McKinsey, Oct 2017: Click here to read the report.
More institutional investors recognise environmental, social, and governance factors as drivers of value. The key to investing effectively is to integrate these factors across the investment process.
The techniques used in sustainable investing have advanced. While early ethics-based approaches such as negative screening remain relevant today, other strategies have since developed. These newer strategies typically put less emphasis on ethical concerns and are designed instead to achieve a conventional investment aim: maximising risk-adjusted returns. Many institutional investors have now adopted approaches that consider ESG factors in portfolio selection and management.
To help investors capitalise on opportunities in sustainable investing, this article offers insights on how to integrate ESG factors with the investment process—from defining the objectives and approach for an investment strategy, through developing the tools and organisational resources required to manage investments, to managing performance and reporting outcomes to stakeholders.