What Is ESG Investing?
ESG stands for Environmental, Social, and Governance. Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities. ESG metrics are not commonly part of mandatory financial reporting, though companies are increasingly making disclosures in their annual report or in a standalone sustainability report. Numerous institutions, such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD) are working to form standards and define materiality to facilitate incorporation of these factors into the investment process.
CFA Institute Guide to ESG Investing for Investment Professionals
This guide takes fiduciary duty, externalities, disclosures, and other important ESG issues into account.
ESG Investing Trends
As ESG investing accelerates in demand, several key trends are emerging – from climate change to social unrest. The coronavirus pandemic, in particular, has intensified discussions about the interconnectedness of sustainability and the financial system. CFA Institute is leading the financial industry by producing valuable research, convening experts and practitioners for discussion, and setting standards to enable the mainstreaming of ESG investing.
Sustainable Investing and Investment Management
Explore the new mindsets and strategies to help you deliver value and meet client needs.
Climate Change in the Investment Process
Explore climate change’s impact on investing, key tools for investment professionals, and case studies.
Inclusion & Diversity in Finance
Take action to create new capabilities and a more diverse workforce and inclusive workplace cultures.
There is no one exhaustive list of ESG examples. ESG factors are often interlinked, and it can be challenging to classify an ESG issue as only an environmental, social, or governance issue, as the table below shows.
These ESG factors can often be measured (e.g., what the employee turnover for a company is), but it can be difficult to assign them a monetary value (e.g., what the cost of employee turnover for a company is).
Conservation of the natural world
- Climate change and carbon emissions
- Air and water pollution
- Energy efficiency
- Waste management
- Water scarcity
Consideration of people & relationships- Customer satisfaction
- Data protection and privacy
- Gender and diversity
- Employee engagement
- Community relations
- Human rights
- Labor standards
Standards for running a company- Board composition
- Audit committee structure
- Bribery and corruption
- Executive compensation
- Political contributions
- Whistleblower schemes
There is not a standardized approach to the calculation or presentation of different ESG metrics. Investors can employ a variety of analytical approaches and data sources to address ESG considerations, including weighting to client interest and potential value. Understanding the relative merits and limitations of different metrics can help to form a more complete picture of ESG risks and opportunities.
The Operating Model to Enable Sustainable Investing
Learn about ESG data quality, understand the barriers to widespread sustainable investing, and discover how to improve frameworks and standards.
ESG Integration Case Studies & the ESG Integration Framework
Read case studies focusing on integration in ESG fixed income, equities, and more.
ESG versus SRI
ESG investing grew out of investment philosophies such as Socially Responsible Investing (SRI), but there are key differences. Earlier models typically use value judgments and negative screening to decide which companies to invest in. ESG investing and analysis, on the other hand, looks at finding value in companies—not just at supporting a set of values.
SRI Investing and Islamic Finance: Similarities and Differences
This report identifies the ESG and ethical considerations at the core of both SRI investing and Islamic finance by tracing the origins, historical connections, and the main concepts in both approaches.
Handbook on Sustainable Investments
Stay informed about recent trends in ESG and sustainable investing with these practical examples for institutional asset owners.
Why Is CFA Institute Focused on ESG?
CFA Institute consistently monitors key debates and evolving issues in the investment industry. ESG investing and analysis has become of increasing interest to investment professionals globally as governments, asset owners, and high-net worth investors consider the impact of ESG factors on their investments and local markets. We believe more thorough consideration of ESG factors by financial professionals can improve the fundamental analysis they undertake and ultimately the investment choices they make. CFA Institute is specifically focused on the quality and comparability of the ESG information provided by corporate issuers and how to integrate various ESG factors into the investment selection process.
Skills & Expertise for a Career in ESG Investing
Understand how firms and investment management professionals can demonstrate commitment to ESG research, ensure ESG expertise, and grow in staffing and career paths to support ESG investing.
ESG and Sustainability Reporting & Regulations
Learn more about how global ESG regulations and sustainability reporting have evolved, and how CFA Institute has responded to these changes.
Corporate Governance and ESG: CFA Program Refresher Reading
Exclusive to CFA Institute members, this CFA Program refresher reading gives an overview of ESG and corporate governance, its underlying principles and theories, and how these factors influence the investment decision-making process.
CFA Institute to Develop ESG Disclosure Standards for Investment Products
CFA Institute is developing ESG Disclosure Standards for Investment Products that aim to build a framework for investment managers to better communicate, and their clients to better understand, the nature and characteristics of ESG-centric funds and investment strategies.
Regional ESG Insights from CFA Institute
ESG and Responsible Institutional Investing Around the World
This review of academic research on ESG investing focuses on the growing role of institutional investors, and highlights the importance of assessing portfolio risk exposure to climate change.
ESG Integration and Analysis Integration in the Americas: Markets, Practices, and Data
This report outlines ESG integration best practices in the Americas markets.
ESG Integration and Analysis in Asia Pacific: Markets, Practices, and Data
Understand key ESG trends, drivers, and factors in ESG integration across APAC markets and investment practices.
ESG Integration and Analysis in Europe, the Middle East, and Africa: Markets, Practices, and Data
This report outlines ESG integration best practices in EMEA markets.