The Responsible Investor: An Introductory Guide to Responsible Investment

Description

The Responsible Investor is a practical introductory guide for private as well as institutional investors and financiers interested in environmental, social and governance (ESG) issues. The authors have academia, advisory, asset management, asset owner and central bank backgrounds, bringing diverse perspectives and extensive senior-level experience in implementing Responsible Investment across different types of portfolios. Together, they have distilled what can seem a complex area into a clear guide to the topic, accessible to readers who don’t necessarily have prior in-depth knowledge in the field of Responsible Investment but are interested to know more. The book presents the development of Responsible Investment, its different approaches and the drivers of Responsible Investment, as well as the implementation opportunities in different asset classes. The book introduces Responsible Investment trends that investors can take into consideration in their investment decisions. In addition, the book covers ESG data and assessment, impact and reporting for Responsible Investments. This book suits both rookies and veterans – be they private investors, managers of investment funds or institutional investors or financiers. It is also valuable reading for students in finance, Responsible Investment and corporate social responsibility as an accessible overview of the topic. Cover Half Title Series Page Title Page Copyright Page Table of Contents About the authors Preface Acknowledgements List of abbreviations Introduction 1 What is Responsible Investment? 1.1 What is Responsible Investment? 1.1.1 Defining Responsible Investment 1.2 ESG investment philosophies 1.2.1 Ethical investing 1.2.2 Impact investing as a philosophy 1.2.3 Philanthropic investing 1.2.4 Responsible investing 1.2.5 Combining philosophies 1.3 An introduction to Responsible Investment approaches 1.4 An introduction to Responsible Investment tools Chapter 1 key Q&As 2 Responsible Investment is mainstream 2.1 From ethical to responsible 2.1.1 The first ethical funds 2.2 The rise of responsibility 2.2.1 Norm-based screening as the first step 2.2.2 Active ownership and other emerging approaches 2.2.3 Responsible investing developing alongside corporate responsibility Chapter 2 key Q&As 3 Drivers of Responsible Investment 3.1 Values 3.2 Financial return 3.3 The operating environment 3.3.1 Culture 3.3.2 Market development, economics and finance 3.3.3 Institutions and regulation 3.3.4 Case: EU sustainable finance regulation 3.3.5 Organizations 3.3.6 Reputation Chapter 3 key Q&As 4 Becoming a Responsible Investor 4.1 Strategy and policy document requirements 4.1.1 Defining Responsible Investment 4.1.2 Aligning a Responsible Investment policy with overall objectives 4.1.3 Ownership policy 4.2 Implementing Responsible Investment 4.3 Monitoring 4.4 Reporting 4.5 Developing a Responsible Investment roadmap 4.5.1 Important dimensions of the roadmap 4.5.2 Well begun is half done Chapter 4 key Q&As 5 Materiality and megatrends 5.1 The three-pillar ESG model and the selection of material ESG issues 5.2 Company-level materiality 5.3 Sector-level materiality 5.4 Megatrends 5.4.1 Climate change 5.4.2 Biodiversity loss 5.4.3 Population growth 5.4.4 Digitalization 5.5 Rising trends 5.5.1 Animal rights 5.5.2 Cannabis 5.5.3 Taxation 5.5.4 Human rights 5.5.5 Modern slavery 5.5.6 Diversity, equality and inclusion Chapter 5 key Q&As 6 Responsible Investment approaches 6.1 Active ownership 6.1.1 Engagement 6.1.2 Meeting with company executives 6.1.3 Proxy voting 6.2 ESG integration 6.3 Impact as an approach 6.3.1 Elements of impact investing 6.4 Screening 6.4.1 Negative screening 6.4.2 Positive screening 6.4.3 Tilting 6.5 Thematic 6.6 Selecting Responsible Investment approaches Chapter 6 key Q&As 7 Responsible Investment across different asset classes 7.1 Listed equity 7.1.1 Direct equity investments 7.1.2 Indirect equity investments 7.1.3 Passive equity investments and ESG 7.1.4 The rise of ESG in equity index strategies 7.2 Listed fixed income 7.2.1 Money market 7.2.2 Corporate bonds 7.2.3 Government bonds 7.2.4 The rise of sustainable bonds 7.3 Real estate 7.3.1 Sustainable real estate in practice 7.3.2 Indirect real estate investments 7.3.3 Green building certifications 7.3.4 ESG initiatives and policies 7.4 Private equity 7.4.1 From compliance to value creation 7.4.2 Supporting innovation and impact 7.5 Hedge funds 7.5.1 Hedge fund characteristics and their relevance for RI 7.5.2 Opportunities for a responsible hedge fund investor 7.6 Private debt 7.6.1 Private debt characteristics and their relevance for RI 7.6.2 Impact and thematic investing opportunities 7.6.3 Microfinance 7.7 Infrastructure 7.7.1 Closing the infrastructure gap 7.7.2 Managing material risks and delivering value 7.8 Commodity investments 7.8.1 Commodity futures 7.8.2 Real assets 7.8.3 Commodity-linked companies 7.8.4 ESG considerations in commodity sectors Chapter 7 key Q&As 8 ESG data 8.1 Where does ESG data come from? 8.1.1 Corporate responsibility reporting frameworks as a source of ESG data 8.2 The characteristics of sustainability data reported by companies 8.3 ESG information on companies from sources other than the company 8.4 A hierarchy of ESG data 8.4.1 Context 8.4.2 Policy, strategy and outcome indicators Chapter 8 key Q&As 9 ESG ratings 9.1 Factor thinking in ESG analysis 9.2 Anatomy of an ESG rating or ESG score 9.2.1 What do ESG ratings measure? 9.2.2 What ESG issues to include in an ESG rating 9.2.3 Defining the relative importance of the ESG issues included 9.2.4 Establishing the list of indicators and weights for each ESG issue 9.2.5 All indicators and issues are rated and combined into the final ESG rating 9.3 Characteristics of ESG indicators 9.4 Characteristics of ESG ratings 9.5 Commercial players in ESG ratings and the data sector Chapter 9 key Q&As 10 Assessing the responsibility of asset managers and funds 10.1 Evaluating asset managers’ corporate responsibility 10.2 Evaluating asset managers’ Responsible Investment activities 10.3 Evaluating the responsibility of a particular investment fund 10.3.1 RI fund labels 10.3.2 ESG ratings-based analysis for funds 10.3.3 ESG factor-based analysis for funds Chapter 10 key Q&As 11 Responsible Investment reporting 11.1 Who is responsible for Responsible Investment reporting? 11.2 How to report on Responsible Investment? 11.2.1 Principles for Responsible Investment 11.2.2 Sustainability Accounting Standards Board 11.2.3 Task Force on Climate-related Financial Disclosures 11.3 What gets reported? 11.3.1 Description of the general approach 11.3.2 Portfolio-level information 11.3.3 Practical examples of Responsible Investment activities Chapter 11 key Q&As Epilogue Appendix Index