The world is rapidly changing and its interdependency and interconnectivity are accelerating at an exponential pace. These significant changes require new approaches to investing that seriously take into account notions of sustainable finance. Holding long term investments requires understanding, identifying and managing long term financial risks and opportunities. For some investment institutions, their investment horizons are often indefinite. Therefore, their asset allocation, portfolio construction and risk management processes and decisions must regularly and rigorously assess whether their investments are resilient and can be sustained indefinitely. We understand today, better than ever before, how Environmental, Social and Governance (ESG) considerations can impact long term risks and opportunities in financial markets.
These Principles of Sustainable Investing are an urgent call by MSCI to all investment institutions worldwide to embrace this new world, benefit from the enormous opportunities it provides, and mitigate the inherent risks it brings. They set forth MSCI’s views and recommendations on the core principles and best practices for ESG integration by investors globally.
According to MSCI, there are three core principles of sustainable investing. The first principle consists of an investment strategy whereby asset owners should integrate ESG considerations into their asset allocation processes. Secondly, portfolio managers should incorporate ESG considerations throughout the entire portfolio management process. Lastly, research analysts assessing companies and issuing investment recommendations to portfolio managers should integrate ESG considerations
The index provider groups the various approaches to integrating ESG practices into three common approaches: values-based investing, impact investing and ESG integration. Values-based investing, Impact investing and ESG integration
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