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.
“Beware lest you lose the substance by grasping at the shadow.” The same goes for integrating ESG factors into investing, says Bryan Esterly, CFA.
"Standards for disclosure around material ESG factors by sector are critical. Once we have this, we can start to innovate at a faster rate," says Erika Karp, founder of Cornerstone Capital.
With social responsibility now firmly established across the financial services spectrum, Steve Lydenberg, CFA, sees the potential for responsible investing to go beyond mere product innovation and deliver fundamental changes to the operating norms of the global financial system.
No word resonates more with investment professionals than "risk," and climate change is becoming the risk of the 21st century. As the threats posed to financial markets by climate change are understood with greater clarity, some investors seem to be taking note.
Many educational endowments and other investment organizations are struggling with the question of whether to comply with the widespread demands of students and other constituencies to divest their fossil fuel stocks. Some have announced decisions to divest, whereas others have announced decisions not to divest.
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