PRI launches guide for institutional investors to integrate ESG strategies

18 September 2016

Editor

EU regulation

The United Nations-led PRI (Principles for Responsible Investment) has published a guide which it said is the most comprehensive description to date of what ESG (environmental, social and governance) -integrated analysis is, and which explains how it works in practice.

The guide contains information and case studies on integration techniques that apply to investment strategies including fundamental, quantitative, smart beta and passive investment. It assists asset owners and investment managers with constructing ESG-integrated investment processes and helps asset owners to assess their managers' integration practices. A chapter on sell-side investment research maps out the types of ESG-integrated research available and demonstrates brokers' integration techniques.

The PRI said that integrating ESG factors into the analysis of listed equity investments is the most widespread responsible investment practice in the market today and that more investors are being encouraged to start integrating ESG factors - or applying  integration techniques across more of their assets - because of the levels of capital flowing into funds that integrate ESG factors and the growing awareness of academic research supporting the benefits.

A momentum in favour of integrating ESG factors is taking place, the PRI believes. The PRI believes then it will become standard investment practice and it hopes this guide will assist signatories and the investment industry as a whole in preparing for the new norm.

Separately BlackRock has published research on climate change, which the large US fund manager believes can no longer be ignored by investors. BlackRock argues that even short-term investors can be affected by regulatory and policy developments, technological disruption or an extreme weather event although the long-term investors will be most affected by climate change.

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