PRI

Integrate (material ESG factors)

Screen (positive, norm, negative)

Thematic

E-factors

• Climate change
• Water scarcity and security
• Energy security
• Deforestation
• Biodiversity loss

Data                                                                                  Ratios

• Total GHG emission                                              Water intensity (consumption unit per asset, sales, etc.)
• Total Energy consumption                                     GHG intensity (ditto)
• Total Waste                                                            Energy intensity (ditto)
• Total fines
• No of spills

Social factors                                                                                      Data

• Community concerns (eg. health impacts from ops)               # of workplace safety violations
• Supply chain issues (eg. child labour)                                    # of community protests or incidents
• Labour relations (eg. gender)                                                 # and cost of product recalls
• Product safety
• Trade practices (bribery and corruption)
• Community involvement (infrastructure dev. )

Social ratios

• % of women in workforce and mgt
• lost time incident rate
• unionisation rate
• employee turnover rate

Factors                                                                                       Data

• Board accountability (eg. independence of board)          # of board meetings
• Internal control (eg. independence of audit comm.)         board meeting attendance
• Financial disclosure (eg. inappropr account. policies)     # of audit committee meetings
• Shareholder rights (eg. voting rights)
• Remuneration (eg. LT incentives)
• Corp. litigation (eg. consumer prot. issues)

Ratios

• % of independent directors
• % of female board members
• Av CEO to worker pay

INTEGRATION 

• of material ESG factors
• Risk, Return and opps
• Assess materiality

SCREENING

• positive, norms based, negative

THEMATIC

• certain ESG outcomes
  • IMPACT 100% ESG outcomes with possibly financial tradeoff
• Examples
  • Project bonds
    • Funds allocated to specific projects
  • Revenue bonds
    • Typically issued by states, municipalities or government agencies to finance income-generating projects such as public transport
  • Green labelled bonds (use of proceeds)
    • Asset linked for ring-fenced future investments (unspecific) that qualify as green (as defined by issuer)
      • Corporates
      • Finance industries
      • Agencies and local authorities
  • Securitised green bonds
    • Backed/secured by income from loans/leases on green assets
  • Climate themed bonds
    • Broader definition for climate change solutions

Fundamental strategies

• adjust forecasted financials or valuations for expected impact of ESG factors

Quantitative Strategies

• integrate ESG factors alongside factors such as value, size, momentum, growth, and volatiliy

Smart Beta Strategies

• create excess risk-adjusted returns ??

Passive strategies

• adjust weights in portfolio to certain ESG risks

1. Qualitative Analysis (ID key issues, then ID material ESG factors)

• Economy, Industry, Co Strategy, Quality of mgt
• --> assessing ESG Materiality, ID Co' ESG factors, Summary of material ESG factors

2. Quantitative Analysis

• Financial FC, Models
• --> Sector comparison, Deep dive into water related risks, assessment results, now how will ESG identified impact financial modelling and investment decisions
• --> scoring and rating, Integrating ESG into DCF, ESG Macro modelling

3. Investment Decision

• Buy/Increase/Hold/maintain/sell/decrease/dont invest

4. Active Ownership

• Co engagement/voting

=active ownership, i.e. the us of investors influence as owners of secucrities. to maximize LT value, incl. value of common economic, social and E assets