Session 6 Flashcards
What is ESG
Environmental, social, governance
Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities
ESG - environmental
Climate change Resource depletion Waste Pollution Deforestation
ESG - governance
Bribery & corruption Executive pay Board diversity and structure Political lobbying and donations Tax strategy
Esg-social
Human rights Modern slavery Child labour Working conditions Employee relations
History of responsible investing - 1971
Launch of PAX world fund
Started by 2 united methodist ministers to avoid investing money in companies contributing to the Vietnam war
History of responsible investing - 1977
Sullivan principles: equalities at work
Ex: non-segregation, equal pay, equal employment
History of responsible investing - 2000
Launch of global compact initiative
Built from Sullivan principles, aimed to implement universal sustainability principles based on CEO commitments
History of responsible investing - 2004
UN global compact report on how to better integrate ESG issues in asset management
History of responsible investing- 2005
First report to argue that ESG Integration is a part of fiduciary (trusting) duty
History of responsible investing:2006
Launch of the principles for responsible investment
The UNPRI 6 principles for responsible investment
- Will incorporate ESG issues into investment analysis and decision-making
- Be active owners&incorporate ESG issues into our ownership policies and practices
- Seek appropriate disclosure on ESG issues by the entities in which we invest
- Promote acceptance&implementation of the principles within the investment industry
- Work together to enhance our effectiveness in implementing the principles
- Each report on our activities&progress towards implementing the principles
Why invest responsibility?
Materiality
Market demand
Regulation
Why we invest responsibly? - materiality
Recognition in the financial industry and in academia that ESG factors can affect risks and return
Why we invest responsibly?
Market demand
Demand from beneficiaries and clients for greater transparency about how their money is invested
Why we invest responsibly?
Regulation
Guidance from regulators that considering ESG factors is part of investors duties to their clients and beneficiaries