How do investors like us add ESG (Environment, social, Governance) into the investment Process

The E in ESG, environmental criteria, includes the energy your company takes in and the waste it discharges, the resources it needs, and the consequences for living beings as a result.

S, social criteria, addresses the relationships your company has and the reputation it fosters with people and institutions in the communities where you do business.

G, governance, is the internal system of practices, controls, and procedures your company adopts to govern itself, make effective decisions, comply with the law.

Let’s come to the things to keep in mind while incorporating ESG in current investment-

Integration, when including ESG issues, investment decisions to be undertaken while incorporating analysis, to better manage improved return & risks.

Screening, were applying filters to lists of potential investments, to rule out the contention for investment based on investors values or ethics.

Thematic, seeking to combine attractive risk return profiles with intention to contribute to environment & social outcome, which is an impact investment.

How can we improve investees ESG Performance aka Active Ownership?

By Engagement discussing ESG issues with companies to improve their handling, disclosures,.

This can be done individually or in collab with other investors.

By Proxy Voting, formally expressing approval/disapproval through voting on resolutions, on specific ESG Issues.

What are the Principles of Responsible Investment (PRI)? -

Firstly, it was launched in 2006 at NSE New York stock exchange.

PRI works to understand investment implications on ESG Factors to support signatories.

What are the 6 Principles of Responsible Investment? -

• We will incorporate ESG Issues into investment analysis & Decision making process.
• We will be active owners & incorporate egg issues into our ownership policies & practices.
• We will seek disclosure on ESG issues by the entities which we invest.
• We will promote acceptance & implementation of principles within the investment industry.
• We will work together to enhance effectiveness in strategy implementation.
• We will report our activities & progress towards implementing the principles.

Focusing on above points this will also help you analyses the role that regulation and that industry initiatives (self-regulation) play in shaping sustainable finance, and the finance sector’s contribution to the Sustainable Development Goals and the goals of the Paris Agreement on Climate Change.

Promoting & Advancing Responsible Investment –

The Net 0 Asset Owner Alliance

• Established in 2019, with 42 institutional investors, 6.6 $ trillion assets,
• Net 0 green house gas emissions by 2050.
• Convened by UNEP FI & PRI & Supported by WWF.

Fiduciary Duty

They exist to ensure that those who manage other people money act in their beneficiary interests rather than own.

From Freshfields to a legal framework for impact

The modern definition of fiduciary duty does not require investors to fully account for sustainability impact of investment activities.

In Jan 2019, Generation foundation, the PRI & UNEP FI Launched the project, a legal framework for Impact.

While there are differences across jurisdictions & investors groups, where investing for sustainable impacts approaches can be effective in achieving an investor financial goal,

We as investors are likely required to consider using them & act accordingly.

Climate Action 100+ (CA 100+)

An investor led engagement initiative, which is supported by over 550 investors, responsible for over 54 $ trillion in Asset Under Management.

This has 3 Action Areas –

• Implementing a strong governance framework.
• Take action to reduce greenhouse Gas emissions.

Wrapping up but before that, A quick question,

Can you name some significant responsible investment initiatives; -

drop your answers in my comment section, please.

There’s still time to share your experience and insights here, for my column. Send me an email!

See you tomorrow.

Ayushi Benjamin

[email protected]