ESG integration in investment analysis
The ongoing consideration of ESG factors within an investment analysis and decision-making process with the aim to improve risk-adjusted returns. This approach is based on the belief that ESG factors can affect the risk and return of investments and that ESG factors are not fully reflected in asset prices.
Defining ESG factors
An ESG factor is any qualitative or quantitative information pertaining to environmental, social, or governance topics.
Information includes but is not limited to raw data, statistics, estimates, assessments, analyses, rankings, and scores.
Consideration of ESG factors
Consideration of ESG factors does not imply that there are restrictions on the investment universe, that ESG factors are given more or less consideration than other types of factors, that all ESG factors are given equal consideration, or that the resulting portfolio will have any particular characteristics.
The term “Consideration” (1) more precisely reflects the nature of ESG integration, (2) helps distinguish ESG integration from other ESG investment approaches, and (3) helps prevent other ESG investment approaches from being characterised as ESG integration.
Process and implementation of ESG integration
ESG integration involves seeking out ESG information, assessing the materiality of that information, and integrating information judged to be material into investment analysis and decisions. The details of implementation can vary, but it is an ongoing part of the investment process, not a one-time activity.
ESG integration in investment analysis
The ongoing consideration of ESG factors within an investment analysis and decision-making process with the aim to improve risk-adjusted returns. This approach is based on the belief that ESG factors can affect the risk and return of investments and that ESG factors are not fully reflected in asset prices.
Defining ESG factors
An ESG factor is any qualitative or quantitative information pertaining to environmental, social, or governance topics.
Information includes but is not limited to raw data, statistics, estimates, assessments, analyses, rankings, and scores.
Consideration of ESG factors
Consideration of ESG factors does not imply that there are restrictions on the investment universe, that ESG factors are given more or less consideration than other types of factors, that all ESG factors are given equal consideration, or that the resulting portfolio will have any particular characteristics.
The term “Consideration” (1) more precisely reflects the nature of ESG integration, (2) helps distinguish ESG integration from other ESG investment approaches, and (3) helps prevent other ESG investment approaches from being characterised as ESG integration.
Process and implementation of ESG integration
ESG integration involves seeking out ESG information, assessing the materiality of that information, and integrating information judged to be material into investment analysis and decisions. The details of implementation can vary, but it is an ongoing part of the investment process, not a one-time activity.
