Environmental, Social & Governance (ESG) analysis has become an increasingly important part of the investment process. Investors are starting to incorporate ESG data into the investment process to gain a fuller understanding of the companies in which they invest. Consequently, it is important for financial institutions and other organizations to consider reporting frameworks, disclosure practices, and the developing regulatory landscape around ESG policy.
ESG Regulation & Policy
Many jurisdictions—either through regulation or listing standards—require a certain level of ESG reporting and disclosure from companies to provide investors with material ESG-related information.
The topic of materiality is a big one. Investors, regulators, and the industry continue to hold discussions as to whether to adopt standards on material ESG information, but definitional and “what is considered material” issues still need to be sorted out.
CFA Institute Viewpoint
CFA Institute encourages the incorporation of ESG data into the investment process so that investors can be more informed about the decisions they are making. This approach sees value in the incorporation of ESG data into the investment process, but it is agnostic on the value-investing argument more pertinent in the SRI community.