Introduction

The report is a collaborative effort to promote the integration of environmental, social, and governance (ESG) factors in investment decisions. The report, supported by 20 leading financial institutions including Deutsche Bank, Goldman Sachs, UBS, AXA Group, among many others, outlines a set of recommendations to assist the financial industry’s transition towards sustainable development practices.

The importance of managing environmental and social risks has become essential in enhancing the overall quality of companies to compete successfully in today’s globalised and highly competitive business world. However, there is currently no overarching understanding of how to effectively integrate ESG factors in investment decisions. Thus, this report provides guidance on ways to improve the integration of ESG aspects into financial analysis, securities brokerage service, and buy-side/sell-side research functions.

Analysts and brokers

The report encourages analysts and brokers to incorporate ESG factors in their research wherever appropriate and develop the necessary investment models and tools to expand the scope to other industries and asset classes. While considering emerging stars, it is recommended to adapt specifically to the unique situations in those markets.

Companies

As the ESG performance of a company provides a measure of quality, the report urges companies to implement ESG principles to improve reporting and disclosure hence improving transparency to the financial community.

Lead by accountants

The report recommends that accountants should facilitate standardisation of the ESG criteria, which is beneficial to companies, investors, and analysts.

Education institutions

Academic institutions and research organizations are encouraged to contribute research in ESG criteria to better support financial analysts’ work on ESG risks and opportunities.

Investors and asset managers

To contribute to the sustainability of the environment and society, the report recommends investors and asset managers to integrate ESG factors in research and investment processes.

Pension trustees

The report calls pension trustees to participate in integrating ESG-related mandates into investment portfolios, thus taking into account their beneficiary obligations to ultimately contribute to sustainable development.

Governments and multilaterals

Proactive consideration of multimillion-dollar investments to sustainable development principles is one of the recommendations of the report.

Conclusion

The report recommends that integration of ESG factors is fundamental in the financial industry and provides a roadmap for financial institutions to manifest their commitment to corporate social responsibility. Notably, the report recognizes the need for change and judicious investment to avert financial risks resulting from social and environmental change. Therefore, it is essential to act fast to promote overall quality, leading to stronger and more sustainable investment markets.