Does environmental, social, and governance (ESG) investing add or subtract value from investment portfolios? According to the findings of a trio of researchers, summarized in the new In Practice series, the answer is neither: Investors can both match index performance while also “doing good” for the environment and society.
Jason Voss, CFA, and C. Thomas Howard recommend replacing modern portfolio theory (MPT) with behavioral finance and dismantling the finance industry's closet indexing factory; Larry Cao, CFA, helps to define blockchain; Mark Harrison, CFA, considers issues of performance measurement in factor investing; and Christopher K. Merker, PhD, CFA, looks at the rising tide of environmental, social, and governance (ESG) investing, in the top Enterprising Investor posts from May.
Taking environmental, social, and governance (ESG) factors into account and avoiding unsustainable investment choices is not a theoretical fad but a robust downside protection mechanism and an attractive outperformance opportunity deserving of attention.
To better see "the big picture" of responsible investing, which emphasizes environmental, social, and governance (ESG) issues, we spoke with Rob Lake, an independent advisor who helps asset owners invest responsibly.
Though the market is still dominated by conventional financial instruments, recent years have seen increasing interest in SRI and Islamic finance. More than 10% of the total assets under management in the United States are now invested following SRI practices, and this year British Prime Minister David Cameron announced that the United Kingdom will become the first non-Muslim country to issue an Islamic bond.
Islamic finance and the forms of finance generally referred to as sustainable and responsible investing (SRI) are yet to actively collaborate with each other. One would think that to strengthen their position in a market dominated by conventional finance, Islamic finance and SRI would be sharing their successes and failures, coming together for joint ventures, and supporting each other on issues for which they have similar views. But such collaboration has not occurred. Building bridges between the two remains an opportunity that is waiting to be seized upon by the industry leaders from the two sides.
If the film industry has anything to teach finance professionals, it's this: The financial services industry, particularly Wall Street, had a serious public relations problem long before the financial crisis of 2008.
Impact investing, a rapidly growing sector of socially responsible investing (SRI), represents the nexus of philanthropy and traditional finance: It expands the definition of return on invested capital to include both financial and social returns.
The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.