S6 - Market and morality Flashcards
What is responsible investment?
It generally refers to an approach that, in addition to the usual financial criteria, integrates other factors (environmental, social and governance in the case of ESG investment) into investment decisions. These factors may vary depending on the values and objectives of each investor.
What factors does ESG investing take into account?
Environmental performance (E): water management, waste management, resource management, environmental preservation, carbon footprint, use of toxic products, etc.
Social impact (S): ways of treating stakeholders (customers, employees, suppliers, communities), promotion of equity, diversity and inclusion, etc.
Governance issues (G): governance structure, board composition, respect for stakeholders, etc.
A company’s score is established through a combination of self-reported data and expert analysis.
What are the contribution and limitation of ESG factors?
Contribution: Effectively compares companies to each other.
Limitations: Does not take into account the overall mission of a company or impact on society.
What is shareholder activism? It’s limitation?
Definition: When shareholders mobilize to encourage better corporate practices by companies in which they are co-owners. Shareholders seek to influence a company’s practices through public statements, regular dialogue with management, the filing of resolutions on the agenda of general meetings and the active exercise of their voting rights.
Limitation: Influence is proportional to the number of shares, and therefore for this strategy to work, it is necessary to have sufficient weight or to regroup among shareholders.
What is divestment? Example? Limits?
Definition: Divestment is the divestment of assets, usually for ethical, financial or political reasons. At the institutional level, divestment can take the form of a policy and/or set of economic sanctions used by companies, shareholder groups, individuals, and governments to pressure a company or country, usually in protest of the company’s or country’s policies and practices.
Example:
* Companies ceasing business operations in Russia to protest the invasion of Ukraine
Limits: By divesting, we stop being in conversation with the company or industry. Some investor groups prefer to continue to invest with strings attached in order to influence the company’s decisions or activities.
What are some ethical dilemmas that can arise when investing?
If responsible investments were not as successful, would you still invest in them?
For you, is investing a question of values or a question of performance?
