ESG Issues in Investing: What, Why, and Why Not (Online Forum)
Whether it’s BP, Lonmin, or Enron, many large companies have hit the headlines for the wrong reasons — and frequently for things that have gone horribly wrong with environmental, social, and governance (ESG) issues. ESG in investing covers a variety of issues, including alternative energy, water, waste, biodiversity, forestry, transportation, health care, human rights, child labor, employee relations, and executive compensation. It is not only about large companies getting things wrong but also about very long-term changes taking place in the world, with climate change being most familiar.
Investors examine these issues for different reasons — ranging from purely economic motives, such as more comprehensive identification of an investment’s risks, to purely moral reasons, such as ensuring they do not become party to actions they find morally objectionable. There are ongoing debates about why ESG issues are important and to what extent they should be given due consideration in traditional investing. Whatever your opinion is of ESG, there is no denying that some of its central issues, such as climate change, are receiving increasing attention from investors.
To gain clarity on the debate about ESG issues in investing, CFA Institute is hosting an online forum 27 June under its Future of Finance initiative, which is a global effort to shape a trustworthy, forward-thinking financial industry that better serves society. Our distinguished panel will include: Jeroen Bos, CFA; Andrew Canter, CFA; Amy Domini, CFA; Raj Thamotheram; and Roger Urwin.
The discussion will be held on 27 June 2014. If you’d like to share your perspective or pose a question to our panelists, scroll to the bottom of this post and leave a comment, or send a tweet to @Usman_Hayat. We’ll do our best to incorporate your thoughts into our discussion.
Keep your browser open to this post on 27 June 2014 as the discussion will unfold live in the window immediately below.
Bos is the head of global equity research at ING Investment Management and member of the board of directors of the CFA Society Netherlands. In recent years, Bos has been working on improving the integration of ESG factors into the equity research process with a goal to improve the risk-return profile of the equity investments the firm makes. He will be joining us from the Netherlands.
Canter is the chief investment officer of Futuregrowth, a specialist investment company that manages its investments “in an ethical and sustainable way.”
Domini is the founder and CEO of Domini Social Investments, LLC, which was established in 1991. She is the author of Socially Responsible Investing: Making a Difference and Making Money.
Thamotheram is a strategic adviser on long-term wealth creation and the management of “preventable surprises.” He is CEO of Preventable Surprises, president emeritus of the Network for Sustainable Financial Markets, and a visiting fellow at the Smith School (Oxford University).
Urwin is the global head of investment content at Towers Watson. He is involved with the Towers Watson thought leadership group (Thinking Ahead Group) and is the author of a number of papers on asset allocation policy, manager selection, and governance. He also serves on the CFA Institute Board of Governors and an advisory director to MSCI Inc.
Questions to Discuss
- What is the case for considering ESG issues in investments? To what extent does traditional investing not consider ESG issues, and why?
- Are ESG issues only about economic value, or are they also about morals and values?
- What’s your view on the debate on fiduciary responsibility and the financial performance of investments that consider ESG issues?
- What’s the track record of ESG research in identifying long-term risks ahead of time (e.g., BP, Lonmin)? If ESG research can’t identify such risks, what’s the ESG economic value proposition?
- Companies that are likely to be seen as controversial from an ESG/sustainability perspective (e.g., manufactures of tobacco) are also publishing sustainability reports. Is there a credible and shared understanding of what is meant by “sustainability” in investing?
- How relevant are ESG considerations in asset classes other than equities?
- What organizational arrangements does an institutional investor need to put into place to consider ESG issues effectively?
- What differences could one expect in the real world if every investor started considering ESG issues in investing?
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.