Prior to undertaking this course, students should have:
A fundamental understanding of finance, investments, and economics.
Basic knowledge of portfolio construction and asset management.
Familiarity with the concepts of environmental, social, and governance (ESG) factors.
Basic statistical analysis skills, as quantitative analysis will be an integral part of this course.
The primary objectives of this course are:
To educate students on why investors integrate ESG factors into their investment decisions and the various approaches to ESG integration.
To enhance students’ understanding of the use of ESG in investment decision making, portfolio construction, and firm-level risk management.
To provide students with knowledge of the ESG assessment process for mutual funds, fund managers, and companies.
To delve into the impact of ESG factors on fixed income investments, credit rating agencies, and ESG credit scoring.
I. Why Investors Integrate ESG
- Meeting Requirements under Fiduciary Duty or Regulations
- Meeting Client and Beneficiary Demands
- Lowering Investment Risk and Increasing Investment Returns
- More Tools and Techniques to Use in Analysis and Improving the Quality of Engagement and Stewardship Activities
- Reputational Risk at a Firm Level
II. The Different Approaches to Integrating ESG
- Qualitative ESG Analysis
- Quantitative ESG Analysis
- Highlights between the Quantitative Approaches and Qualitative Approaches
- Tools and Elements of ESG Analysis
- Elements of ESG Integration
- Differences between Company or Business Analysis and Security Analysis
III. Investment Decision and Portfolio Construction and ESG Integration
- Techniques in Practice
- Discussion of Private Markets, Real Estate, and Infrastructure
- Discussion of ESG in Fixed Income and Differences to Equity
- Challenges to ESG Integration
- Challenges from Incomplete Datasets and Identifying and Assessing ESG Data
- Investment Firm Culture Challenge
- Criticism for ESG Integration
IV. Mutual Fund and Fund Manager ESG Assessment
- Company ESG Assessment and Rating
- ESG Index Providers
- Primary and Secondary ESG Data Sources
- Other Uses of ESG and Sustainability Systems Data
- Resource, Supply, and Operational Risk Mitigation
- Modeling Future Sustainability Scenarios, Including Climate Change, Wage Growth, and Social Effects
V. Fixed Income, Credit Rating Agencies, and ESG Credit Scoring
- Different Levels at Which ESG Factors Can Affect Bond Price
- Performance and Credit Risk
- Continuing Evolution for Credit and ESG Since PRI Releases
- Global and Regional Credit Rating Agencies
- Corporate Credit Risk Assessments
- Certain Fixed-Income Investors Use QESGs
- Green Bonds Considered a Different Class of Credit
- Sovereign Credit Risk Assessment
- ESG and Credit Ratings: Discussion over Relationship
- Potential Bias in Ratings
