Level 1 Introduction Flashcards
Name ESG strategy classifications
Eurosif
GISA Equivilant
PRI Equivilant
EFAMA Equivilant
How many times have the ESG google search volume increased in the past 5 years
20 times
Investor commitment. How many of Total AUM have signed the PRI. Both fixed income and equity
close to 50%
EUROSIF- PROMOTING SUSTAINABILITY THROUGH EUROPEAN FINANCIAL MARKETS Rank the strategies
Exclusion
Engagement and voting
ESG intergration
Normbased screening
Best in class
Sustainability themed Impact investing
Terminology and Definitions What is sustainable development
Development that meet the need sof the present without compromising for future generations to meet their needs
Terminology and Definitions What is the Triple bottom line
It focuses corporations not just on economic value they add but also on environmental and social value they add- or destroy
Terminology and Definitions What is Corporate social responsibility.
The responsibility of enterprises for the impact on society
ESG Investment. 85tr committed but how is the actual AUM
A lot smaller
What is Value based exclusions?
Exclusion of companies derivion a significan portion of their revenues or profit from activities seen as negative for society
Name the most common type of value based exclusions?
Controversioal weapons
TObacco
All weapons gambling
What is normes based exclusions?
and what are the most common conventions
Exclusion of companies that violate internationally or natinally regognized norms or conventions
UN Global Compact principles
Universal declaration of human rights
International labour declaration
Unitied nation convention against corruption
etc..
Explain te best in class strategy?
And what are the main characteristics
The selection of companies with the best environmental, social and governance practices,
Main caracterictics
Mainly active equity strategies
Bias towards large cap companies
Increasingly used in fixed income strategies
If you wnat to exclude based on Environmental, What can you look for?
CO2 emissions
Use of water
Waste
data quality
enivironmental management
If you wnat to exclude based on Social, What can you look for?
Repitational risk
Diversity
Health and saftey
stakeholder relations
Human rights
If you wnat to exclude based on Governance, What can you look for?
Shareholder rights
Renumeration
Transparency
Internal controls
reporting
Business ethics
What are the main themes of the sustanability themed strategy?
And what are their main characteritics
Main themes are
Reneable energies
Water
Mobility
Resource-efficiency
demographics and aging
Main characteristics are
Mainly acitve equity strategies
Bias towards small and mid cap companies
What is the definition of ESG intergration?
What are the common motives and main barriers
ESG intergration defines practices by traditional financial management that take envirionmental, social and corporate governance aspects into accounts troughout the investment decision-making process.
Seek primary a fincnial advantaeg from the intergration
Reputational risk management
Main barriers are
General knowledge about aout goals and possibilties
Related direct and indirect cost
ESG data and availaility
What is the ESG strategy engagement and voting?
Engagement are all interaction between investors and investees to adress ESG related topics or strategy.
Teh objective can be to monitor performance or exercise influence of a comanies ESG practice.
Proxy voting is the investors practive to actively exert the votin right on the annual meetin
What is the shareholders right direcive 2017/828 EC?
A dircetive to strengten the sharehodlers rights and facilitate cross border voting.
Encouraging long term engagement of inst investors.
Increased transparency
Explain the motives behind proxy voting
Comply with fiduciary duty (institutions)
Comply with regulatory framework (inst)
Seek strategic changes, particulary if passive investment strategies are employed
What are the main challanges in proxy voting?
Cost and benefits
Free rider problem
Conflict of interest
Lack of transperancy
Explain the strategy impact investing
Investment made in companies or organization and fund with the intention to generate social and envirionmental impact alongside financial return.
Investment are often project specific.
Impact investing
What are the characteristics?
Intentionally- The intentis ti generato social ond or environmental impact trough investment is and essential component.
Return expectation- investments are expect to reutn at least on minimum Retunr on capital.
Impact measurement- The hallmark of impact investing is to measure and report the performance and progress of underlying investments
The ESG investment Spectrum
What are the focus of Impact investing/Concessionary rate
What are the Impact intention
Investments that target social and environmental impact and deliver BELOW market rate financial returns
Impact intention is benefit stakeholders and contributes to solutions
The ESG investment Spectrum
What are the focus of Impact investing/Market rate
What are the Impact intention
Investments that target social and environmental impact and deliver market rate financial returns
Impact intention is benefit stakeholders and contributes to solutions
The ESG investment Spectrum
What are the focus of thematic/sustainablity themes investments
What are the Impact intention
Investments that specifically target sustanabilty themes.
like clearn energy, green property etc
Impact intention is benefit stakeholders
The ESG investment Spectrum
What are the focus of Negative screening(&norms based)
What are the Impact intention
industry sectors or companies are excluded/divested to avoid risk or better align with values.
Impact intention is to avoid harm
The ESG investment Spectrum
What are the focus of ESG intergration
What are the Impact intention
Focus is consideration and analysis fo ESG factors as part of investment decision making
Impact intention is to avoid harm
The ESG investment Spectrum What are the focus of Postive or best in class screening
What are the Impact intention
Investment targets companies or industries with better ESG performance
Impact intention is tp benefit stakeholders
The ESG investment Spectrum
What are the focus of Traitional investment
What are the Impact intention
Focus is limited or no regard for ESG factors
Impact intention is Agnostic
What is the primary and secondary sustainablity motive
Primary motive is the generate impact trough sustanable and responsible investment practices. eg helth improvement, sustanable land use etc
Secondary motive the to earn at leeat market return
Takeaways from Chapter 1
ESG/RI to become market standard
Dynamic market with high growth rates
Differnet startegies for differnet objectives
Profit and purpose are not conflicting goals
