Impact Investing Overview

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Questions and Answers

What do Christian investors typically avoid when selecting investment firms?

Firms that support environmental responsibility
Firms that facilitate abortion or contraceptives (correct)
Firms that promote labor unions
Firms that prioritize fair employment practices

Which of the following restrictions is NOT typically imposed by Islamic investors?

Investment in businesses involved in gambling
Investment in companies that pay interest
Investment in ethically sourced products (correct)
Investment in alcohol-producing firms

Which aspect of corporate responsibility is prioritized by Christian investors?

Investing in fast fashion
Support of human rights and labor unions (correct)
Maximizing shareholder profits
Minimizing corporate taxes

In the context of ethical investment strategies, which activity do Shari’a-compliant investors specifically restrict?

Investing in firms earning substantial interest revenue (D) Signup and view all the answers

The Triple Bottom Line approach emphasizes which of the following aspects?

Balancing economic, social, and environmental factors (C) Signup and view all the answers

What does responsible investment aim to mitigate?

Risky ESG practices (D) Signup and view all the answers

Which of the following best describes socially responsible investment (SRI)?

Evaluating companies using social and environmental criteria (C) Signup and view all the answers

How can responsible investment impact financial stability?

By considering ESG factors that influence risk-adjusted returns (B) Signup and view all the answers

Which investment approach can be combined with socially responsible investment?

Best-in-class investment (C) Signup and view all the answers

What is a hurdle in the context of socially responsible investment?

A threshold for qualifying companies for investment (B) Signup and view all the answers

What is one objective of ethical investment strategies?

Incorporating ESG factors into investment decisions (A) Signup and view all the answers

What can result from investments that consider ESG factors?

Improved risk-adjusted returns (A) Signup and view all the answers

Which of the following describes the relationship between responsible investment and active ownership?

Active ownership is a component of responsible investment strategies. (A) Signup and view all the answers

What is a common objective for investors in impact investing?

To pursue competitive, market-rate returns (D) Signup and view all the answers

Which of the following is NOT typically excluded in ethical or faith-based investments?

Pharmaceuticals (B) Signup and view all the answers

What role does shareholder activism play in faith-based investment?

It aims to improve the conduct of investee companies (C) Signup and view all the answers

The Global Impact Investing Network's 2019 survey estimated which approximate market size for impact investing?

US$502 billion (D) Signup and view all the answers

Which of the following strategies is a common focus of ethical investment?

Negative screening of morally objectionable companies (C) Signup and view all the answers

What is a common negative screening criterion in ethical investments?

Avoiding companies involved in significant human rights violations (A) Signup and view all the answers

Why might some impact investors intentionally invest for below-market-rate returns?

To align with their strategic objectives (B) Signup and view all the answers

Which principle is commonly employed in ethical investing to guide investment decisions?

Investment decisions guided by negative screening of objectionable sectors (C) Signup and view all the answers

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Study Notes

Impact Investing

Impact investing involves investments aimed at generating measurable social and environmental impact alongside financial returns.
The global impact investing market is estimated at US$502 billion as of recent data.
66% of investors in impact investing pursue competitive, market-rate returns.

Ethical and Faith-Based Investment

Ethical investments align with specific principles, often employing negative screening to exclude morally objectionable companies.
Common exclusions include:
- Tobacco
- Alcohol
- Pornography
- Weapons
Exclusions may also relate to violations of international human rights standards.
Faith-based investors, including religious organizations, often engage in shareholder activism to influence corporate conduct.

Christian Investment Guidelines

Christian investors avoid:
- Companies facilitating abortion or contraceptives
- Companies involved in embryonic stem cell research
- Firms in the weapons industry
Preference is given to companies that promote human rights, environmental stewardship, and fair labor practices.

Shari’a Compliance

Investors following Islamic principles refrain from investing in:
- Alcohol, pornography, and gambling-related businesses
- Companies that earn significant revenue from interest
- Pork-related businesses.

Responsible Investment

Responsible investment incorporates ESG (Environmental, Social, and Governance) factors into investment decisions and active ownership practices.
It aims to mitigate risky ESG practices, protect investment value, and enhance societal and environmental outcomes.
Responsible investment strategies can be combined within a portfolio, allowing for a diversified approach.

Socially Responsible Investment (SRI)

SRI utilizes social and environmental criteria for evaluating potential investments.
Companies are scored based on specific criteria relevant to sectors, often establishing hurdles for eligibility within the investment universe.
SRI can be paired with strategies such as best-in-class investment, thematic funds, or high-conviction investment strategies.