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H. Y. Ching
1 Introduction
Integrating environmental, social and corporate governance (ESG) policies and practices into a company strategy and its day-to-day operations is increasingly viewed by
investors as relevant to their ability to realize long-term value (SSE 2015). Businesses
looking to build long-term value are those that are anticipating and responding to the
changing needs of their stakeholders, society and the external environment (Morrow
and Yow 2014). Companies have been pressured to report their performance on sustainability and some efforts have been made to establish initiatives to guide them in
that direction (Delai and Takahashi 2011).
Due to increasing demands for the integration of ESG by asset managers and the
materiality of ESG metrics, this type of information is being used by these managers in the construction of their portfolios (Morrow and Yow 2014). Most large
companies are providing sustainability information that is the basis for responsible
investors to make decisions to invest in companies that are concerned with social
and environmental aspects (Tuli 2013). This is called Responsible Investment (RI).
This is an investment approach that explicitly considers the relevance of ESG factors
and health in the long term and stability of the market as a whole (Principles for
Responsible Investment PRI 2015). PRI recognizes that the generation of sustainable and long-term returns depends on stable, dynamic and well-governed social,
environmental and economic systems.
Responsible investment is an investment strategy that aims to incorporate ESG
factors into investment decisions (Principles for responsible investment 2015). For
Arnold et al. (2012), the question of how these investors process relevant information
contained in sustainability reports is of the utmost importance as ESG information
has become increasingly relevant to capital market participants in their investment
decisions.
This concept is also known as Sustainable Investment. In an article written
in 2017 for www.morningstar.com (https://www.morningstar.com/articles/814953/
what-exactly-is-sustainable-investing.html), John Hale states that sustainable investment is a long-term investment approach that incorporates ESG considerations into
the investment process. According to this organization, there is a growing interest
in sustainable investment, as many institutions and individuals seek to express their
concerns about sustainability issues through their investments, just as they do with
their purchases and in the workplace.
In the case of sustainable investment, the most commonly used strategy today is
the Socially Responsible Investment (SRI). SRI is a long-term, investment-oriented
approach that integrates ESG factors into the research, verification and selection
process of securities in an investment portfolio. In the universe of investment vehicles incorporating ESG factors in asset management, 519 companies are registered,
including mutual funds, equity funds, exchange traded funds or Exchange Traded
Funds (ETFs) and closed-end funds, which represent US$ 1,74 trillion in ESG shares.
The creation of SRI indices and the wide availability of ESG information for conventional investment analysts as a criterion for participation selection are some of
H. Y. Ching
1 Introduction
Integrating environmental, social and corporate governance (ESG) policies and practices into a company strategy and its day-to-day operations is increasingly viewed by
investors as relevant to their ability to realize long-term value (SSE 2015). Businesses
looking to build long-term value are those that are anticipating and responding to the
changing needs of their stakeholders, society and the external environment (Morrow
and Yow 2014). Companies have been pressured to report their performance on sustainability and some efforts have been made to establish initiatives to guide them in
that direction (Delai and Takahashi 2011).
Due to increasing demands for the integration of ESG by asset managers and the
materiality of ESG metrics, this type of information is being used by these managers in the construction of their portfolios (Morrow and Yow 2014). Most large
companies are providing sustainability information that is the basis for responsible
investors to make decisions to invest in companies that are concerned with social
and environmental aspects (Tuli 2013). This is called Responsible Investment (RI).
This is an investment approach that explicitly considers the relevance of ESG factors
and health in the long term and stability of the market as a whole (Principles for
Responsible Investment PRI 2015). PRI recognizes that the generation of sustainable and long-term returns depends on stable, dynamic and well-governed social,
environmental and economic systems.
Responsible investment is an investment strategy that aims to incorporate ESG
factors into investment decisions (Principles for responsible investment 2015). For
Arnold et al. (2012), the question of how these investors process relevant information
contained in sustainability reports is of the utmost importance as ESG information
has become increasingly relevant to capital market participants in their investment
decisions.
This concept is also known as Sustainable Investment. In an article written
in 2017 for www.morningstar.com (https://www.morningstar.com/articles/814953/
what-exactly-is-sustainable-investing.html), John Hale states that sustainable investment is a long-term investment approach that incorporates ESG considerations into
the investment process. According to this organization, there is a growing interest
in sustainable investment, as many institutions and individuals seek to express their
concerns about sustainability issues through their investments, just as they do with
their purchases and in the workplace.
In the case of sustainable investment, the most commonly used strategy today is
the Socially Responsible Investment (SRI). SRI is a long-term, investment-oriented
approach that integrates ESG factors into the research, verification and selection
process of securities in an investment portfolio. In the universe of investment vehicles incorporating ESG factors in asset management, 519 companies are registered,
including mutual funds, equity funds, exchange traded funds or Exchange Traded
Funds (ETFs) and closed-end funds, which represent US$ 1,74 trillion in ESG shares.
The creation of SRI indices and the wide availability of ESG information for conventional investment analysts as a criterion for participation selection are some of