often using negative screening to avoid investing in companies whose products and services are deemed morally objectionable by the investor or certain religions
exclusions: tobacco, alcohol, weapons
shareholder engagement depends on
scale of ownership
quality of engagement dialogue and method and
whether the company has been informed by the investor that
撤资
divestment is a possible sanction
