Fundamentals of ESG Investing

What is ESG Investing?

The interest in responsible investing has now grown to such an extent that the investment community has shifted from asking whether to adopt the ESG principles to how they should implement them. We will explore the developments in the areas of, and approaches adopted towards, responsible investing. At the end of this session participants will be able to:

• Define responsible investing
• Define and contrast
  • Ethical investing
  • Socially responsible investing
  • Thematic investing
  • Impact investing
  • Environmental, social and governance (ESG) investing
• Understand the objectives of ESG
• Explain the arguments for and against ESG in relation to affordability and effectiveness
• Explain how ESG can create both risks and opportunities for investors
• Understand the historical development of ethical and socially responsible and ESG investment

ESG Investment and Engagement

In this section, we look at approaches towards engagement and how engagement may create value for corporations and investors, both by enhancing returns and by controlling risk. We look at the advantages and disadvantages of individual and collective engagement, the enablers and barriers to successful engagement, and the ways in which a company can assess it engagement success. At the end of this session participants will be able to:

• Define activism and engagement in the context of ESG investing
• Describe how engagement may create value for companies and investors
• Understand how to generate stakeholder engagement in ESG investing and risk management
• Describe the features and purpose of an engagement plan and the typical steps taken for engaging with a company
• Understand how to assess the performance of engagement activity, including benchmarking
• Understand the Equator Principles as an ESG risk management framework for project finance

ESG Investment and Portfolio Management

In this section, we examine the screening approaches that may be adopted in the management of an investment portfolio and the benefits and limitations of these approaches. We will also look at the distinction between the screening of individual companies and collective investments, along with the impact that ESG has on, and the different approaches that need to be adopted for, active and passive portfolio management. At the end of this session participants will be able to:

• Describe approaches for integrating ESG into the portfolio management process
• Contrast negative and positive screening and describe the roles that they have on investment selection
• Describe the benefits and limitations of the main screening processes
• Distinguish between ESG screening of individual companies and collective investments
• Describe the impact of ESG on active and passive management

The ESG Market and Developing Trends

The ESG market continues to grow steadily. We will examine its estimated scale and growth, along with the key drivers behind that growth and the key challenges faced by the investment industry. In addition, we will discuss the challenges of applying ESG in different locations, along with the developing trends, themes and regulatory developments impacting this area. At the end of this session participants will be able to:

• Describe the size and growth of the ESG market by asset class
• Explain the key drivers behind the increased interest in ESG investing
• Explain the key drivers and challenges for ESG among investment industry stakeholders
• Describe the challenges of undertaking ESG analysis across different geographical regions and cultures
• Recognize current and developing ESG issues, trends and themes
• Identify global trends and regulatory developments along with their financial analysis impacts