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ESG Trends to watch in 2018

2018 Environmental, Social and Governance Trends

The last month has seen some great new ESG reports uploaded to Savvy Investor, including MSCI's eagerly awaited "2018 ESG Trends to Watch".

Responsible investing continues to grow in the consciousness of institutional investors. The list below includes reports on the integration of ESG issues into passive investing, into factor investing and into fixed income. Other papers focus on how ESG relates to sustainability and climate change. We'll leave it to you to discover the five big trends that MSCI have identified for 2018.

Savvy Investor

2018 ESG Trends to Watch (MSCI)
This white paper by MSCI explores five key trends that, in the authors' view, will shape how investors approach the ESG risks and opportunities on the horizon.

Is ESG integration into passive becoming the new norm? (FTSE Russell)
Asset owners are becoming mindful of ESG, and ESG considerations are increasingly being integrated into passive investment mandates.

Long-Term Thinking: The renewable revolution (Legal & General IM, 2018)
A renewable revolution is taking place in the way we produce and consume energy and it presents an enormous opportunity for investors.

Sustainability disclosure is helping drive investment decisions, HBS faculty study finds (Eaton Vance)
(For compliance reasons, this paper is only accessible in the USA and Canada)
A HBS study shows that voluntary disclosure of ESG factors aids in investor decision-making, as evidenced by disparities between valuations of ESG-minded companies and their industry peers.

From 'why' to 'why not': Sustainable investing as the new normal (McKinsey & Company)
Institutional investors are recognizing that ESG factors should be integrated across the investment process, providing further evidence that sustainable investing is shifting from a peripheral investment strategy into the mainstream.

Managing Sustainability Risks in Developed Markets Fixed Income (PineBridge)
PineBridge discusses indicators for key risks (KRIs) at the industry level, using ESG issues to enhance alpha and to diversify risk.

2017 ESG Survey (Callan, Jan 2018)
Callan's 5th annual ESG survey reflects input from over 100 U.S. institutional funds with over $1.1 trillion AUM, showing how institutional investors have incorporated ESG considerations into their investment decision-making process.

Foundations of ESG: How ESG Affects Valuation, Risk, and Performance (MSCI)
Bearing special attention to the distinction between correlation and causality, this paper focuses on understanding how ESG characteristics have led to better financial performance within corporations.

Sustainable Factor Investing (Invesco, Oct 2017)
(For compliance reasons, this paper is only accessible in certain geographies)
​ESG considerations and factor investing are not only gaining in popularity, but also converging into the concept of sustainable factor investing. Herein, both narratives are explored individually, as well as their recent intertwining.

Measuring Physical Climate Risk in Equity Portfolios (Deutsche AM, Dec 2017)
Given the increased frequency of natural disasters, this whitepaper provides some of the tools that investors need to more accurately monitor and address the physical effects of climate change on investment portfolios.

Carbon Pricing: Discover Your Blind Spots on Risk and Opportunity (S&P Dow Jones Indices, 2018)
Carbon pricing schemes can lead to financial risks, depending upon the company’s carbon efficiency, business model, location, and the sector-based market conditions.

A Framework for Pension Fund Action on Climate Change (PLSA, Dec 2017)
This PLSA guide provides an action plan for pension funds in order to further safeguard assets by discussing changes they can make to internal policies on governance, reporting, investment, and engagement related to ESG issues.

Has stewardship improved things for Japanese equity investors? (Robeco, Dec 2017)
Low ROIC has deterred recent global investors in Japanese equities. Since the 2014 Japanese Stewardship Code was introduced, some progress has been made on corporate engagement with investors and improved corporate governance.

Sustainable Investments Handbook for Institutional Asset Owners (CFA Institute)
Complete with several case studies, this publication aims to provide the reader with a comprehensive overview of contemporary best practice in sustainable investing.

The Role of the Corporation in Society (Eaton Vance Institutional, Jan 2018)
(For compliance reasons, this paper is only accessible in the USA and Canada)
This report includes research and case examples about the ways in which sustainable business practices impact financial valuations and the valuation premium held by sustainability leaders in both equity and fixed income markets.

Institutional Investment Mandates: Anchors for Long-Term Performance (FCLT, 2018)
Asset owners with long-term investment horizons have to ensure that assets are managed in line with their long-term goals. Defining investment mandates is critical to this process, and this report acts as a helpful guide.

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