Working within the main asset classes and securities, responsible investing covers a range of activities from exclusion/negative screening, through themes (cleantech, water, etc.), corporate engagement, to best-in-class/positive screening.
The UN established the Principles for Responsible Investing in order to promote this movement.
One of the key tools in sustainable investment are environmental, sustainable and governance metrics (ESG). There are criticisms of a reliance on ESG because
- Focuses on companies’ activities, rather than their products and usage
- Data generally comes from businesses and can be subject to varying levels of attestation and audit
- Only the material metrics drive outperformance