Financial Arguments for Responsible Investing

'Shedding Light on Responsible Investment: Approaches, Returns and Impacts' (PDF, 1.23MB) published by Mercer in November 2009 analyses 16 academic studies; ten of which show a positive relationship between ESG factors and companies’ financial performance. It follows on from  'Demystifying Responsible Investment Performance' (PDF, 1.20 MB), published by UNEP FI and Mercer in October 2007 which reviews the results of 20 academic studies on the relationship between ESG factors and portfolio performance. This report finds a positive relationship between the two, highlighting that there is no performance penalty from taking ESG factors into account.

'Environmental, Social, and Governance Factors at Listed Companies: A Manual for Investors' (PDF, 1.27 MB) is a supplement to the CFA’s 2005 Manual on corporate governance. The Manual examines how ESG factors have figured more prominently in the value of corporations and how traditional financial analysis needs to be more successful in integration these dynamic attributes. The Manual also discusses how ESG factors represent a broad set of intrinsic concerns that may ultimately affect valuation of equity, fixed income, real estate and infrastructure investments.

The Stern Review addresses the effects of climate change, highlighting the economic and environmental risks incurred and proposing global solutions. It suggests that climate change threatens to be the greatest and widest-ranging market failure ever seen, while tackling it is "a pro-growth strategy for the longer term”. The report concludes that one percent of global GDP needs to be invested to mitigate the effects and that failure to do so could cost up to twenty percent of global GDP. Click here (PDF, 319.98 KB) to view the executive summary.