Influences: The accelerating growth of sustainable investing, the pandemic, and scenarios for the future

The report notes the growing demand for ESG factors, with 73% of investment professionals now taking them into consideration in investing, up from 54% three years ago. The largest increase is in environmental factors. The pandemic is promoting a sustainability catalyst, leading investors to take a longer-term view and demonstrate social responsibility. It also highlights different scenarios for sustainable investing in the future, including reversing sustainability, transformations, and divergence/complacency.

Drivers: Business model and investment model

The report suggests companies need to expand their portfolio offerings to meet investor demand and showcase ESG ratings with consideration of material ESG factors in investing decisions to ensure long-term outcomes. It recommends that organisations should examine the six building blocks for crafting a comprehensive ESG plan and select the framework that works best.

Enablers: Operating model and people model

The report discusses the importance of sustainable investing to incorporate a sustainability approach that aligns to the organisational mission values, as well as the need for greater transparency, engagement, and reporting. It identifies the critical steps to developing deep ESG insights, mastering the value of ‘soft’ data, and incorporating ESG factors into risk management. The report recommends the following:

• Organisations need to cultivate a culture of sustainability that is collaborative and embraces diverse thinking.
• Organisations should integrate ESG factors, with goals of transparency, consistency, and resiliency, and deploy organisational agility.
• Investment professionals, including ESG specialists and traditional analysts, must understand all parts of sustainability and what sustainability means in terms of investment proposition.
• Investment professionals should work with company management to identify key ESG indicators that are material to their business and have the potential to impact financial performance.
• Operating models within organisations must reflect their commitment to sustainability through organisational agility in people and processes and iterative improvements.

Actions needed: Rubric for progress and role of CFA Institute

The report suggests future developments of sustainable investing will depend heavily on industry leadership and innovation in investment thinking and practice and innovative data management to develop institutional commitment to sustainability. It recommends the consideration of organisational agility in people and processes, as well as iterative improvements in policy and practice, to further craft sustainable investing and foster industry leadership that should lead to broader adoption of ESG-related investment strategies. Furthermore, the report proposes that CFA Institute should examine the role of itself regarding sustainability research, education and resources to promote the role of ESG in investment practice.

To sum up, the report highlights the future of sustainable investing and the importance of integrating sustainability issues into an investment process. It identifies drivers, enablers, future scenarios, and recommendations to promote sustainable investing and outlines the key ingredients to crafting comprehensive ESG plans in organisations. The report suggests that sustainable investing is essential for the sustainability of the investment industry, promotes innovation and collaboration, and encourages investment professionals and investment industry to develop their knowledge and skills so that they can embrace ESG investment concepts and make informed decisions.