Unlock the power of sustainable investing with our CFA ESG Investing study notes. Designed for ambitious finance professionals like you, our meticulously crafted materials provide the edge you need to excel in the rapidly growing field of environmental, social, and governance (ESG) investing.
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ESG Investing by CFA Institute
Personal Course Notes
Content here are my personal notes when I passed this course in 2023. These
notes are meant to complement the actual CFA content.
I read the whole content twice, highlighted content and wrote notes on only
those I felt most important to process well.
Any captured diagrams or exhibits should be reviewed & understood thoroughly.
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,CHAPTER 1 – INTRODUCTION TO ESG INVESTING
ESG factors
E factors pertaining to natural world (e.g. water)
S factors that affect lives of humans (e.g. human rights)
G factors that involved issues tied to countries / jurisdictions or common practice in industry
(e.g. laws)
Shareholder Rights Directive (EU – SRD) requires investors to be active owners & act with more
long-term focus.
ESG investing is part of responsible investment
Impact investment higher returns than social investing, intent is both social and financial return
Social investment intent is more social and less financial return.
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, RESPONSIBLE Investment (8 important types)
1. Socially responsible investment (SRI)
SRI rankings. SRI approach includes social & environmental criteria.
Hurdle is the qualification of inclusion or selection.
2. Best-in-class investment
Deploy “positive screening” - companies that overcome defined ranking hurdle
Disadvantage: Not all best-in-class are “responsible”
3. Sustainable investment
Contribute to sustainable economy, minimize E & S depletion.
Disadvantage: Very broad term
4. Thematic investment
Themes or assets specifically related to ESG factors
Disadvantage: Not all thematic are responsible or best-in-class
5. Green investment
Allocating capital to mitigate climate change, biodiversity loss, resource inefficiency,
other environmental challenges
Subcategory of thematic or impact investing
6. Social investment
Address social challenges
Address bottom-of-pyramid (BOP), poorest 2/3 of economy. E.g. micro-financing,
access to basic telco, energy
Incl. social impact bonds which contract with public sector
7. Impact investment
Positive, measurable E or S impact and financial returns, e.g. investing in the 17 SDGs
8. Ethical/Value-driven and Faith-based investment
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