© CFA Institute. For candidate use only. Not for distribution.
CERTIFICATE IN
ESG INVESTING
CURRICULUM
2023
,© CFA Institute. For candidate use only. Not for distribution.
COPYRIGHT
© 2022 CFA Institute. All rights reserved.
No part of this publication may be reproduced or transmitted in any form or by any
means, electronic or mechanical, including photocopy, recording, or any information
storage and retrieval system, without permission of the copyright holder.
To view a list of CFA Institute trademarks and the Guide for the Use of CFA
Institute Marks, please visit our website at www.cfainstitute.org.
ISBN: 978-1-953337-78-8 (paper)
ISBN: 978-1-953337-79-5 (ebook)
Authors
Chapters 1 and 2
Clarisse Simonek, CFA , WeESG
Thomas Verhagen, WeESG
Chapter 3
Shuen Chan, Legal & General Investment Management (LGIM), Real Assets
Iancu Daramus, Fulcrum Asset Management
Chapter 4
Vincent van Bijleveld, Finance Ideas Sustainable Investment Consultants
Rudy Verstappen, Altera Vastgoed
Chapters 5, 6 and 9
Paul Lee, Redington
Chapter 7
Ben Yeoh, CFA, RBC Global Asset Management
Chapter 8
J. Jason Mitchell, Man Group plc
CFA Institute would also like to sincerely thank the following contributors:
Sylvia Solomon, ASIP
Brishni Mukhopadhyay, CFA
Monica Filkova, CFA
Claudia Gollmeier, CFA, CIPM
Matyas Horak, CFA, FRM
Fionnuala O’Grady, MSc
Vincent Piscaer
Maxine Wille, CFA
Hardik Shah, CFA
William Moomaw, PhD
David Sanders, CFA
Nick Bartlett, CFA
, © CFA Institute. For candidate use only. Not for distribution.
CONTENTS
Copyright ii
Authors ii
Unit Aims xi
Introduction xiii
ESG Update xiii
Foreword by Marg Franklin xv
Chapter 1 Introduction to ESG Investing 17
Introduction 17
What Is ESG Investing? 18
Long-Termism and ESG Investing 18
The Definition and Scope of ESG Issues 19
Types of Responsible Investment 20
Responsible Investment 21
Macro-Level Debate on ESG Integration 27
Macro-Level Debate on Integrating ESG Considerations 28
Financial Materiality of ESG Integration 37
Efficiency and Productivity 37
Reduced Risk of Fines and State Intervention 38
Improved Ability to Benefit from Sustainability Megatrends 43
Challenges in Integrating ESG Factors 46
ESG Factors’ Influence on Financial Performance 49
Putting ESG Investing into Practice 51
Investment Decisions 51
Shareholder Engagement 52
Policy Engagement 52
Key Initiatives 52
United Nations Initiatives 53
Reporting Initiatives 58
Key Facts 62
Further Reading 64
Self Practice and Self Assessment 65
Solutions 69
Chapter 2 The ESG Market 71
Introduction 71
History of ESG Investing, Including Modern Responsible Investment 72
A Brief History of Sustainability 72
Early Phase of ESG Investing 72
Modern Responsible Investment 73
ESG Investing in Numbers 74
Market Drivers of ESG and Challenges in ESG Integration 79
Asset Owners 81
Pension Funds 84
Insurance 88
Sovereign Wealth 89
, © CFA Institute. For candidate use only. Not for distribution.
iv Contents
Individual (Retail) Investors and Wealth Management 90
Asset Managers, Fund Promoters, and Financial Services 91
Investment Consultants and Retail Financial Advisers 93
Investment Platforms 94
Fund Labelers 94
Policymakers, Regulators, Investees, Governments, Civil Society, and
Academia 95
Examples of Policy and Regulatory Developments across the Globe 97
Investees 103
Governments 104
Civil society 104
Academia 104
Key Facts 105
Further Reading 108
Self Practice and Self Assessment 109
Solutions 113
Chapter 3 Environmental Factors 115
Introduction 116
Key Environmental Issues 117
Climate Change 121
Pressures on Natural Resources 139
Pollution, Waste, and a Circular economy 146
Systemic Relationships between Business Activities and Environmental
Issues 150
Systemic Risks to the Financial System: Physical and Transitional
Risks 151
The Relationship between Natural Resources and Business 153
Supply, Operational, and Resource Management Issues 154
Supply Chain Transparency and Traceability 156
Key “Megatrends” and Drivers Influencing Environmental Change in Terms
of Potential Impact on Companies and Their Environmental Practices 161
Growth of Environmental and Climate Policies 161
International Climate and Environmental Agreements and Conventions 161
Assessment of Materiality of Environmental Issues 178
Corporate and Project Finance 179
Public Finance Initiatives 180
Asset Management 183
Approaches to Account for Material Environmental Analysis and Risk
Management Strategies 185
Levels of Environmental Analysis 186
Analyzing Environmental Risks 188
Applying Material Environmental Factors to Financial Modeling, Ratio
Analysis, and Risk Assessment 196
Opportunities Relating to Climate Change and Environmental Issues 200
Circular Economy 201
Clean and Technological Innovation 202
Green and ESG-Related Products 208
Blue Economy 214
CERTIFICATE IN
ESG INVESTING
CURRICULUM
2023
,© CFA Institute. For candidate use only. Not for distribution.
COPYRIGHT
© 2022 CFA Institute. All rights reserved.
No part of this publication may be reproduced or transmitted in any form or by any
means, electronic or mechanical, including photocopy, recording, or any information
storage and retrieval system, without permission of the copyright holder.
To view a list of CFA Institute trademarks and the Guide for the Use of CFA
Institute Marks, please visit our website at www.cfainstitute.org.
ISBN: 978-1-953337-78-8 (paper)
ISBN: 978-1-953337-79-5 (ebook)
Authors
Chapters 1 and 2
Clarisse Simonek, CFA , WeESG
Thomas Verhagen, WeESG
Chapter 3
Shuen Chan, Legal & General Investment Management (LGIM), Real Assets
Iancu Daramus, Fulcrum Asset Management
Chapter 4
Vincent van Bijleveld, Finance Ideas Sustainable Investment Consultants
Rudy Verstappen, Altera Vastgoed
Chapters 5, 6 and 9
Paul Lee, Redington
Chapter 7
Ben Yeoh, CFA, RBC Global Asset Management
Chapter 8
J. Jason Mitchell, Man Group plc
CFA Institute would also like to sincerely thank the following contributors:
Sylvia Solomon, ASIP
Brishni Mukhopadhyay, CFA
Monica Filkova, CFA
Claudia Gollmeier, CFA, CIPM
Matyas Horak, CFA, FRM
Fionnuala O’Grady, MSc
Vincent Piscaer
Maxine Wille, CFA
Hardik Shah, CFA
William Moomaw, PhD
David Sanders, CFA
Nick Bartlett, CFA
, © CFA Institute. For candidate use only. Not for distribution.
CONTENTS
Copyright ii
Authors ii
Unit Aims xi
Introduction xiii
ESG Update xiii
Foreword by Marg Franklin xv
Chapter 1 Introduction to ESG Investing 17
Introduction 17
What Is ESG Investing? 18
Long-Termism and ESG Investing 18
The Definition and Scope of ESG Issues 19
Types of Responsible Investment 20
Responsible Investment 21
Macro-Level Debate on ESG Integration 27
Macro-Level Debate on Integrating ESG Considerations 28
Financial Materiality of ESG Integration 37
Efficiency and Productivity 37
Reduced Risk of Fines and State Intervention 38
Improved Ability to Benefit from Sustainability Megatrends 43
Challenges in Integrating ESG Factors 46
ESG Factors’ Influence on Financial Performance 49
Putting ESG Investing into Practice 51
Investment Decisions 51
Shareholder Engagement 52
Policy Engagement 52
Key Initiatives 52
United Nations Initiatives 53
Reporting Initiatives 58
Key Facts 62
Further Reading 64
Self Practice and Self Assessment 65
Solutions 69
Chapter 2 The ESG Market 71
Introduction 71
History of ESG Investing, Including Modern Responsible Investment 72
A Brief History of Sustainability 72
Early Phase of ESG Investing 72
Modern Responsible Investment 73
ESG Investing in Numbers 74
Market Drivers of ESG and Challenges in ESG Integration 79
Asset Owners 81
Pension Funds 84
Insurance 88
Sovereign Wealth 89
, © CFA Institute. For candidate use only. Not for distribution.
iv Contents
Individual (Retail) Investors and Wealth Management 90
Asset Managers, Fund Promoters, and Financial Services 91
Investment Consultants and Retail Financial Advisers 93
Investment Platforms 94
Fund Labelers 94
Policymakers, Regulators, Investees, Governments, Civil Society, and
Academia 95
Examples of Policy and Regulatory Developments across the Globe 97
Investees 103
Governments 104
Civil society 104
Academia 104
Key Facts 105
Further Reading 108
Self Practice and Self Assessment 109
Solutions 113
Chapter 3 Environmental Factors 115
Introduction 116
Key Environmental Issues 117
Climate Change 121
Pressures on Natural Resources 139
Pollution, Waste, and a Circular economy 146
Systemic Relationships between Business Activities and Environmental
Issues 150
Systemic Risks to the Financial System: Physical and Transitional
Risks 151
The Relationship between Natural Resources and Business 153
Supply, Operational, and Resource Management Issues 154
Supply Chain Transparency and Traceability 156
Key “Megatrends” and Drivers Influencing Environmental Change in Terms
of Potential Impact on Companies and Their Environmental Practices 161
Growth of Environmental and Climate Policies 161
International Climate and Environmental Agreements and Conventions 161
Assessment of Materiality of Environmental Issues 178
Corporate and Project Finance 179
Public Finance Initiatives 180
Asset Management 183
Approaches to Account for Material Environmental Analysis and Risk
Management Strategies 185
Levels of Environmental Analysis 186
Analyzing Environmental Risks 188
Applying Material Environmental Factors to Financial Modeling, Ratio
Analysis, and Risk Assessment 196
Opportunities Relating to Climate Change and Environmental Issues 200
Circular Economy 201
Clean and Technological Innovation 202
Green and ESG-Related Products 208
Blue Economy 214
