yourSRI - The ESG Service Provider
Member: Society Free
yourSRI: Handbook on Sustainable Investments
Background Information and Practical and Examples for Institutional Asset Owners
The craft and science of investing is essentially about optimising performance by either achieving the maximum future return for any given risk level or minimising risk for a defined return goal, all the while being exposed to fundamental uncertainty about the future. There is little room for additional goals in this equation.
Or so you think!
A fast-growing share of investors have recently widened their scope of analysis to criteria regarded as extra-financial. They are driven by different motivations. Adoption of sustainable investment strategies can be driven, on the one hand, by the sole motivation to hedge portfolios against knowable risks by expanding the conceptual framework to incorporate the latest best practice in risk management. Other investors focus on a long-term view and make an active bet on societal change. Recent empirical research has shown that considering sustainability factors within investment practices does not come at a cost (i.e., through a reduced opportunity set) but allows for competitive returns. Furthermore, the growing market and resulting competition in the wake of sustainable investing going mainstream has the welcome effect of compressing fees for such products. Hence, staying informed about recent trends in sustainable investing is imperative no matter what the main motivation is.
This is where this publication, prepared by Swiss Sustainable Finance (SSF) and translated by the CFA Institute Research Foundation, comes in.
Its practical insights into different approaches of sustainable investments, complemented with case studies from different asset owners, permits the reader to gain a comprehensive overview of contemporary best practice in sustainable investing.
The financial industry has a long history of imposing its values and practices onto the real economy. While in the case of the increasing financialisation of our world this might have raised concerns, for sustainable investing it can turn into an opportunity. If taking on a longer-term view and rewarding corporate sustainability turns into the new normal, this might counteract the ever shorter time horizons of market participants. Such a shift is in perfect conformity with the CFA Institute mission “to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.”
To read the full text, please click here.