Introduction to ESG Investing

<p>Engage with investor-led initiatives (D)</p> Signup and view all the answers

<p>Neglect in developing ESG products (B)</p> Signup and view all the answers

<p>To maintain regional and sectorial diversification (B)</p> Signup and view all the answers

<p>25% (C)</p> Signup and view all the answers

<p>1.79% (D)</p> Signup and view all the answers

<p>Information technology (B)</p> Signup and view all the answers

<p>USA (C)</p> Signup and view all the answers

<p>Leader (D)</p> Signup and view all the answers

<p>13.4% (A)</p> Signup and view all the answers

<p>It shows a decline in representation compared to the parent index. (C)</p> Signup and view all the answers

<p>Environmental, Social, and Governance (C)</p> Signup and view all the answers

<p>Client pressure and evidence of financial benefits (A)</p> Signup and view all the answers

<p>United Nations Principles for Responsible Investment (PRI) (C)</p> Signup and view all the answers

<p>By identifying potential long-term risks and opportunities (A)</p> Signup and view all the answers

<p>Missed opportunities for better returns and higher risks (B)</p> Signup and view all the answers

<p>The challenge of navigating complex ESG factors (B)</p> Signup and view all the answers

<p>Improved risk management and potential for enhanced returns (C)</p> Signup and view all the answers

<p>Corporate social responsibility (A)</p> Signup and view all the answers

<p>Soft law lacks legally binding force or has weaker binding force. (D)</p> Signup and view all the answers

<p>Increased risk of fines and state intervention. (A)</p> Signup and view all the answers

<p>Minimizing waste. (C)</p> Signup and view all the answers

<p>To enhance returns through additional risk consideration. (D)</p> Signup and view all the answers

<p>By conserving resources and reducing costs. (B)</p> Signup and view all the answers

<p>The perception of sustainability has improved regarding costs. (D)</p> Signup and view all the answers

<p>Reduced risks of fines. (A)</p> Signup and view all the answers

<p>The potential for significant cost reductions. (D)</p> Signup and view all the answers

<p>People, planet, and profit (A)</p> Signup and view all the answers

<p>Higher probability of regulatory fines (A)</p> Signup and view all the answers

<p>Responsible investment (C)</p> Signup and view all the answers

<p>Incorporating social and governance issues into investment decisions (B)</p> Signup and view all the answers

<p>Selecting companies that perform best on environmental, social, and governance criteria (D)</p> Signup and view all the answers

<p>Investing with the intention of generating social outcomes (A)</p> Signup and view all the answers

<p>It solely focuses on maximizing returns without regard for social issues (A)</p> Signup and view all the answers

<p>Shareholder engagement (C)</p> Signup and view all the answers

<p>Personal career experience (A)</p> Signup and view all the answers

<p>Perception of conflict with fiduciary duties (B)</p> Signup and view all the answers

<p>The difference between a portfolio's return and the benchmark's return (D)</p> Signup and view all the answers

<p>By leading to over-weighting or under-weighting of specific sectors (A)</p> Signup and view all the answers

<p>Aggressive deviation from established benchmarks (C)</p> Signup and view all the answers

<p>Utilities, materials, and energy (C)</p> Signup and view all the answers

<p>Fear of negative financial impact on beneficiaries (A)</p> Signup and view all the answers

<p>Decreased diversity in investment choice (C)</p> Signup and view all the answers

ESG investing considers environmental, social, and governance factors alongside financial returns when making investment decisions.

Environmental factors include a company's impact on the environment, such as its carbon emissions, water usage, and pollution levels.

Social factors consider a company's relationships with its employees, customers, and society, such as its labor practices, diversity, and community involvement.

Governance factors assess a company's leadership, corporate structure, and ethical practices, such as its board composition, shareholder rights, and transparency.

Corporate social responsibility (CSR) emphasizes a company's commitment to ethical behavior and contributing to society. It's a broader concept encompassing social and environmental responsibility beyond just shareholder profits.

Triple bottom line (TBL) accounting expands beyond traditional financial reporting to include social and environmental performance alongside financial performance. It aims to measure a company's overall sustainability.

The practice of investing in companies that consider environmental, social, and governance factors in their operations.

A broader framework for assessing a company's sustainability, encompassing more than just accounting.

The benefits of effectively managing a company's sustainability.

The role of ESG investing in relation to other responsible investment approaches.

Different approaches to responsible investment, each with its own focus and characteristics.

Investing in companies with strong environmental, social, and governance practices.

Quasi-legal instruments that have less binding force than traditional law but can evolve into hard law over time.

ESG investing can lead to cost reductions, improved efficiency, and increased productivity due to sustainable practices.

ESG investing can help reduce the risk of fines and state intervention by adhering to environmental and social standards.

ESG investing can help mitigate negative environmental and social impacts, such as pollution or labor exploitation.

ESG investing allows investors to benefit from megatrends, such as renewable energy or clean technology, by investing in sustainable companies.

Investing that seeks to maintain regional and sectorial diversification while targeting companies with higher ESG ratings, aiming to mimic the performance of the parent market cap index.

The difference in performance between an investment fund and its benchmark index.

A type of SRI index that focuses on selecting the top-performing companies in each sector based on their ESG ratings, aiming for the 'best of the best'.

A type of investment that considers environmental, social, and governance factors alongside financial returns, aiming to create a positive societal impact.

Companies with a higher ESG rating are considered 'Leaders' in ESG performance, meaning they prioritize sustainability factors.

Companies with an average ESG rating are considered 'Average' in ESG performance, making them neither leaders nor laggards.

Companies with a lower ESG rating are considered 'Laggard' in ESG performance, indicating they may have weaker sustainability practices.

The percentage of a portfolio invested in a specific sector, like technology, financials, healthcare, etc.

Consultants and advisors may not fully consider ESG factors in their advice due to a narrow focus on investment objectives and a perceived lack of interest from asset owners.

Asset owners and individual investors can directly influence consultants and advisors by asking about their ESG integration and demanding it be a regular discussion topic.

Asset owners may feel they lack the size or influence to impact the products offered by fund managers, leading to reluctance to integrate ESG in investment decisions.

The lack of clear signals from asset owners about their interest in ESG investing makes fund managers less likely to develop and offer ESG-focused products.

Asset owners may face challenges integrating ESG into Requests for Proposals (RFPs) and investment mandates, indicating a lack of clarity and well-defined processes.

Investment professionals often rely more on their personal experiences than objective evidence when making ESG investment decisions.

The idea that ESG considerations should not negatively impact financial returns, leading to debates on whether ESG integration aligns with fiduciary duty.

Some institutional investors hesitate to incorporate ESG into their governance due to a perceived conflict between financial interests and social responsibility.

Strategies like screening, divestment, and thematic investing involve shifting portfolio weights based on ESG performance, potentially diverging from market benchmarks.

A common benchmark for global equity funds, showcasing the relationship between sector weight and carbon footprint.

The utilities, materials, and energy sectors have a significant impact on the environmental footprint of the MSCI ACWI, despite their relatively small weight in the index.

ESG investing's impact on portfolio returns is a key concern, especially regarding how strategies like screening or thematic investing affect portfolio performance.