The responsible investor: an introductory guide to responsible investment

Table of Contents
Contents

About the authors

Preface

Acknowledgements

List of abbreviations

Introduction

What is Responsible Investment?
What is Responsible Investment?
Defining Responsible Investment
ESG investment philosophies
Ethical investing
Impact investing as a philosophy
Philanthropic investing
Responsible investing
Combining philosophies
An Introduction to Responsible Investment approaches
An Introduction to Responsible Investment tools
Chapter 1 key Q&As
Responsible Investments is mainstream
From ethical to responsible
The first ethical funds
The rise of responsibility
Norm-based screening as the first step
Active ownership and other emerging approaches
Responsible investing developing alongside corporate responsibility
Chapter 2 key Q&As
Drivers of Responsible Investment
Values
Financial Return
The Operating Environment
Culture
Market development, economics and finance
Institutions and regulation
Case: EU sustainable finance regulation
Organizations
Reputation
Chapter 3 key Q&As
Becoming a Responsible Investor
Strategy and policy document requirements
Defining Responsible Investment
Aligning a Responsible Investment policy with overall objectives
Ownership policy
Implementing Responsible Investment
Monitoring
Reporting
Developing a Responsible Investment roadmap
Important dimensions of the roadmap
Well begun is half done
Chapter 4 key Q&As
Materiality and megatrends
The three-pillar ESG model and the selection of material ESG issues
Company-level materiality
Sector-level materiality
Megatrends
Climate change
Biodiversity loss
Population growth
Digitalization
Rising trends
Animal rights
Cannabis
Taxation
Human rights
Modern slavery
Diversity, equality and inclusion
Chapter 5 key Q&As
Responsible Investment approaches
Active ownership
Engagement
Meeting with company executives
Proxy voting
ESG integration
Impact as an approach
Elements of impact investing
Screening
Negative screening
Positive screening
Tilting
Thematic
Selecting Responsible Investment approaches
Chapter 6 key Q&As
Responsible Investment across different asset classes
Listed equity
Direct equity investments
Indirect equity investments
Passive equity investments and ESG
Listed fixed income
Money market
Corporate bonds
Government bonds
The rise of sustainable bonds
Real estate
Sustainable real estate in practice
Indirect real estate investments
Green building certifications
ESG initiatives and policies
Private equity
From compliance to value creation
Supporting innovation and impact
Hedge funds
Hedge fund characteristics and their relevance for RI
Opportunities for a responsible hedge fund investor
Private debt
Private debt characteristics and their relevance for RI
Impact and thematic investing opportunities
Microfinance
Infrastructure
Closing the infrastructure gap
Managing material risks and delivering value
Commodity investments
Commodity futures
Real assets
Commodity-linked companies
ESG considerations in commodity sectors
Chapter 7 key Q&As
ESG data
Where does the ESG data come from?
Corporate responsibility reporting frameworks as a source of ESG data
The characteristics of sustainability data reported by companies
ESG information on companies from sources other than the company
A hierarchy of ESG data
Context
Policy, strategy and outcome indicators
Chapter 8 key Q&As
ESG ratings
Factor thinking in ESG analysis
Anatomy of an ESG rating or ESG score
What do ESG ratings measure?
What ESG issues to include in an ESG rating
Defining the relative importance of the ESG issues included
Establishing the list of indicators and weights for each ESG issue
All indicators and issues are rated and combined into the final ESG rating
Characteristics of ESG indicators
Characteristics of ESG ratings
Commercial players in ESG ratings and the data sector
Chapter 9 key Q&As
Assessing the responsibility of asset managers and funds
Evaluating asset managers’ corporate responsibility
Evaluating asset managers' Responsible Investment activities
Evaluating the responsibility of a particular investment fund
RI fund labels
ESG ratings-based analysis for funds
ESG factor-based analysis for funds
Chapter 10 key Q&As
Responsible Investment reporting
Who is responsible for Responsible Investment reporting?
How to report on Responsible Investment?
Principles for Responsible Investment
Sustainability Accounting Standards Board
Task Force on Climate-related Financial Disclosures
What gets reported?
Description of the general approach
Portfolio-level information
Practical examples of Responsible Investment activities
Chapter 11 key Q&As

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.