What does Socially Responsible Investment (SRI) refer to?
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Socially Responsible Investment (SRI) refers to approaches that apply social and environmental criteria in evaluating companies, using a chosen set of criteria to score companies for qualification within the investment universe.
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What does Socially Responsible Investment (SRI) refer to?
Socially Responsible Investment (SRI) refers to approaches that apply social and environmental criteria in evaluating companies, using a chosen set of criteria to score companies for qualification within the investment universe.
What is Doughnut Economics?
Doughnut Economics is a framework that balances ecological ceilings and social foundations, aiming to create a sustainable economy that meets the needs of all within the planet's boundaries.
What are the Nine Planetary Boundaries?
The Nine Planetary Boundaries are a framework developed by the Stockholm Resilience Centre that identifies critical environmental thresholds that humanity must not exceed to maintain a stable and resilient Earth system.
What does the Certificate in ESG Investing aim to address?
The Certificate in ESG Investing aims to close a critical skills gap that persists throughout the investment industry by providing education on ESG considerations.
What is Best-in-Class Investment?
Best-in-Class Investment, also known as 'positive screening', involves selecting companies that meet a defined ranking hurdle based on ESG criteria within each sector or industry.
What is the mission of CFA Institute regarding ethical standards?
The mission of CFA Institute is to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.
What does green investment entail?
Green investment refers to allocating capital to assets that mitigate climate change, biodiversity loss, resource inefficiency, and other environmental challenges, including low-carbon power generation and pollution control.
What are universal owners?
Universal owners are large institutional investors whose diversified portfolios represent a slice of global capital markets, making their investment returns dependent on the overall health of the economy.
What is doughnut economics?
Doughnut economics is a framework developed by economist Kate Raworth that combines planetary boundaries with social boundaries to create a sustainable and just economy.
What is the significance of 'climate change' as a planetary boundary?
Climate change is a critical planetary boundary that, if crossed, could lead to severe environmental and societal consequences, affecting global stability and sustainability.
What are negative megatrends in the context of ESG investing?
Negative megatrends refer to issues like resource scarcity and health and income inequalities that can create a drag on economic prosperity.
What is social investment?
Social investment refers to allocating capital to assets that address social challenges, including products aimed at the bottom of the pyramid (BOP), which encompasses the poorest two-thirds of the economic human pyramid.
What is the economic cost of undernutrition in Ethiopia?
The economic cost of undernutrition in Ethiopia is just under US$70 million a year, highlighting the severe economic consequences of social issues.
What is Triple Bottom Line (TBL) accounting?
Triple Bottom Line (TBL) accounting is a framework that incorporates three dimensions of performance: social, environmental, and financial, aiming to measure the sustainability and societal impact of an organization.
What is Responsible Investment?
Responsible investment is a strategy and practice to incorporate ESG factors into investment decisions and active ownership, aimed at mitigating risky ESG practices to protect value.
What is sustainable investment?
Sustainable investment refers to a strategy that prioritizes the selection of companies with a positive impact or those that benefit from sustainable macro-trends, while screening out activities considered contrary to long-term environmental and social sustainability.
What is the term 'Climate change' in the context of financial stability?
Climate change refers to the long-term alteration of temperature and typical weather patterns in a place, which poses significant risks to financial stability as its impacts may extend beyond the traditional horizons of financial actors, affecting future generations.
What is Negative Screening in Responsible Investment?
Negative Screening is an investment strategy that excludes certain sectors, companies, or practices from a portfolio based on specific ESG criteria, such as avoiding investments in weapons or tobacco.
What is the term 'stranded assets' in the context of ESG?
Stranded assets refer to assets that become obsolete due to regulatory, environmental, or market constraints, rendering them unable to generate expected returns.
What is the role of investment professionals in relation to ESG factors?
Investment professionals play a vital role in understanding, analyzing, and placing value on plans and intentions around environmental, social, and governance (ESG) factors.
What are negative externalities?
Negative externalities are costs incurred by third parties as a result of an economic transaction, which are not reflected in the price of goods or services, potentially harming overall market returns.
What is the macro-level debate on ESG incorporation?
The macro-level debate on ESG incorporation encompasses various perspectives, including risk, fiduciary duty, economics, impact and ethics, client demand, and regulation regarding the integration of ESG factors into investment decisions.
What does Shareholder Engagement involve?
Shareholder Engagement reflects active ownership by investors who seek to influence a corporation’s decisions on ESG matters through dialogue with corporate officers or votes at shareholder assemblies.
What is the Bottom of the Pyramid (BOP) in responsible investment?
BOP refers to a market-based model of economic development that seeks to alleviate poverty while providing growth and profits for businesses serving low-income communities.
What are social impact bonds?
Social impact bonds are a mechanism to contract with the public sector, where the sector pays for better social outcomes in certain services and shares part of the savings with investors.
What is the significance of ESG investing?
ESG investing recognizes that social, environmental, and governance issues can impact the risk, volatility, and long-term returns of investments, and that investments can have both positive and negative effects on society and the environment.
What do Christian investors typically avoid in their investments?
Investments in firms that facilitate abortion, contraceptives, embryonic stem-cell research, or are involved in the production and sale of weapons.
What are the benefits of integrating ESG factors in investment?
Integrating ESG factors can lead to direct financial benefits and help manage risks associated with societal, regulatory, and client pressures.
What are the UN’s Sustainable Development Goals (SDGs)?
The SDGs are an agreed framework for all UN member state governments to align with global priorities, such as transitioning to a low-carbon economy and eliminating human rights abuses in corporate supply chains.
What is the triple bottom line (TBL) accounting?
Triple bottom line (TBL) accounting is an accounting framework that incorporates three dimensions of performance: social, environmental, and financial.
What are the aims of key supranational ESG initiatives?
Key supranational ESG initiatives aim to promote responsible investment practices, enhance transparency, and drive progress in sustainability across global markets.
What does the term 'biosphere integrity' refer to in the context of planetary boundaries?
Biosphere integrity refers to the health and stability of ecosystems and biodiversity, which is one of the Nine Planetary Boundaries that must be maintained to ensure a sustainable environment.
What is the role of active owners in ESG investing?
Active owners encourage high standards of ESG performance in the companies or entities in which they are invested.
What is the significance of income inequality in the context of ESG investing?
Income inequality can create social stresses and economic risks, impacting the overall health of the economy and the investment returns of large institutional investors.
What are 'global risks' as identified by the World Economic Forum?
Global risks are significant threats that can impact economies and societies, including issues like asset bubbles, climate action failure, and geopolitical conflicts, which require attention from financial regulators.
What role does the Financial Stability Board play in relation to climate change?
The Financial Stability Board monitors risks to the financial system, including those posed by climate change, and aims to integrate these risks into financial regulatory frameworks.
What are core boundaries in the context of planetary boundaries?
Core boundaries are critical thresholds, such as climate change and biosphere integrity, whose significant alteration could drive the Earth system into a new state.
What is short-termism in investment practice?
Short-termism covers activities where investors trade based on anticipation of short-term price movements rather than long-term value, and engage with investee companies prioritizing maximizing near-term financial results over long-term value creation.
What are the Sustainable Development Goals (SDGs)?
The SDGs are a set of 17 goals launched by the United Nations in 2015 aimed at addressing global challenges such as poverty, inequality, and climate change.
What restrictions do Shari’a-compliant investors have?
They avoid investments in firms that profit from alcohol, pornography, gambling, pay interest, or are involved in pork-related businesses.
What is ESG investment?
ESG investment refers to the integration of environmental, social, and governance factors into investment analysis and decision-making processes.
What is Negative Screening in responsible investment?
Negative Screening is the practice of avoiding investments in controversial sectors, such as arms or fossil fuels, often for ethical or religious reasons.
What are ESG megatrends?
ESG megatrends are large-scale, systemic changes that impact companies and their practices, often driven by evolving societal expectations and regulatory frameworks.
What is Sustainable Investment?
Sustainable investment refers to the selection of assets that contribute to a sustainable economy, minimizing natural and social resource depletion, and may include best-in-class and/or ESG integration.
What is thematic investment in the context of ESG?
Thematic investment in an ESG context is an approach based on needs arising from environmental or social challenges, focusing on themes such as access to low-carbon energy and efficient use of water.
What does 'tragedy of the horizon' mean in relation to climate change?
'Tragedy of the horizon' describes the challenge of recognizing that the catastrophic impacts of climate change will occur beyond the immediate future, creating a disconnect between current incentives and the need for long-term solutions.
What does the risk perspective in ESG integration highlight?
The risk perspective in ESG integration highlights the increasing importance of environmental risks, such as extreme weather events and climate change, as significant factors affecting investment decisions.
What is the link between responsible investment and financial system stability?
The link between responsible investment and financial system stability involves understanding how integrating ESG considerations can contribute to a more stable financial system by addressing risks and promoting sustainable practices.
What is ESG investing?
ESG investing is an approach to managing assets where investors explicitly incorporate environmental, social, and governance (ESG) factors in their investment decisions with the long-term return of an investment portfolio in mind.
What is impact investing?
Impact investing refers to investments made with the intent of generating positive, measurable social or environmental impact alongside a financial return.
What is the misconception regarding fiduciary duty and ESG factors?
The misconception is that fiduciary duty prevents the consideration of ESG factors in investments, when in fact, failing to incorporate financially material ESG factors may constitute a failure of fiduciary duty.
What is the current status of ESG definitions?
There is currently no universal standard for what factors are included under the 'E,' 'S,' and 'G' definitions, and they may overlap with one another.
What is the significance of the Paris Agreement in the context of ESG investing?
The Paris Agreement aims to limit global warming to less than 2°C, and many companies are aligning their commitments to become 'net-zero' emitters in accordance with its goals.
What financial consequences did PG&E face due to climate-related risks?
PG&E was driven to bankruptcy proceedings due to wildfire liabilities, which were exacerbated by climate change and resulted in significant loss of life and property.
How do investors typically reflect ESG considerations in their investment process?
Investors typically reflect ESG considerations in their investment process through exclusionary screening, integration of ESG factors into financial analysis, and active ownership or engagement.
What is ESG investing?
ESG investing refers to the practice of considering environmental, social, and governance factors in the context of security selection and portfolio construction, recognizing the benefits of effective sustainability management.
What are the benefits of effective sustainability management?
Effective sustainability management can reaffirm a company's license to operate, increase efficiency, meet regulatory requirements, reduce fines, improve employee satisfaction, and drive innovation.
How does CFA Institute ensure the quality of the Certificate in ESG Investing?
CFA Institute applies rigorous standards across its Education portfolio to ensure the quality of the curriculum for the Certificate in ESG Investing.
What is the significance of continuing education for investment professionals?
Continuing education is significant for investment professionals as it equips them with the necessary tools to navigate the complex ESG landscape and act in the best interest of their clients.
What does 'fiduciary duty' mean in relation to ESG factors?
Fiduciary duty refers to the obligation of financial institutions or individuals to manage money or assets on behalf of beneficiaries, ensuring that they act in the beneficiaries' best financial interests.
What is the significance of the Freshfields report regarding ESG integration?
The Freshfields report argues that integrating ESG considerations into investment analysis is permissible and arguably required to reliably predict financial performance across all jurisdictions.
What are 'sin stocks'?
Stocks of companies that engage in activities considered unethical or immoral, such as alcohol, gambling, or tobacco production.
What are Governance Factors in ESG?
Governance Factors involve issues tied to countries or jurisdictions, common practices in an industry, and the interests of broader stakeholder groups.
What types of exclusions are common in ethical investment?
Common exclusions in ethical investment include tobacco, alcohol, pornography, and weapons.
What challenges do companies face in delivering on their climate-related commitments?
Key challenges include lack of ambition and leadership, securing quality data, and balancing carbon reduction with business and social impacts of the transition.
What was the financial impact of the water crisis on the Brazilian Aluminium Company (CBA)?
The water crisis in Brazil caused a reduction in CBA's EBITDA by between US33 million due to shortfalls in hydropower generation.
How does climate change relate to systemic risk in finance?
The Financial Stability Board (FSB) has identified climate change as a potential systemic risk that could impact the stability of the financial system.
What is Corporate Social Responsibility (CSR)?
Corporate Social Responsibility (CSR) refers to the practices and policies undertaken by corporations to have a positive influence on the world, encompassing social, environmental, and economic considerations.
What is the Universal Declaration of Human Rights?
A significant international agreement that outlines fundamental human rights to be universally protected.
What is negative screening in ESG investing?
A strategy that involves avoiding investments in companies that do not align with certain ethical or moral beliefs, often referred to as 'sin stocks'.
What is the significance of engagement in responsible investment?
Engagement in responsible investment refers to the efforts by equity owners and bondholders to influence an issuer's behavior regarding ESG matters, distinguishing it from other investment approaches focused solely on portfolio construction.
What is the Shareholder Rights Directive (SRD)?
The Shareholder Rights Directive (SRD) is a regulation issued by the European Union in September 2020, requiring investors to be active owners and to act with a more long-term focus.
What are Externalities in the context of ESG incorporation?
Externalities refer to the wider effects of investments on society, the environment, and the economy that are not reflected in the price of the investment.
What is Impact Investment?
Impact Investment is an investment strategy that aims to tackle social and environmental problems while providing financial returns, focusing on positive impacts and effective capital deployment.
What are the benefits of incorporating ESG in decision making?
Incorporating ESG in decision making can enhance returns, improve risk management, and contribute to financial system stability.
What are the nine planetary boundaries identified by the Stockholm Resilience Centre?
The nine planetary boundaries are thresholds within which humanity can safely operate, including climate change, loss of biosphere integrity, land-system change, and altered biogeochemical cycles.
What are ESG Factors?
ESG factors are criteria used to evaluate the environmental, social, and governance aspects of an investment, which include environmental issues like resource use, social issues affecting human capital and communities, and governance issues related to corporate practices.
What do Environmental Factors in ESG refer to?
Environmental Factors pertain to the natural world, including the use of and interaction with renewable and non-renewable resources such as water, minerals, ecosystems, and biodiversity.
What are the consequences of short-termism in investing?
Short-termism may lead to adverse long-term consequences such as promoting bubbles, financial instability, and general economic underperformance, while ignoring long-term factors like ESG.
What do modern fiduciary duties require regarding ESG factors?
Modern fiduciary duties require investors to incorporate financially material ESG factors into their investment decision-making and to understand the sustainability preferences of their beneficiaries.
Who are stakeholders in the context of ESG?
Stakeholders are members of groups whose support is essential for an organization’s existence, including communities impacted by companies and regulators.
What is corporate social responsibility (CSR)?
Corporate social responsibility (CSR) is a business model in which companies integrate social and environmental concerns in their operations and interactions with stakeholders.
What is financial materiality of ESG integration?
Financial materiality of ESG integration refers to the relevance of ESG factors in influencing a company's financial performance and investment returns.
What is the Triple Bottom Line (TBL)?
The Triple Bottom Line is a concept that evaluates a company's commitment to social, environmental, and economic sustainability, often referred to as the three Ps: people, planet, and profit.
How does Corporate Social Responsibility (CSR) relate to Corporate Sustainability?
Corporate Social Responsibility is a broad business concept that describes a company's commitment to ethical business practices, while Corporate Sustainability focuses on creating long-term stakeholder value through ethical, social, and environmental strategies.
How do ESG factors impact a company's financial results?
ESG factors can significantly impact a company's financial results by influencing its reputation, operational efficiency, and regulatory compliance, among other aspects.
What does the spectrum of capital in responsible investment illustrate?
The spectrum of capital in responsible investment illustrates the range from finance-only investments with limited ESG consideration to investments that accept below-market returns for high positive social or environmental impact.
What is the commitment of BlackRock regarding coal production?
BlackRock committed to divesting from companies that generate more than 25% of their revenues from coal production for its actively managed portfolios and required reporting from investee companies on their climate-related risks.
What are the different approaches to ESG investing?
Different approaches to ESG investing include responsible investment, socially responsible investment, sustainable investment, best-in-class investment, ethical/values-driven investment, thematic investment, green investment, social investment, and shareholder engagement.
Why is Client Demand for transparency increasing in investments?
Client Demand for transparency is increasing due to growing awareness that ESG factors influence company value, returns, and reputation, as well as the environmental and social impacts of their investments.
What is responsible investment?
Responsible investment is an umbrella term for various approaches that allow investors to consider ESG factors in their security selection and portfolio construction, combining financial and non-financial outcomes.
What do Social Factors in ESG encompass?
Social Factors affect the lives of humans and include the management of human capital, non-human animals, local communities, and clients.
What is ethical (or values-driven) investment?
Ethical investment refers to investing in line with certain principles, often using negative screening to avoid companies whose products and services are deemed morally objectionable.
What is the role of faith-based investors in shareholder activism?
Faith-based investors engage in shareholder activism to improve the conduct of investee companies in alignment with their ethical beliefs.
How has climate change impacted water resources for companies?
Climate change has aggravated water depletion, leading to higher costs for companies and an increasing frequency of extreme weather events that disrupt manufacturing.
What is the Net-Zero Asset Owner Alliance?
The Net-Zero Asset Owner Alliance is a group of asset owners committed to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050, launched under the auspices of the UN.