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ESG: Materiality, Integration, Material Integration & Integration of Materiality

The Top Recent Papers on ESG integration and materiality

ESG considerations have been deemed to be of material importance to the investment management community.  Within certain jurisdictions, it has even been mandated that ESG considerations should be integrated into the investment process.  But determining an ESG materiality evaluation framework can become quite complex.  Which ESG factors are material for specific asset classes or industries?  Which ESG scoring methodology should be adopted?  And what are the industry's best practices for integrating this data into an investment decision-making process?  

State Street Global Advisors describes the alignment between the SASB's Materiality Framework and the UN SDGs, Calvert discusses ESG considerations that are materially relevant for green bond investors, and other papers provide additional case studies on ESG integration.  We hope you find this list particularly material.  

ESG materiality

Integrating ESG Considerations in Portfolio Design (Jacobi, 2019)

Jacobi looks at ESG considerations for multi-asset investors, describing why it is critical to integrate ESG data into the core portfolio monitoring and decision-making framework alongside traditional factors. The authors also provide case studies of the application of these techniques to portfolio construction issues.

The impact of ESG integration upon credit quality (HSBC Global Asset Management, 2019)

For compliance reasons, this paper is only accessible in certain geographies

Within corporations and governments, a failure to integrate ESG best practices has the potential to generate negative outcomes that could affect profitability, risk profiles, and credit ratings.

Material Change: A five-step ESG Checklist for Trustees (LGIM, Mar 2019)

For compliance reasons, this paper is NOT accessible in the United States and Canada

How can pension trustees prepare for new requirements on the financial materiality of environmental, social and governance (ESG) factors?

Green bonds: Sustainable finance opportunities in public fixed income (Eaton Vance blog, 2019)

This blog post from Eaton Vance's Calvert team covers some of their material ESG-related criteria for evaluating investments in green bonds.

Aligning Global Sustainability Goals with SASB's Materiality Framework (State Street, Mar 2018)

The UN SDGs and the SASB's Materiality Framework are both standards relevant to a company's ESG performance. Of these, the SASB's 30 categories focus specifically on sustainability issues that are financially material. Performance within these categories can also be related back to specific SDGs.

ESG for EMD: Toward Best Practice (Neuberger Berman blog, Jan 2019)

For compliance reasons, this paper is only accessible in certain geographies

The authors discuss ESG indicators that are materially relevant for EM debt markets, as well as the need to develop proprietary methods for evaluating ESG scores in combination with EMD credit analysis.

Voting the Votes: Materiality and Shareholder Proposals One Year On (Neuberger Berman, 2018)

For compliance reasons, this paper is only accessible in certain geographies

Neuberger Berman presents a materiality driven framework for voting on shareholder proposals that is based upon the SASB's materiality standards.

Real Estate: Building Blocks for the Low Carbon Economy (FTSE Russell, 2018)

This is a case study of how FTSE Russell has managed the integration of sustainability concerns within a series of new real estate indexes that are designed to mirror the FTSE EPRA Nareit Developed Index.

Lost in Translation: In Search of Authenticity in ESG Integration (Invesco, May 2018)

For compliance reasons, this paper is only accessible in certain geographies

Invesco attempts to draw a line in the sand, delineating the difference between authentic and inauthentic ESG integration. They also call for asset managers to collaborate in order to establish the most pertinent ESG metrics.

The Financial and Societal Benefits of ESG Integration: Focus on Materiality (Eaton Vance, 2017)

For compliance reasons, this paper is only accessible in the United States and Canada

Determining ESG factors that are materially relevant for a specific industry, then identifying companies that are performing well on these metrics can be an additional source of alpha. This Calvert-Serafeim paper explains further.

Integrating ESG in Portfolio Construction (QMA, Jun 2018)

QMA presents a unique approach, whereby companies can be ranked by ESG metrics (that are material in their industry) whether or not they report sufficient data. This approach also generates comparable alpha to non-ESG portfolios.

Materiality Matters: ESG Issues that impact performance (Russell Investments, 2018)

For compliance reasons, this paper is only accessible in certain geographies

Russell Investments presents their method for generating a 'material ESG score' for a corporation. This ESG score evaluates and identifies issues that are of financial importance to a company.

ESG: Past, Present and Future (PPI, 2018)

This report by the Pensions Policy Institute begins from a basis of accepting that ESG factors are financially material to performance, and then asks the question - given that this is the case, what are the duties of pension schemes? It also presents several case studies of particular UK pension schemes and their statements of investment principles.