Details

ESG Investing For Dummies

1. Aufl.

von: Brendan Bradley
19,99 €
Verlag:	Wiley
Format:	EPUB
Veröffentl.:	26.02.2021
ISBN/EAN:	9781119771111
Sprache:	englisch
Anzahl Seiten:	368

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Beschreibungen

Titelbeschreibung

Your guide to investing for a more sustainable world Investing in one’s own future has always been a good financial move. But what if you want to ensure that the companies you have a financial interest in are also helping to improve the present and future of all of us—and of the planet? More than ever before, sustainable investors want to be confident that a company’s Environmental (net zero emissions target), Social (response to the Covid-19 pandemic), and Governance (no repeats of Enron and WorldCom) policies and actions are positively impacting the global outlook—and to identify ways that their dollar can incentivize business leaders to do even better. The worldwide rise of an Environmental, Socially Responsible, and Governance (ESG) approach to investing shows you’re not alone, and the $30+ trillion—and growing—committed in this way says it’s already become a transformative global movement. ESG provides a framework for evaluating companies that, unlike unrelated investment strategies, informs and guides sustainable investment. Even if you’re a novice investor, ESG For Dummies will allow you to hit this new investing landscape running, providing you with measurable ways to factor ESG into company performance, see how these are reflected in your investment return, and show how you can monitor companies to ensure your money is being put to ethical use. You’ll also become familiar with the big names to follow in the ESG world, how they’re already effecting positive change, and how you can help. <ul> <li>Identify the drivers for each category of ESG </li> <li>Define and measure material ESG factors for investing success </li> <li>Understand principles for building a diversified sustainable portfolio </li> <li>Recognize material ESG factors effect on company performance </li> </ul> ESG investing introduces powerful tools to do real and lasting good: this book shows you how to use them to help make everyone’s future, including your own, much more secure.

Inhaltsverzeichnis

Introduction 1 About This Book 1 Foolish Assumptions 2 Icons Used in This Book 3 Beyond the Book 3 Where to Go from Here 3 Part 1: Getting to Know ESG 5 Chapter 1: Entering the World of ESG Investing 7 Surveying the Current ESG Landscape 8 Exploring What ESG Is (and Isn’t) 9 Defining the breadth of ESG 10 Comparing SRI, ethical, and impact investing to ESG 14 Determining whether ESG delivers good investment performance 16 Understanding ESG’s Impact on the Environment, Society, and Governance 17 Meeting environmental and global warming targets 17 Providing solutions to social challenges 18 Meeting corporate governance requirements 18 Using International Standards to Determine ESG Objectives 19 Leading the charge: European legislation on ESG 20 Ahead of its time: The United Nations 21 Staying focused: The Sustainability Accounting Standards Board 21 Building a framework: The Global Reporting Initiative 22 Chapter 2: Back to the Future: Understanding the Evolution and Growth of ESG Investing 23 Studying the Evolution of Investing in ESG 24 Investing through the ages: From SRI to ESG 24 Go green: The changing global environment 27 On trend: Changing investor demographics 28 Crunch the numbers: Evolving data and analytics 29 Exploring the “Personality” of an ESG Company 31 Determining material ESG factors 31 Performing a materiality analysis 32 Applying weights to materiality measures 33 Understanding Why ESG Is Important 34 Global sustainability challenges 35 The interest of millennial investors in ESG 35 More systematic, quantitative, objective, and financially relevant approaches 36 Surveying Specific ESG Ratings and Metrics 36 Data quality, ratings bias, and standardization 37 Issues with ESG scoring 38 ESG momentum importance 39 Applying artificial intelligence and data science to ESG analysis 39 Defining an ESG Policy 40 Familiarize yourself with ESG and asset owner–specific legislation 40 Undertake a peer review 41 Review your statement of investment beliefs and core investment principles 41 Specify responsible investment guidelines 41 Outline responsible investment procedures 42 Include engagement and active ownership approaches 42 Spell out reporting requirements 43 Chapter 3: Give Me an ‘E’! Defining the Environmental Sector in ESG 45 Outlining a Company’s Use of Natural Resources 46 CO2 or GHG? Climate change and carbon emissions 46 Clean and green: Energy efficiency 48 A crisis awaits: Conservation of water 49 There is no Planet B: Air and water pollution 50 Live and let live: Biodiversity 51 See the forest for the trees: Deforestation 52 Don’t throw your future away: Waste management 54 Studying the Effects of a Company’s Operations on the Environment 55 Direct operations 55 Supply chains 56 Defining “Green” for a Company 57 Internalizing (or managing) externalities 58 The 3Rs: Reduce, reuse, and recycle 58 Detailing a Company’s Performance as a Steward of the Physical Environment 60 Managing operations to reduce emissions and promote sustainability 61 Collaborating with others to create solutions for environmental issues 61 Chapter 4: Give Me an ‘S’! Investigating the Social Aspects of ESG 63 Identifying Factors in a Company’s Social Performance 65 Customer satisfaction 65 Data protection and privacy 66 Gender and diversity 68 Employee engagement 69 Community relations 70 Human rights 71 Labor standards 72 Evaluating a Company’s Social Performance 73 The results are in: Achievements 74 When in Rome: Differentiating on a national or regional basis 75 Determining Measurements for Social Performance 75 The alignment of social and economic responsibilities 76 Long-term change for people and communities 77 Deciding on Weight Factors 78 Take your pick: Different social issues 78 Think outside the box: Scenario analysis 79 Chapter 5: Give Me a ‘G’! Decoding the Governance Component of ESG 83 The Good Place: Defining What “Good” Corporate Governance Looks Like 84 The benefits of good governance 85 Practices and values 86 Multiple stakeholder orientation 87 Walk the Walk: Evaluating a Company’s Governance Values 88 Board responsibilities 89 Board composition 90 Audit committee structure 90 Bribery and corruption 92 Executive compensation 94 Lobbying 95 Political contributions 96 Whistleblower schemes 97 Lead the Way: Emphasizing How ‘G’ Can Dictate the ‘E’ and ‘S’ Factors 98 Governance as an overarching principle for ESG 98 The role of governments 100 Around the World: Underlining Regional Differences in Governance Activities 101 Emerging markets 102 North America 104 Europe 105 Chapter 6: Highlighting Corporate Greenwashing 107 The Grass Isn’t Always Greener: The Basics of Greenwashing 108 Tracking the growth of greenwashing 108 Specifying the details 109 Using plain language 110 Setting up a system 112 Just When You Thought It Was Safe: Coronawashing 113 Coronawashing on the corporate side 113 Coronawashing on the investor side 114 Part 2: Investing in ESG through Different Instruments 117 Chapter 7: Approaches to ESG Investing 119 Understanding Socially Responsible Investing 120 Looking at reasons for SRI 120 Comparing a best-in-class strategy to an exclusion strategy 121 Weighing the potential return on SRI decisions 122 Evaluating Impact Investing 124 Defining and tracking “impact” 124 Measuring social and environmental outcome targets 126 Calculating impact metrics 127 Focusing on Faith-Based Investing 128 Reviewing religious principles of finance 128 Examining exclusion screening and divesting 129 Advocating for values through proxy voting 130 Chapter 8: Analyzing Equity-Based Instruments 133 Integrating ESG Strategies into Investment Decisions 134 Just the basics: Getting an overview of the process 134 Using active strategies 136 Analyzing the impact of different ESG scores 137 Watch out: Thinking about risks and disclosures 138 Investigating how companies with higher ESG scores outperform 139 Take it easy: Applying passive strategies 140 Reviewing relative returns and performance of ESG stocks 143 Verifying Quantitative Strategies 145 Constructing equity portfolios that integrate ESG factors 146 Adjusting stock index constituent weights 148 Determining which ESG factors matter most in quantitative strategies 148 Identifying Smart Beta Strategies 151 Extending negative stock screening to smart beta strategies 153 Using ESG equity factors and scores to weight portfolio construction 153 Focusing on a Given Theme 154 Sector exposure 154 Thematic exposure 155 Chapter 9: ESG and Fixed Income Instruments 157 Analyzing Fixed Income (Bond) Factors 158 The importance of risk 158 Strategies for adding ESG to fixed income portfolios 159 Bond issuer goals 160 Defraying interest rate costs 161 All together now: ESG integration issues 162 Bond pricing 163 Mix it up: Credit and ESG ratings 164 Emphasizing Bond Issuer Differences 165 For king and country: Sovereign issuance 166 Corporate issuance 168 Room for more: Emerging markets 168 Highlighting Fixed Income Indexes 169 Identifying Specific ESG Exposures 171 For the earth: Green bonds 172 Think big: Social bonds 174 Keep it up: Sustainability and sustainability-linked bonds 175 Chapter 10: Exploring Derivative and Alternative Instruments 177 Achieving Passive Returns Using ESG Indexes 178 The basics of exchange-traded products 179 OTC derivatives 180 Building blocks: Structured products 181 Increasing Focus on ESG in Alternative Assets 182 Sustainable lending 182 ESG in hedge funds 184 Focusing on Illiquid Assets 186 Around the block: Real estate 186 Laying foundations: Infrastructure 187 Hush-hush: Private equity 188 Investing in “Traditional” ESG 189 Pull the plug: The basics of renewable energy investment 190 Light my fire: Solar power 191 There she blows: Wind power 192 Chapter 11: Highlighting Geographical Differences in ESG Investing 195 The Beginning: Europe 196 Highlighting the regulatory developments 198 Enjoying a first mover advantage on ESG investment 201 Continuing inflows for ESG funds 202 The Middle: North America 203 Highlighting political and regulatory roadblocks in the United States 204 Investigating Canada’s approach 206 Driving up demand 207 The End: Developed versus Emerging Markets 208 Seeing that emerging markets are lagging but disclosure is increasing 209 Highlighting political and regulatory developments 211 Determining whether an ESG approach is better suited to developed economies 212 Part 3: Applying ESG Philosophy 215 Chapter 12: Creating Value through ESG for Corporations 217 Crystal Clear: Corporate Disclosure and Transparency 218 Meet the team: ESG engagement 219 Thank you for sharing: Communication from the board 221 Grow the Pie: Generating Enhanced Returns 221 Increasing access to capital 222 Corporate adoption and action 223 Roll Up, Roll Up: Attracting More Customers 224 Tracking sustainability practices 225 Measuring intangible value drivers 226 Identifying material opportunities 227 Pare It Back: Reducing Costs 228 Green financing 228 How low can you go? Lower interest rates and higher credit ratings 229 The Bottom Line: Increasing Productivity and Attracting Talent 230 Chapter 13: Devising an ESG Policy 233 Here’s a Great Idea: Creating a Plan 234 Promoting ESG among key stakeholders 235 Creating an internal governance structure 235 Don’t Reinvent the Wheel: Undertaking a Peer Review 236 Devising ESG investment strategies 236 Identifying, assessing, and selecting ESG investments 238 Go Over It: Reviewing Your Core Investment Principles 238 Familiarizing Yourself with ESG-Specific Regulations 240 Comparing Europe and the United States 240 Taking into account sustainability-related risks 241 Doing effective due diligence on ESG greenwashing 242 Surveying Reporting Requirements 243 Essential characteristics of ESG data 244 Material factors for investors 244 Examining ESG Engagement 245 Conducting constructive dialogue on managing ESG risks 245 Seizing business opportunities associated with sustainability challenges 246 Chapter 14: Defining and Measuring ESG Performance and Reporting 249 Defining Criteria and Metrics 250 Follow the rules: Looking at regulators’ work 251 The devil is in the details: Analyzing corporate sustainability reports 252 Walk the walk: Committing to corporate social responsibility practices 253 Show me the money: Identifying investment performance 254 Calculating Relative ESG Performance 255 Against the broader market 257 Against specific benchmarks 258 Getting a Handle on Ratings and Rankings 259 Securities 260 Portfolios 261 Not the sharpest tool: Smart beta 262 Developing Frameworks for Reporting 262 In your view: ESG objectives 263 Play by the rules: ESG compliance 265 Meet the players: Comparing different frameworks 265 Chapter 15: Elaborating the ESG Endgame 269 Highlighting the Evolution of ESG from Niche to Mainstream Strategy 269 Achieving competitive financial returns with positive ESG impact 270 Emphasizing the need for common terminology 271 Watching the Growing Use and Acceptance of ESG Standards 272 Digging into disclosures 272 Providing data consistency 274 Developing national and international financial reporting standards 275 Looking at the Increasing Impact of ESG Ratings and Rankings 278 Qualitative decisions 279 Quantitative decisions 280 Improving Education 281 What do investors believe is important? 282 What should a company know about its ESG rating? 283 Part 4: The Part of Tens 285 Chapter 16: Ten Frequently Asked Questions for an ESG Approach 287 What Is ESG Investing? 287 Which Sustainability Goals Should Be Followed? 288 What Are the Characteristics of an ESG Company? 289 How Is an ESG Company Rated? 290 What Investing Principles Should Be Adopted for ESG? 291 What Is Stewardship? 292 How Is an ESG Approach for Asset Owners Implemented? 293 How Are Benchmarks and Performance Measurement Incorporated in ESG? 293 What’s the Latest on Disclosures and Reporting? 294 What’s the Future of ESG Investing? 295 Chapter 17: Ten Issues Surrounding ESG Portfolio Construction 297 Reasons for Varying ESG Scores between Rating Agencies 297 Criteria Used in Creating a Combined ESG Score 298 Trends Driving ESG Materiality 299 Quantitative Approaches to ESG Analysis 300 Qualitative Analysis: Verifying and Supplementing Quantitative Analysis 301 ESG Regulations 302 Risk and Reward 303 Derivative and Alternative Instruments 304 Stranded Assets 305 Sustainable Investing 306 Chapter 18: Ten Factors Influencing the Growth of ESG Investing 307 Climate Change: The Route to Net Zero 308 Environmental and Social Issues Coming to the Fore 308 Stewardship as a Driver for Change 309 ESG Disclosures 310 Accounting 311 Regulation and International Standards 312 Impact Investing: Actively Do Good versus “Do No Harm” 313 Data and Technology 314 Consolidation of the ESG Ratings Companies 315 Political Impacts: Geopolitics and Public Pressure 316 Appendix: Great Resources For ESG Investing 319 Index 327

Autorenportrait

Brendan Bradley is co-author of FinTech For Dummies. He fosters and develops support for new investment areas, including AI-assisted research for automated modeling and transforming unstructured financial content in the ESG ecosystem.

Back cover copy

Invest in things that make the world better Even if you’re new to investing, you can use your money to make a difference. This book explains today’s ESG landscape so you can create a socially and environmentally responsible portfolio. You can consider stocks and bonds, and you can get an introduction to derivative and alternative instruments. Let ESG Investing For Dummies be among your advisors as you research investments, craft your portfolio, assess performance, and—most importantly—help make this world a more equitable and sustainable place.Inside. . . <li><bl>Understand ESG’s environment, social, and governance factors</bl></li><li><bl>Get a handle on the evolution and growth of ESG investing</bl></li><li><bl>Watch out for “greenwashing”</bl></li><li><bl>Unpack ESG performance reporting</bl></li><li><bl>The latest ESG trends</bl></li><li><bl>The future of ESG investing</bl></li>