Matt Orsagh, CFA, CIPM, is a director of capital markets policy at CFA Institute, where he focuses on corporate governance issues. He was named one of the 2008 “Rising Stars of Corporate Governance” by the Millstein Center for Corporate Governance and Performance at the Yale School of Management.
The CFA Institute report, Climate Change Analysis in the Investment Process, focuses on the physical and transition risks climate change is projected to create; explains to investors carbon markets; and reviews the resources available for investors looking for the best climate change integration tools.
One of the most important issues surrounding climate change for financial professionals is the policy response regulators and policymakers make around such issues as climate change data transparency and quality.
Firms use fund names to both market themselves and to inform investors. Fund names are always important, but in the case of the current challenges with funds that advertise themselves as ESG or sustainable funds, disclosures beyond the fund name would be especially helpful.
lthough different definitions for materiality apply, the consensus among investors is that a material ESG issue is a fundamental value driver of a company or security that affects the income statement, balance sheet, and cash-flow statement positively or negatively.
Workshop participants believe that ESG factors can materialize through a series of short-term, incremental upticks or downticks that individually impact short-term and long-term investment return.
Investors and analysts have been investing in environmental, social, and governance (ESG) data from data providers and also developing the skills of their in-house teams to better understand ESG issues.
Many people perceive that environmental, social, and governance (ESG) integration means sacrificing performance because they believe that ESG integration is the same as screening out companies and sectors from their investment universe.
Some workshop participants suggested that environmental, social, and governance (ESG) factors comes into play when the investment horizon is a minimum of five years, making them material only to long-term investors.