Portfolio Management 8 - Characteristics of Socially Responsible Investing Flashcards
What are the distinguishing characteristics of socially responsible investing?
Socially responsible investing, also known as ethical and green investing, means avoiding industries that negatively affect the environment and its people. This includes companies that produce or invest in alcohol, tobacco, gambling and weapons.
What is the tool that investors use to report or change a company policy that conflicts with the environment?
Shareholder advocacy
What is the term that socially responsible investing where investments are made in companies that support or provide environmentally friendly products and practices. These companies encourage new technologies that support the transition from carbon dependence to more sustainable alternatives.
Green investing
What is the process of selecting stocks or securities that meet certain predefined criteria, such as financial performance, ethical considerations, or social responsibility.
Positive screening
What is the process of finding companies that score poorly on environmental, social and governance (ESG) factors relative to their peers. These companies can then be avoided when constructing a portfolio.
Negative Screening
What is the difference between positive and negative screening in investment selection?
Positive screening techniques work to identify and highlight organizations that are actively functioning to further environmentally sustainable and positive social practices rather than simply avoiding bad behavior. Meanwhile, negative screening excludes investments in companies that actively work against the investor’s values, such as organizations with a history of international bribery or corruption.
What is the broad application of ESG investing in the application of social factors?
The impact on society:
- Human Capital (e.g. Diversity, Equity, and Inclusion)
- Product Liability (e.g. Product Safety and Quality)
- Stakeholder Opposition (e.g. Community Relations and Supply Chain Transparency)
- Social Opportunities (Workplace Health and Safety)
What is the broad application of ESG investing in the application of environmental factors?
The impact on the enviroment:
- Dependancy on natural resources
- Addressing climate change
- Carbon footrpint emissions
What is the broad application of ESG investing in the application of governance factors?
ESG governance standards ensure a company uses accurate and transparent accounting methods, pursues integrity and diversity in selecting its leadership, and is accountable to shareholders.
ESG investors look to see that:
-companies avoid conflicts of interest in their choice of board members and senior executives
-don’t use political contributions to obtain preferential treatment
-engage in illegal conduct
What is meant by RI- Responsible Investing?
RI, also known as sustainable investment, is
an umbrella term meant to encapsulate all
forms of investing that use ESG criteria to
make investment determinations.
What is a thematic investment?
Investments in sectors or subjects with sustainability themes such as water, renewable energy, sustainable timber/agriculture, etc. Applicable to all asset classes, though most familiar in private-market vehicles
What is an impact investment?
Defined by the Global Impact Investing
Network as investments made with the
intention to generate measurable social and environmental impact alongside a financial return.* In practice these
largely take the form of local, private-market investments targeting specific sectors, geographies, or demographics (subcategories include place-based or community investing
What is a Socially Responsible Investment (SRI)?
An investment strategy in which a largely negative screening is performed to align investments with ethical or moral considerations (also known as values investing or faith-based
investing if driven by religious values).
This is applicable to all asset classes.
What are approaches to responsible investing?
Socially Responsible Investment (aka Ethical, Values-Based, or Faith-Based Investment)
* Mission-Related Investment and Program-Related Investment
* ESG Investment
* Thematic Investment
* Impact Investment (includes Place-Based/Community Investment)
What is an Environmental, Social, and Governance (ESG) Investment?
Positive screening and/or fully integrating ESG factors into the investment process to capture alpha or manage beta.
This is applicable to all asset classes.
