Investment Management Overview

Topics Covered

1. Responsible Investment Strategies
2. ESG Integration
3. Impact Investing
4. Green Bonds
5. Active Ownership / Stewardship

1. Responsible Investment Strategies

• Negative/Exclusionary Screening: Exclude sectors or companies based on ESG criteria.
• Positive/Best-in-Class Screening: Invest in top ESG performers within industries.
• Norms-based Screening: Invest based on international standards from OECD, UN, UNICEF.
• ESG Factor Integration: Incorporate ESG factors into financial analysis for risk-adjusted returns.
• Thematic Investing: Focus on sustainability themes, e.g., clean energy.
• Impact Investing: Targeted investments for social/environmental issues.
• Active Ownership: Use shareholder power to influence corporate behavior and promote ESG disclosure.

2. ESG Integration

• Definition: Incorporating ESG risks into investment analysis to account for all relevant factors.
• Importance: ESG issues can impact company profitability and stock prices.
• Analysis Types: Qualitative and quantitative, e.g., scorecards.
• Misconceptions: Does not mean exclusion from sectors or ignoring traditional financial factors.

ESG Integration Components

• Research: Collect financial and ESG data, assess materiality, and engage with companies.
• Security & Portfolio Analysis: Adjust forecasts and valuation models based on ESG data.
• Investment Decision: ESG factors influence whether to buy, hold, or sell.

Key Notes

• Focus on ESG is crucial in emerging markets.
• ESG integration requires training, data availability, portfolio process integration, and active ownership.

3. Impact Investing

• Definition: Investments aimed at positive social and environmental impact with financial returns.
• Asset Classes: Includes cash equivalents, fixed income, venture capital, private equity, and green bonds.
• Market Growth: Managed assets in impact investing have grown significantly.
• Core Characteristics: Intentional social/environmental impact, financial return expectation, impact measurement and reporting.

4. Green Bonds

• Origin: First issued by World Bank in 2008.
• Purpose: Fund environmentally conscious projects and assets.
• Issuers: Governments, banks, municipalities, corporations.
• Green Bond Principles: ICMA framework includes use of proceeds, project evaluation, proceeds management, and reporting.

Demand and Examples

• Cumulative issuance reached USD 3.7 trillion by 2025.
• Examples include French sovereign green bond, Green City Bonds.

5. Active Ownership / Stewardship

• Definition: Using ownership rights to influence investee companies' activities.
• Application: Includes engagement, voting, and activism.
• Engagement: Dialogue to improve business practices concerning ESG issues.
• Evidence of Value: Studies show engagement can add value to portfolios.

Engagement Techniques

• Voting at shareholder meetings.
• Direct dialogue with company representatives.
• Filing shareholder resolutions.

References & Examples

• References: CFA Institute, Global Investor Study, Aberdeen, ESG Investing.
• Examples of Engagement: Aviva, UNPRI, BlackRock initiatives.

This overview provides a comprehensive understanding of responsible investment practices, highlighting the integration of ESG factors, the growing impact investing market, and the strategic role of green bonds and active ownership in influencing corporate behavior towards sustainability.