The authors of this guide define the objectives and approach for an investment strategy and reveal tools and organisational resources required to manage investments, performance and report outcomes to stakeholders. They provide a series of questions and recommendations across six dimensions of investing, to help investors develop or refine sustainable investing strategies, in line with specific investor priorities. These are followed by evolving approaches among investors at the front of the field worthy of investor consideration. The guide concludes with a statement of the progress of the sustainable investing market.

Interviews with C-levels, ESG leaders, investment managers and other institutional investors reveal how they got started, what practices they follow, what challenges they encountered, how they resolved them, and how they have enhanced their sustainable investing approaches over time. The interviews revealed three most common motivations for adopting sustainable investing:

• Enhancing returns
• Strengthening risk management
• Aligning strategies with the priorities of beneficiaries and stakeholders

The interviews highlight a primary theme, that is that sustainable investing is more effective when its core activities are integrated into existing processes, rather than carried out in parallel. The authors then explore achievable integration of sustainable investing with investors’ existing capabilities across six dimensions.

1. Linking sustainable investing to the mandate
2. Defining the sustainable investment strategy
3. Selecting tools for sustainable portfolio construction and management
4. Developing sustainable investment teams
5. Monitoring the performance of investment managers
6. Reporting on sustainable investing practices and performance

With some of the world’s leading institutional investors at the forefront of adopting sustainable investing strategies, this guide offers practical recommendations for investors to join the sustainable investing market and experience the reported benefits of investing, for investors and beneficiaries alike, with ESG factors in mind.

1. In 2016, sustainable investments constituted 26% of assets, $22.89 trillion in total, that are professionally managed in Asia, Australia and New Zealand, Canada, Europe, and the United States, marking a 4.5% increase since 2014 (Global Sustainable Investment Alliance).
2. The most widely applied sustainable investment strategy is negative screening (excluding companies or practices from investment portfolios based on ESG criteria). Though ESG integration (the systematic and explicit inclusion of ESG factors in financial analysis) is becoming increasingly popular, growing at 17% per year.
3. European asset managers have the highest proportion of sustainable investments (52.5%, as at 2016), followed by Australia and New Zealand, 50.6% and Canada, 37.8%.
4. Two-thirds of high-net-worth millennials surveyed in the United States agreed with the statement, “My investment decisions are a way to express my social, political, or environmental values.” More than one-third of high-net-worth baby boomers expressed the same belief—a noteworthy proportion, given that baby boomers are a major constituency for institutional investors.
5. Recent comprehensive research, based on more than 2,000 studies over the last four decades, demonstrates sustainable investing is uncorrelated with poor returns.
6. Investors have grown confident pursuing sustainable investment approaches, realising that sustainable investing can produce market-rate returns on par with traditional approaches.
7. In the United States, the Sustainability Accounting Standards Board has developed the leading approach for identifying the unique ESG factors that are material in each sector.
8. Most institutional investors that integrate ESG factors in their strategies use at least one of three main techniques for portfolio construction and management: negative screening, positive screening, and proactive engagement.
9. A sustainable investment strategy is a balance between risk and return and a thesis about which factors strongly influence corporate financial performance.