Asset managers make use of the ESG framework to make their investment decisions in one or more of several possible ways, write the Smart About Money editors. | News24_Business
Take ESG considerations into account when deciding whether to invest in a share, bond or other security.Use ESG considerations to pick securities scoring well on ESG factors or involved in businesses aligned to an ESG theme such as climate change.
Managers make use of the ESG framework to make their investment decisions in one or more of the following ways:Asset managers may consider ESG factors together with the traditional financial factors when analysing shares and bonds and making investment decisions. ESG factors will play a role in the choice of securities but this does not necessarily mean they will only invest in shares or bonds that rate well on ESG factors.
Screening may not be suitable when a manager is investing in a small concentrated market or one dominated by an industry that ranks poorly in ESG factors, such as the mining industry. South Africa has both these characteristics. Some managers invest only in sectors that are positioned to take advantage of certain ESG themes – for example, a climate change theme may focus on renewable energy, green buildings, electric cars and green bonds that finance environmental projects. Managers who practice impact investing typically fund listed and unlisted projects that aim to deliver positive, measurable environmental or social outcomes.
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