ESG and Sustainable Finance

With ESG being in the market since 2005 it the last years that it has evolved to a growing necessity for companies and financial institutions. A norm of the market soon to become necessity, should be first of all followed and supported by banks, insurers and investment firms. A driver for sustainability and responsibility towards a safer and better world.

KEY DEFINITIONS, DEVELOPMENTS AND DRIVERS

• Importance of environmental, social and governance risks for the economy
• The concept and risks of climate change
• Definition of sustainable finance and ESG investing
• Brief introduction to key concepts in a historical context – corporate and social responsibility, ethical, socially responsible, thematic and impact investing
• Main international Agreements: UN 2030 Agenda for Sustainable Development and Paris Agreement on Climate Change
• European Commission initiatives: Action Plan on Financing Sustainable Growth
• UN PRI Interventions: Principles for Responsible Investment, Principles for Sustainable Insurance and Principles of Responsible Banking

ESG FACTORS AND IMPACT ON SECURITY ANALYSIS/VALUATION

• Identification of the general environmental, social and governance factors/issues
• The concept of materiality and its importance for the ESG analysis
• Materiality map of ESG risks and opportunities among sectors
• Impact of ESG characteristics/profile on equity valuation, risk and performance
• Impact of ESG characteristics/profile on bond investments’ risk/return
• Reporting and sources of analysis of non-financial information
• Main providers ESG ratings and company analysis

SUSTAINABLE INVESTING APPROACHES AND STRATEGIES

• Classification and basic principles of ESG investing approaches
• Negative screening approaches: exclusion/negative screening and norms based screening
• Positive screening approaches: best-in-class and integration
• Generating impact: Thematic investing and impact investing
• ESG considerations in the process of portfolio construction
• Trends over time and world regions

ENGAGEMENT: ELEVATING THE IMPORTANCE OF SUSTAINABILITY ISSUES AT COMPANIES’ LEVEL

• Understanding engagement versus exclusion/divesting
• Tools for engagement: active ownership/shareholders’ activism, constructive dialogue and proxy voting
• The relevance of corporate social responsibility to attain and disclose sustainability goals
• Greenwashing and associated reputational responsibility/risk
• Role of institutional investors’ engagement in investee companies to improve ESG practices/orientation
• Stewardship codes

SUSTAINABLE MUTUAL FUNDS AND COLLECTIVE INVESTMENT VEHICLES

• Diversity of sustainable mutual funds based on different investing approaches
• Key findings of studies comparing ESG and traditional mutual funds
• Active and passive investing by sustainable mutual funds: the values and challenges of each approach
• The market of sustainable ETFs
• Definition of an ESG benchmark, variety of ESG benchmarks according to investing approaches and use of benchmarks for performance evaluation
• Climate benchmarks and low-carbon benchmarks
• The process and providers of ESG ratings for mutual funds
• How should investors and financial advisors read/interpret ESG/sustainable ratings?

A MAIN EXAMPLE OF IMPACT INVESTING: GREEN BONDS AND SOCIAL BONDS

• Definition of green bonds and their role for environmental sustainability
• Eligible projects for green bond issues
• The green bond market
• Main differences between Green Bond Principles and the EU-green bond standard
• Pricing of green bonds versus pricing of conventional bonds
• Definition of social bonds and Social Bond Principles
• Green and Social together: sustainable bonds

SHORT ANALYSIS OF OTHER SUSTAINABLE FINANCIAL PRODUCTS

• SG criteria/approaches in insurance products
• ESG criteria/approaches in banking products
• ESG criteria and private equity
• ESG/sustainable certificates

EU LEGAL FRAMEWORK ON THE INTEGRATION OF ESG FACTORS BY INVESTMENT FIRMS AND FINANCIAL ADVISORS

• Main EU-level harmonized criteria to determine whether an activity is environmentally sustainable
• Disclosure of information by investment firms and financial advisors on the integration of sustainability risks in investment decision-making processes and advice on financial products.
• Integration of sustainability factors under the UCITS, AIFMD and MIFID II regulations.

Certificate of attendance

• 20 hours of self study including articles and presentations
• Full lifetime access to learning material

Instructor:

Mark R Outhwaite
ESG expert, AML / prevention of financial crime, trainer