ESG Investing

ESG-based investment vehicles have gained enormous prominence in the past two years. The ESG premium on the S&P500 has gone from negative to positive, where it has stayed for over a year. Why is this so and what are the forces at play that has made this happen? This program explores the main investment themes and goes into detail with the most popular ESG indices. According to a recent Bloomberg Intelligence report, global ESG-based investment assets will top USD50trn by 2025, when total global assets under management (AUM) will reach USD140trn. These staggering forecasts underline the importance attributed to this fundamental change to investment management.

This program offers the informed intermediate learner eight sessions packed with information and the opportunity to ask questions and discuss answers.

The first session outlines the breadth and depth of ESG-based investments in terms of types of asset owners, types of funds and size of investment portfolios (AUM). The following three sessions describe, contrast and analyze the six different ESG strategies professional investors apply in practice. Session five looks at how traditional equity investment analysis changes as a result of ESG elements in the portfolio. A major element in this session is the debate around how the perpetuity element in CAPM valuation will change and how to quantify it. Session six asks the same question as in session five, only this time focusing on fixed income investment analysis. It is reasonable to assume that bond spreads will change, thus driving valuation changes, but how will this process be driven? Session seven discusses the use of ESC indices in portfolio allocation and performance appraisal. A small number of actual index calculations will be performed for illustration. The final session brings participants to discuss practical approaches to managing ESG investment risk in a portfolio, whether by controls, guidelines or sanctions.

Key Takeaways and Learning Objectives:

After this course, participants will be able to:

• Describe the size of and the players in the ESG investment market
• Discuss positive and negative screening strategies and to which extent they lead to portfolio tracking errors
• Explain the main benefits and several disadvantages of integrating ESG fully into existing investment portfolios
• Describe ways investment managers can exert direct ESG influence over companies through impact investing or active ownership
• Discuss corporate ESG activity as either an excess cost or an insurance premium when analyzing returns
• Analyse corporate CDS and credit spreads in light of ESG exposure and determine whether bond ratings are sustainable
• Explain the composition of an ESG-based investment index and describe a broad range of index families
• Explain the extent to which an investor is exposed to ESG investment risk when investing in non-compliant securities

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