ESG INVESTING - BASIC CONCEPTS

  • ESG Investing Investing strategies consider Environmental, Social, and Governance factors to align portfolios with sustainable goals. Example: Investing in a green energy fund over fossil fuels.
  • Sustainable Investing A focus on investments that support long-term sustainability without compromising returns. Example: Investing in renewable energy companies like ?rsted.
  • Impact Investing Directing investments to generate measurable social and environmental impact alongside financial returns. Example: Supporting microfinance institutions to empower underserved communities.
  • Negative Screening Excluding companies or industries from portfolios due to harmful activities. Example: Avoiding tobacco or arms manufacturing companies.
  • Positive Screening Selecting companies excelling in ESG performance or sustainable practices. Example: Investing in Tesla for its leadership in electric vehicles.
  • Best-in-Class Investing Investing in top-performing ESG companies within an industry. Example: Choosing the most sustainable mining firm for resource-sector investments.
  • Thematic Investing Investing in themes like clean energy, water conservation, or gender equity. Example: Funds targeting solar panel manufacturers or women-led companies.
  • Shareholder Advocacy Using shareholder influence to push for ESG improvements in companies. Example: Advocating for diversity policies at annual meetings.
  • Green Bonds Bonds issued to fund environmentally beneficial projects. Example: Governments funding wind farms through green bonds.
  • Social Bonds Bonds targeting social objectives like affordable housing or healthcare. Example: Issuing bonds for constructing public hospitals.
  • Blue Bonds Bonds aimed at ocean and marine resource conservation. Example: Seychelles’ blue bonds for sustainable fisheries.
  • Sustainable Development Goals (SDGs) UN-defined goals influencing ESG investment strategies. Example: Aligning investments with SDG 13 (Climate Action).
  • ESG Integration Embedding ESG factors into traditional investment analysis and decision-making. Example: Factoring carbon footprint into stock valuation.
  • Carbon Footprinting Measuring a portfolio's carbon emissions to manage climate risk. Example: Tracking emissions for an investment fund.
  • ESG Risk Rating Assessing a company’s exposure to and management of ESG risks. Example: MSCI ESG Ratings evaluating climate or governance risks.
  • Climate Transition Risk Risks companies face due to transitioning to low-carbon operations. Example: Oil companies facing declining demand during energy transitions.
  • Divestment Selling off investments in unethical or high-risk industries. Example: Universities divesting from coal and oil companies.
  • Net Zero Investing Aligning portfolios to achieve net-zero carbon emissions by a target date. Example: Investing in companies with carbon-neutral goals by 2050.
  • Carbon Offsetting Financing projects that reduce carbon emissions to counteract portfolio emissions. Example: Funding reforestation projects.
  • Greenwashing Companies exaggerating sustainability claims to attract investors. Example: A firm falsely labeling itself as "carbon neutral."
  • Corporate Social Responsibility (CSR) Voluntary company initiatives to contribute positively to society and the environment. Example: Coca-Cola’s water stewardship programs.
  • Proxy Voting Exercising shareholder votes on ESG-related resolutions during AGMs. Example: Voting for emissions reduction policies.
  • Diversity & Inclusion Investing in companies promoting equitable workplace practices. Example: Backing firms with gender-balanced boards.
  • Supply Chain Transparency Assessing a company’s supply chain for ethical sourcing and environmental impact. Example: Avoiding companies linked to deforestation.
  • Renewable Energy Investing Targeting companies generating energy from renewable sources. Example: Investing in solar panel manufacturers like First Solar.
  • Circular Economy Focusing on investments in recycling, reuse, and waste reduction. Example: Supporting companies developing biodegradable packaging.
  • Ethical Investing Aligning investments with personal or societal ethical standards. Example: Avoiding companies engaged in animal testing.
  • Low-Carbon Funds Investment funds prioritizing low-emission companies. Example: ETFs tracking renewable energy indices.
  • Corporate Governance Assessing a company’s governance structure, leadership, and accountability. Example: Backing firms with independent boards.
  • Green Infrastructure Investing in projects like energy-efficient buildings and public transit. Example: Funding green smart city projects.
  • Biodiversity Investing Investments aimed at preserving natural ecosystems. Example: Funding companies involved in reforestation.
  • ESG Disclosure Requiring companies to report ESG practices and performance. Example: TCFD-aligned climate risk reporting.
  • Socially Responsible Investing (SRI) Screening out unethical investments while supporting positive impacts. Example: Avoiding weapons manufacturers.
  • Human Rights Due Diligence Evaluating company operations to prevent labor or human rights abuses. Example: Reviewing global factory conditions.
  • Water Security Investing Funding projects ensuring sustainable water use and management. Example: Investing in desalination technology firms.
  • Governance Risk Risks from weak leadership, corruption, or lack of accountability. Example: Avoiding companies penalized for fraudulent activities.
  • Climate Adaptation Investments Supporting businesses building resilience to climate impacts. Example: Backing flood-resistant infrastructure projects.
  • Triple Bottom Line Measuring success based on People, Planet, and Profit. Example: Evaluating firms with strong social and environmental goals.
  • Responsible Ownership Engaging with companies to drive ESG improvements. Example: Investors pushing for renewable energy adoption.
  • Carbon Neutrality Companies achieving a balance between emissions and offsets. Example: Investing in firms using carbon-neutral supply chains.
  • Sustainability-Linked Bonds Bonds tied to achieving specific ESG goals. Example: Companies issuing bonds for meeting emissions targets.
  • Energy Efficiency Investing Supporting companies optimizing energy use to reduce waste. Example: Backing LED technology manufacturers.
  • Waste Management Investments Companies focusing on recycling and waste reduction innovations. Example: Investing in firms advancing compostable materials.
  • Data Privacy Compliance Supporting businesses prioritizing data protection and privacy. Example: Investing in cybersecurity companies.
  • Natural Capital Valuing investments based on their impact on natural resources. Example: Supporting sustainable forestry firms.
  • Green ETFs are exchange-traded funds focused on ESG-compliant companies. Example: SPDR S&P 500 ESG ETF.
  • Paris-Aligned Investing Strategies aligned with the Paris Agreement’s climate goals. Example: Funds avoiding coal-intensive sectors.
  • Climate Bonds Bonds supporting projects mitigating or adapting to climate change. Example: Green bonds funding wind energy.
  • Community Investing Supporting underprivileged communities via targeted investments. Example: Backing affordable housing projects.
  • Renewable Energy Certificates (RECs) Investing in certificates representing renewable energy production. Example: Buying RECs from wind farm projects to support green energy.

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