This requires high-quality data, more – and even mandatory – disclosure by issuers of securities and transparency on issues such as ESG integration and the use of ESG research to make responsible investment decisions.
Another focus area is impact investing, i.e. the need for metrics to measure and report on the connection between investment portfolios and their contribution to sustainable development goals.
In addition to disclosing the carbon footprint of portfolios, there is a need for clarity on the share of green (climate solutions) or brown (climate problems) assets in portfolios versus their benchmark.
Yet another step is reporting on the ‘temperature alignment’ of portfolios, i.e. a score showing whether they are aligned with the global warming goals of the Paris climate agreement limiting the rise in Earth's temperature to well below 2 degrees Celsius, and preferably to 1.5C.
“As future makers, we think that measurement and reporting is a critical component of sustainable investing,“ she concludes.
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.