Assess ESG risk

Environmental, Social and Governance (ESG) issues are increasingly integrated into investor decision-making. The Task Force on Climate-related Financial Disclosures (TCFD) and UN Principles for Responsible Investment are two initiatives that highlight this growing trend.

Resource consumption, renewable energy, energy and water consumption, waste generation and responsible sourcing are all factored into ESG ratings. The process of identifying, assessing, responding and disclosing material ESG risks should integrate with a company’s regular enterprise risk management process.

There are six methods for incorporating ESG issues into investment decisions:

  1. Exclusionary screening
  2. Best-in-class
  3. Active ownership
  4. Thematic investing
  5. Impact investing
  6. ESG integration