ESG Investing For Dummies

Title Page
Copyright Page
Table of Contents
Introduction
	About This Book
	Foolish Assumptions
	Icons Used in This Book
	Beyond the Book
	Where to Go from Here
Part 1 Getting to Know ESG
	Chapter 1 Entering the World of ESG Investing
		Surveying the Current ESG Landscape
		Exploring What ESG Is (and Isn’t)
			Defining the breadth of ESG
			Comparing SRI, ethical, and impact investing to ESG
			Determining whether ESG delivers good investment performance
		Understanding ESG’s Impact on the Environment, Society, and Governance
			Meeting environmental and global warming targets
			Providing solutions to social challenges
			Meeting corporate governance requirements
		Using International Standards to Determine ESG Objectives
			Leading the charge: European legislation on ESG
			Ahead of its time: The United Nations
			Staying focused: The Sustainability Accounting Standards Board
			Building a framework: The Global Reporting Initiative
	Chapter 2 Back to the Future: Understanding the Evolution and Growth of ESG Investing
		Studying the Evolution of Investing in ESG
			Investing through the ages: From SRI to ESG
			Go green: The changing global environment
			On trend: Changing investor demographics
			Crunch the numbers: Evolving data and analytics
		Exploring the “Personality” of an ESG Company
			Determining material ESG factors
			Performing a materiality analysis
			Applying weights to materiality measures
		Understanding Why ESG Is Important
			Global sustainability challenges
			The interest of millennial investors in ESG
			More systematic, quantitative, objective, and financially relevant approaches
		Surveying Specific ESG Ratings and Metrics
			Data quality, ratings bias, and standardization
			Issues with ESG scoring
			ESG momentum importance
			Applying artificial intelligence and data science to ESG analysis
		Defining an ESG Policy
			Familiarize yourself with ESG and asset owner–specific legislation
			Undertake a peer review
			Review your statement of investment beliefs and core investment principles
			Specify responsible investment guidelines
			Outline responsible investment procedures
			Include engagement and active ownership approaches
			Spell out reporting requirements
	Chapter 3 Give Me an ‘E’! Defining the Environmental Sector in ESG
		Outlining a Company’s Use of Natural Resources
			CO2 or GHG? Climate change and carbon emissions
			Clean and green: Energy efficiency
			A crisis awaits: Conservation of water
			There is no Planet B: Air and water pollution
			Live and let live: Biodiversity
			See the forest for the trees: Deforestation
			Don’t throw your future away: Waste management
		Studying the Effects of a Company’s Operations on the Environment
			Direct operations
			Supply chains
		Defining “Green” for a Company
			Internalizing (or managing) externalities
			The 3Rs: Reduce, reuse, and recycle
		Detailing a Company’s Performance as a Steward of the Physical Environment
			Managing operations to reduce emissions and promote sustainability
			Collaborating with others to create solutions for environmental issues
	Chapter 4 Give Me an ‘S’! Investigating the Social Aspects of ESG
		Identifying Factors in a Company’s Social Performance
			Customer satisfaction
			Data protection and privacy
			Gender and diversity
			Employee engagement
			Community relations
			Human rights
			Labor standards
		Evaluating a Company’s Social Performance
			The results are in: Achievements
			When in Rome: Differentiating on a national or regional basis
		Determining Measurements for Social Performance
			The alignment of social and economic responsibilities
			Long-term change for people and communities
		Deciding on Weight Factors
			Take your pick: Different social issues
			Think outside the box: Scenario analysis
	Chapter 5 Give Me a ‘G’! Decoding the Governance Component of ESG
		The Good Place: Defining What “Good” Corporate Governance Looks Like
			The benefits of good governance
			Practices and values
			Multiple stakeholder orientation
		Walk the Walk: Evaluating a Company’s Governance Values
			Board responsibilities
			Board composition
			Audit committee structure
			Bribery and corruption
			Executive compensation
			Lobbying
			Political contributions
			Whistleblower schemes
		Lead the Way: Emphasizing How ‘G’ Can Dictate the ‘E’ and ‘S’ Factors
			Governance as an overarching principle for ESG
			The role of governments
		Around the World: Underlining Regional Differences in Governance Activities
			Emerging markets
			North America
			Europe
	Chapter 6 Highlighting Corporate Greenwashing
		The Grass Isn’t Always Greener: The Basics of Greenwashing
			Tracking the growth of greenwashing
			Specifying the details
			Using plain language
			Setting up a system
		Just When You Thought It Was Safe: Coronawashing
			Coronawashing on the corporate side
			Coronawashing on the investor side
Part 2 Investing in ESG through Different Instruments
	Chapter 7 Approaches to ESG Investing
		Understanding Socially Responsible Investing
			Looking at reasons for SRI
			Comparing a best-in-class strategy to an exclusion strategy
			Weighing the potential return on SRI decisions
		Evaluating Impact Investing
			Defining and tracking “impact”
			Measuring social and environmental outcome targets
			Calculating impact metrics
		Focusing on Faith-Based Investing
			Reviewing religious principles of finance
			Examining exclusion screening and divesting
			Advocating for values through proxy voting
	Chapter 8 Analyzing Equity-Based Instruments
		Integrating ESG Strategies into Investment Decisions
			Just the basics: Getting an overview of the process
			Using active strategies
			Analyzing the impact of different ESG scores
			Watch out: Thinking about risks and disclosures
			Investigating how companies with higher ESG scores outperform
			Take it easy: Applying passive strategies
			Reviewing relative returns and performance of ESG stocks
		Verifying Quantitative Strategies
			Constructing equity portfolios that integrate ESG factors
			Adjusting stock index constituent weights
			Determining which ESG factors matter most in quantitative strategies
		Identifying Smart Beta Strategies
			Extending negative stock screening to smart beta strategies
			Using ESG equity factors and scores to weight portfolio construction
		Focusing on a Given Theme
			Sector exposure
			Thematic exposure
	Chapter 9 ESG and Fixed Income Instruments
		Analyzing Fixed Income (Bond) Factors
			The importance of risk
			Strategies for adding ESG to fixed income portfolios
			Bond issuer goals
			Defraying interest rate costs
			All together now: ESG integration issues
			Bond pricing
			Mix it up: Credit and ESG ratings
		Emphasizing Bond Issuer Differences
			For king and country: Sovereign issuance
			Corporate issuance
			Room for more: Emerging markets
		Highlighting Fixed Income Indexes
		Identifying Specific ESG Exposures
			For the earth: Green bonds
			Think big: Social bonds
			Keep it up: Sustainability and sustainability-linked bonds
	Chapter 10 Exploring Derivative and Alternative Instruments
		Achieving Passive Returns Using ESG Indexes
			The basics of exchange-traded products
			OTC derivatives
			Building blocks: Structured products
		Increasing Focus on ESG in Alternative Assets
			Sustainable lending
			ESG in hedge funds
		Focusing on Illiquid Assets
			Around the block: Real estate
			Laying foundations: Infrastructure
			Hush-hush: Private equity
		Investing in “Traditional” ESG
			Pull the plug: The basics of renewable energy investment
			Light my fire: Solar power
			There she blows: Wind power
	Chapter 11 Highlighting Geographical Differences in ESG Investing
		The Beginning: Europe
			Highlighting the regulatory developments
			Enjoying a first mover advantage on ESG investment
			Continuing inflows for ESG funds
		The Middle: North America
			Highlighting political and regulatory roadblocks in the United States
			Investigating Canada’s approach
			Driving up demand
		The End: Developed versus Emerging Markets
			Seeing that emerging markets are lagging but disclosure is increasing
			Highlighting political and regulatory developments
			Determining whether an ESG approach is better suited to developed economies
Part 3 Applying ESG Philosophy
	Chapter 12 Creating Value through ESG for Corporations
		Crystal Clear: Corporate Disclosure and Transparency
			Meet the team: ESG engagement
			Thank you for sharing: Communication from the board
		Grow the Pie: Generating Enhanced Returns
			Increasing access to capital
			Corporate adoption and action
		Roll Up, Roll Up: Attracting More Customers
			Tracking sustainability practices
			Measuring intangible value drivers
			Identifying material opportunities
		Pare It Back: Reducing Costs
			Green financing
			How low can you go? Lower interest rates and higher credit ratings
		The Bottom Line: Increasing Productivity and Attracting Talent
	Chapter 13 Devising an ESG Policy
		Here’s a Great Idea: Creating a Plan
			Promoting ESG among key stakeholders
			Creating an internal governance structure
		Don’t Reinvent the Wheel: Undertaking a Peer Review
			Devising ESG investment strategies
			Identifying, assessing, and selecting ESG investments
		Go Over It: Reviewing Your Core Investment Principles
		Familiarizing Yourself with ESG-Specific Regulations
			Comparing Europe and the United States
			Taking into account sustainability-related risks
			Doing effective due diligence on ESG greenwashing
		Surveying Reporting Requirements
			Essential characteristics of ESG data
			Material factors for investors
		Examining ESG Engagement
			Conducting constructive dialogue on managing ESG risks
			Seizing business opportunities associated with sustainability challenges
	Chapter 14 Defining and Measuring ESG Performance and Reporting
		Defining Criteria and Metrics
			Follow the rules: Looking at regulators’ work
			The devil is in the details: Analyzing corporate sustainability reports
			Walk the walk: Committing to corporate social responsibility practices
			Show me the money: Identifying investment performance
		Calculating Relative ESG Performance
			Against the broader market
			Against specific benchmarks
		Getting a Handle on Ratings and Rankings
			Securities
			Portfolios
			Not the sharpest tool: Smart beta
		Developing Frameworks for Reporting
			In your view: ESG objectives
			Play by the rules: ESG compliance
			Meet the players: Comparing different frameworks
	Chapter 15 Elaborating the ESG Endgame
		Highlighting the Evolution of ESG from Niche to Mainstream Strategy
			Achieving competitive financial returns with positive ESG impact
			Emphasizing the need for common terminology
		Watching the Growing Use and Acceptance of ESG Standards
			Digging into disclosures
			Providing data consistency
			Developing national and international financial reporting standards
		Looking at the Increasing Impact of ESG Ratings and Rankings
			Qualitative decisions
			Quantitative decisions
		Improving Education
			What do investors believe is important?
			What should a company know about its ESG rating?
Part 4 The Part of Tens
	Chapter 16 Ten Frequently Asked Questions for an ESG Approach
		What Is ESG Investing?
		Which Sustainability Goals Should Be Followed?
		What Are the Characteristics of an ESG Company?
		How Is an ESG Company Rated?
		What Investing Principles Should Be Adopted for ESG?
		What Is Stewardship?
		How Is an ESG Approach for Asset Owners Implemented?
		How Are Benchmarks and Performance Measurement Incorporated in ESG?
		What’s the Latest on Disclosures and Reporting?
		What’s the Future of ESG Investing?
	Chapter 17 Ten Issues Surrounding ESG Portfolio Construction
		Reasons for Varying ESG Scores between Rating Agencies
		Criteria Used in Creating a Combined ESG Score
		Trends Driving ESG Materiality
		Quantitative Approaches to ESG Analysis
		Qualitative Analysis: Verifying and Supplementing Quantitative Analysis
		ESG Regulations
		Risk and Reward
		Derivative and Alternative Instruments
		Stranded Assets
		Sustainable Investing
	Chapter 18 Ten Factors Influencing the Growth of ESG Investing
		Climate Change: The Route to Net Zero
		Environmental and Social Issues Coming to the Fore
		Stewardship as a Driver for Change
		ESG Disclosures
		Accounting
		Regulation and International Standards
		Impact Investing: Actively Do Good versus “Do No Harm”
		Data and Technology
		Consolidation of the ESG Ratings Companies
		Political Impacts: Geopolitics and Public Pressure
Appendix Great Resources for ESG Investing
Index
EULA