ESG at a Tipping Point: This short article on Enterprising Investor by Dan Lefkovitz of the Index Industry Association (IIA) explores the surprising resilience of environmental, social, and governance (ESG) investing in 2020, citing passive investment trends and a growing performance correlation between ESG scores and sound traditional financials.
(3 minute read time)
Future of Sustainability in Investment Management: This study describes why sustainable investing is critical to the sustainability of investing and how investment organizations are adapting their business and investment models. It considers a 5- to 10-year time horizon and uses input from 7000+ industry stakeholders. Specific focus is given to the potential for alternative data, improved data quality, and technology advancements to enable better decision-making, and it describes skills needed for the future, the structure of effective teams, and the supply and demand of sustainability talent.
(1.75 hours read time)
ESG and Responsible Institutional Investing Around the World: A Critical Review: This Research Foundation literature review by Pedro Matos examines the academic literature on ESG investing. It focuses on institutional investors, which have now become the largest holders of shares in public companies globally. The author determines that while there is no consensus on the exact list of ESG issues and their materiality, the ESG issue that gets the most attention from institutional investors is climate change, in particular their portfolio companies’ exposure to carbon risk and “stranded assets.” It recommends that investors position themselves for increased regulation, particularly in the European Union.
(2 hours read time)
ESG Case Studies & ESG Integration Framework: This report includes an ESG integration framework that collates many of the ESG integration techniques used by direct investors across the globe. The report also includes case studies, gathered through a partnership between CFA Institute and Principles for Responsible Investment, that are intended to help investors better understand what ESG integration is and how to employ it in both equity analysis and fixed-income analysis.
(5.5 hour read time)
Public Sentiment and the Price of Corporate Sustainability: This Financial Analysts Journal article by George Serafeim combines environmental, social, and governance (ESG) data with “big data” measuring public sentiment about corporate sustainability performance, and finds that the valuation premium for strong sustainability performance increases as a function of positive momentum in public sentiment.
(2 hour read time)
Certificate in ESG Investing: Developed by practitioners for practitioners, this popular certificate delivers the benchmark knowledge and skills required by investment professionals to integrate ESG factors (environmental, social, and governance) into the investment process. It was developed by CFA Society United Kingdom, but is now available globally via online proctoring.
(estimated prep time 130 hours)
Altoriem: This not-for-profit resource library identifies and summarizes research supporting the business case for sustainable finance. It also offers mentoring and collaboration opportunities.
(3–5 hours per month)
Milton Friedman’s hazardous feedback loop: In this article, which won the Thinking Ahead Institute Award for the Most Innovative Investment Paper of 2020, Duncan Austin revisits Friedman’s thesis that “the social responsibility of business is to increase its profits” from a systems perspective, highlighting how he believes it falls short 50 years on. He argues that Friedman’s statement licenses, perhaps unwittingly, companies to obstruct any costly social or environmental policy. Austin makes the case for greater "stakeholder capitalism," taking the emphasis off the entities and instead directing it toward the relationship between entities.
(5 minute read time)
Climate Change Analysis in the Investment Process: This report won the award for Savvy Investor's Best ESG Paper for 2020 and presents case studies aimed to educate investors about what climate change is and its economic impacts, best practices in analysis, and where to find information for integrating climate change in the investment process.
(1.75 hours read time)
Assessing System-Level Investments: A Guide for Asset Owners: This paper by The Investment Integration Project (TIIP) helps asset owners in assessing their managers’ effectiveness in addressing systemic social and environmental risks and rewards. It examines four assumptions that are useful in evaluating and managing systemic challenges, and proposes six dimensions for evaluating managers and their performance.
(2 hour read time)
Introduction to Systems Thinking: This paper introduces the principles and practice of a quietly growing field: systems thinking. With roots in disciplines as varied as biology, cybernetics, and ecology, systems thinking provides a way of looking at how the world works that differs markedly from the traditional reductionistic, analytic view. Understanding how systems work—and how we play a role in them—lets us function more effectively and proactively within them. As our world becomes ever more tightly interwoven globally and the pace of change continues to increase, we will all need to become increasingly “system wise.” This paper provides the language and tools to apply systems thinking principles and practices in your own organization.
(1.5 hour read time)
Universal Ownership in the Anthropocene: This working paper by Ellen Quigley of University of Cambridge reviews the existing literature on Universal Ownership Theory and expands on it to encompass a theoretical and practical framework for universal owners in the Anthropocene era. This extension of the theory is necessary because of the scale and urgency of the climate crisis, on one hand, and the expansion of the category of funds considered to be universal owners on the other – through the rise of fiduciary capitalism and the increase in institutional ownership, and through the increasing prevalence of passive investing.
(2 hour read time)
The Origin of Wealth: This book by Eric Beinhocker of the McKinsey Global Institute examines how can wealth be increased for the benefit of individuals, businesses, and society. He argues that modern science provides a radical perspective on these age-old questions, with far-reaching implications. The economy is a "complex adaptive system" in which physical technologies, social technologies, and business designs continuously interact to create novel products, new ideas, and increasing wealth.
(10 hour read time)
Climate Change: A New Driving Force for Engagement: This case study from Climate Change Analysis in the Investment Process comes from UBS Asset Management. Climate change has long-term implications for investors and thus requires an effective corporate engagement strategy. To be effective, climate engagement must be focused, oriented around a material and relevant framework, and collaborative.
(15 minute read time)
Investing in the Age of Engagement: Institutional and individual asset owners, as well as financial advisers, have become more vocal and demanding across a wide range of issues. In this session, Heather Brilliant, CFA, discusses how buy-side firms, portfolio managers, and analysts can have an influence on the strategies of public companies and engage with ESG issues.
(1 hour)
Earning Investors' Trust Webinar: This webinar provides an overview of the 4th biennial investor trust study by CFA Institute. As investment firms seek to collaborate more effectively on sustainability and in a multi-stakeholder approach, understanding the value of trust can be helpful. Specific attention is given to trust during uncertain or volatile markets and the role of technology and innovation in building trust with clients.
(1 hour)
The ABCs of ESG: Initiatives and Organizations Issuers Should Understand: This online resource lists some of the most prominent frameworks, raters and rankers, organizations, and initiatives related to ESG. To increase your awareness of the ESG landscape, follow the links from this page to read research from these organizations and learn more about what they do and ways to get involved.
(10 hours)
The PRI Collaboration Platform: The platform is a unique forum that allows investors to pool resources, share information, and enhance their influence on ESG issues. It is also a hub for academics and investors to connect and engage with research. Posts include invitations to sign joint letters to companies and join investor–company engagements, proposals for research, calls to foster dialogue with policy makers, and requests for support on upcoming shareholder resolutions.
(3–5 hours per month)
Carbon Budgeting in Quantitative Managed Portfolios: This case study from Climate Change Analysis in the Investment Process comes from Man Numeric. Quantitative portfolios can pursue carbon objectives, but simplistic approaches must be avoided. Investors using quantitative tools need to pay special attention, because ESG data are messy, unstructured, and often not normally distributed.
(15 minute read time)
AI Pioneers in Investment Management: This report is an examination of the trends and use cases of artificial intelligence and big data technologies in investments. Successful investment firms of the future will be those that strategically plan on incorporating AI and big data techniques into their investment processes. Given expectations that there will be many AI applications to make sustainability analysis more robust, successful investment professionals will be those who can understand and best exploit the opportunities brought about by these new technologies.
(1.25 hours read time)
Meaningful Climate Data, Intentional Investments: This webinar explores the life cycle of emissions approach developed by Mirova, one of ten firms highlighted in the CFA Institute's Climate Change Analysis in the Investment Process. The discussion is structured as a due-diligence interview, and the topics covered include structure of the investment team, investment philosophy and process, climate data approach, scenario analysis and benchmarking relative to climate pathways and standard indices, and discussion of company and industry investment examples.
(1 hour)
Using Alternative Data in Investment Decision Making: This webinar examines how alternative data from non-traditional sources can uncover and validate investment opportunities and manage risks. Learn how investment firms apply advanced analytical tools to alternative data and integrate the results into their investment process. Michael Recce, the chief data scientist for Neuberger Berman, discusses how analytics and alternative data can provide early signals for changing trends, such as customer behavior and more.
(45 minutes)
ESG Research in the Information Age: AI, Unstructured Data and the Future of ESG Investing: This white paper by TruValue Labs explores the evolution of ESG research and asserts that in today’s era of information superabundance, a new ESG analytical model is called for, one built around the application of artificial intelligence. The author describes how the internet has given stakeholders of companies a vehicle for distributing information that impacts the market’s valuation of companies. Investment analysts need to thoroughly assess stakeholder sentiment and independent reports of corporate ESG behavior to make informed ESG judgments.
(1 hour read time)
Machine Learning and AI: Core Methods and Applications: This webinar teaches how artificial intelligence (AI) and machine learning are revolutionizing financial services. It introduces key concepts and illustrates the role of machine learning, data science techniques, and AI through examples and case studies from the investment industry. The presentation uses simple mathematics and basic statistics to provide an intuitive understanding of machine learning, as used by financial firms, to augment traditional investment decision making.
(2 hours)
Online Learning Module: Machine Learning: In this online course, learn the difference between supervised and unsupervised machine learning and deep learning with CFA Institute. Understand bias error and learn about useful machine learning algorithms using Python.
(8.75 hours, requires CFA Institute member login)
The Intersection of ESG and a Values-Based Asset Management Firm: In this podcast, Omar Selim, founder and CEO of Arabesque, an ESG quant asset management firm, sits at the nexus of ESG, machine learning, and big data. In this interview, Selim tells viewers why he believes Arabesque is “the Tesla of finance,” what he thinks finance will look like in the next decade, and what it means to build a values-based asset management firm.
(15 minutes)
The Enhanced Importance of Investing with Impact: In this webinar, the head of sustainable investing at Putnam Investments, Katherine Collins, CFA, discusses approaches to impact investing, ESG investing as a core business issue, ESG analysis, how to view companies in the current environment, and why impact investing may matter now more than ever.
(30 minutes)
Impact Investing: Killing Two Birds with One Stone? In this Financial Analysts Journal article, Professors Cornelia Caseau and Gilles Grolleau discuss how the intentional provision of measurable nonfinancial returns, in addition to conventional financial returns, is a cornerstone of impact investing. This attractive promise also constitutes the Achilles’ heel of impact investing. When two or more goals (e.g., impact and financial returns) are pursued through a single means (e.g., investing), humans tend to believe that the means becomes less effective in achieving either goal. They discuss the conceptual foundations of this likely bias and its implications for the impact investing movement and suggest some practical ways to overcome this issue.
(45 minute read time)
Funding the Future: Investing in Long-Horizon Innovation: This report by FCLT Global describes how the declining tenure of managers, the lack of innovation-linked metrics in incentive compensation plans, the typically asymmetric return profile of long-horizon projects, and an investment community that often ignores the potential impact of long-horizon innovation spending in a company’s valuation analysis all contribute to the tendency of management teams to cut long-horizon projects first. Investors can engage around companies’ R&D investment philosophies and reward companies for the optionality offered by long-horizon innovation investment.
(1 hour read time)
APAC Regional Webinar: A Financial Risk Framework for Climate Change: In this webinar, Nobel Laureate Professor Robert Engle, co-director of the NYU Stern Volatility and Risk Institute, explains why climate risk could easily be the next biggest risk that humanity faces after the COVID-19 and the financial crisis induced by the pandemic. The worst impacts are far in the future, and yet they affect behavior and asset prices today. Common economic examples of externalities and regulation are used to frame the analysis. From this point of view, portfolio choices and asset prices are examined.
(1.25 hours)
Introduction to Impact Investing: This learning module from Impact Investing Institute brings together resources from organizations such as the Global Impact Investing Network (GIIN), the International Finance Corporation (IFC), the Impact Management Project (IMP), UN PRI, and the World Economic Forum. It places impact investing in the context of traditional, responsible, and sustainable investing and gives a briefing on the development of impact investing over time, along with the key global frameworks and standards that govern the market. It also acknowledges some of the challenges that impact investing is addressing, as well as the opportunities that are ahead.
(10 hour read time)
How Culture Improves Outcomes: Cognitive Diversity: This blog post by Dr. Katrina Sherrerd, CFA, CEO of Research Affiliates, is the first in a four-part series on culture and discusses how the success or failure of our firms — and our industry — depends on our people strategies. It is not enough to have a mission, vision, and strategy: the missing piece is culture. The key to better outcomes is the group’s ability to leverage its collective intelligence (CI).
(5 minutes)
The Convergence of Stakeholder Capitalism and Desires for More Sustainable Investing: In this podcast, Lutfey Siddiqi, CFA, discusses his thoughts on the convergence of stakeholder capitalism and investors' desires for more sustainable investing, while touching on the subject of trust and whether investee companies have truly embraced long-term sustainability.
(15 minutes)
Driving Change: Diversity & Inclusion in Investment Management: This report offers a framework of 20 actions for the industry to become more inclusive, gathered from a series of industry workshops with nearly 100 investment organizations.
(30 minute read time)
Building Smarter Teams: In this webinar, Professors Anita Woolley and Scott Page discuss their research on the collective intelligence of groups and how firms can use the research to improve the effectiveness of teams — from leadership teams to investment teams to product development teams and more. Research shows that leveraging cognitive diversity (differences in how people think) can achieve better outcomes. They also discuss how to build and lead more diverse teams and the pitfalls to avoid.
(1.5 hours)
Fiduciary Duty in the 21st Century: This report is the culmination of a four-year project by UN PRI, UNEP FI, and The Generation Foundation to clarify investor obligations and duties (known in common law markets as fiduciary duties) in relation to the integration of ESG issues in investment practice and decision making.
(3 hour read time)
Short-Termism Revisited: Improvements Made and Challenges in Investing for the Long-Term: This report reviews the changes to the landscape on this topic over the last 15 years. Many companies have traded in short-term earnings guidance for either long-term guidance or a more diverse set of metrics that better informs investors, but more work remains to be done. Recommendations include investing more in engagement and focusing it on long-term strategy, simplifying executive compensation plans to better align incentives with those of shareowners, and establishing better standards around ESG data.
(1 hour read time)
Investment Governance for Fiduciaries: In this Research Foundation book, the authors look at the effective employment of resources—people, policies, processes, and systems—by an individual or governing body (the fiduciary or agent) seeking to fulfill their fiduciary duty to a principal (or beneficiary) in addressing an underlying investment challenge. Effective investment governance is an enabler of good stewardship and should be of interest to all fiduciaries, no matter the size of the pool of assets or the nature of the beneficiaries. It offers fiduciaries ideas that may help them fulfill their duties to beneficiaries and other stakeholders, and asset consultants and investment managers may find it useful in establishing their credibility among, and pitching their services to, fiduciaries.
(5 hour read time)