ESG. Sustainable Strategies. Responsible Investing. Impact Investment.
According to recent data, US assets under management using sustainable investment strategies grew by 42%
from 2018 to 2020.1
But while the growing acceptance of these strategies has been impressive, confusion still persists about what exactly constitutes ESG or sustainable or responsible investing.
In an effort to provide some clarity, here is a quick guide to some of the most commonly used terms and abbreviations from an investment management perspective.
ESG (environmental, social, governance)
is widely used in the investment industry to describe three types of non-financial factors that may affect the financial performance of a company or a security:
- Environmental includes factors related to renewable energy, lower carbon emissions, water management, pollution control and other ecological concerns.
- Social considerations may relate to labor practices, human rights, corporate social responsibility, data protection, selling practices or corporate supply chains.
- Governance issues can include the composition of boards of directors, corruption policies, auditing structure, executive pay or shareholder rights.
ESG investing can take many forms, and some of those nuances are described below.Responsible investment
relates to the inclusion of ESG factors in investment decisions. ESG integration and active ownership (voting and engagement on the part of shareholders) are both components of responsible investing.ESG integration
refers to the inclusion of ESG issues in investment analysis and decisions. ESG integration doesn’t necessarily imply that investment vehicles also seek to generate a positive ESG impact.Sustainable investing
refers to ESG investment strategies aimed at generating strong performance through investments that focus on companies that are moving society towards a more sustainable future. Impact investing
relates to strategies that address specific economic, social or environmental challenges, including those outlined in the UN Sustainable Development Goals.UN Sustainable Development Goals (SDGs)
are at the heart of the 2030 Agenda for Sustainable Development which was adopted by all United Nations Member States in 2015. The 17 specific goals represent an urgent call for action by all countries to work together to end poverty, improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests. Principles for Responsible Investment (PRI)
is a United Nations-supported international organization that works to promote the incorporation of environmental, social and corporate governance (ESG) factors into investment decision-making. Commitment to Sustainable Investing
Natixis Investment Managers is committed to acting as a force for positive, long-term social and environmental change. As one of the world’s largest asset management firms,2
our multi-affiliate model provides a single point of access to more than 20 investment managers with diverse ESG capabilities. Natixis Investment Managers and nearly all of our affiliated managers are PRI Signatories.3
1 US SIF Foundation: Report of US Sustainable and Impact Investing Trends 2020
2 Cerulli Quantitative Update: Global Markets 2020 ranked Natixis Investment Managers as the 17th largest asset manager in the world based on assets under management as of December 31, 2019.
3 Affiliated investment management firms that are signatories to the Principles for Responsible Investment (PRI). PRI signatory firms demonstrate a commitment to adopt and implement the PRI, where consistent with fiduciary responsibilities. Affiliated firms that are PRI signatories oversee $990.7B / €844.8B / £766.3B (or 93 percent) of Natixis Investment Managers assets as of September 30, 2020. The PRI were developed by an international group of institutional investors with the support of the United Nations Secretary General. They are voluntary and aspirational, offering a menu of possible actions for incorporating environmental, social, and corporate governance (ESG) issues.
This material is provided for informational purposes only and should not be construed as investment advice.
Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices.
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