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Über dieses Buch

This book reviews the latest methods of sustainable investing and financial profit making and describes how ESG (Environmental, Social, Governance) analysis can identify future business opportunities and manage risk to achieve abnormal returns. Megatrends such as climate change, sustainable development and digitalisation increase uncertainty and information asymmetry and have an impact on the future returns on investments. From a profit perspective, it is largely about how ESG factors affect the long-term value added by companies and the valuation of companies in the financial markets. Although sustainability provides an opportunity for abnormal returns, this phenomenon must be considered in a critical light. The book describes the risks and limitations associated with the accountability and availability of ESG data and tools.

This book provides both academic findings and practical models for assessing the sustainability of investees and introduces practical tools and methods to make ESG analysis practice. It focuses on the ESG analysis of equity investments and fund investments in institutional investment organizations and provides a handbook for all investment analysts who are involved with investment decisions. Readers will benefit from understanding the methods, opportunities and challenges that professionals use in their ESG analysis with cases, interviews and practical tools for both institutional and private investors.

Inhaltsverzeichnis

Frontmatter

Basics of Sustainable Investing

Frontmatter

Chapter 1. Motivation for Sustainable Investing: What Is the Purpose?

Abstract
Sustainable investing divides opinions. Some people see it as an ideology that means compromising on return requirements. Others see sustainability as a strategy that creates a competitive edge. However, there is a shift towards profitable sustainable investing, and sustainable investing is becoming more mainstream in light of recent statistics and studies.
Hanna Silvola, Tiina Landau

Chapter 2. Methods of Sustainable Investing

Abstract
There are many methods of sustainable investing. In this context, we have divided these methods into three categories: exclusion, active ownership and the integration of sustainability (ESG) into investment decisions.
Hanna Silvola, Tiina Landau

Engaging with Investees

Frontmatter

Chapter 3. Active Ownership

Abstract
Owners can promote companies’ sustainability and good governance by making an impact at general meetings and through discussions. When the selection of investees is important primarily in terms of risk-adjusted returns (the degree of risk involved in an investment), active ownership can generally be used to make a positive impact on the real world.
Hanna Silvola, Tiina Landau

Sustainability in Investment Analysis

Frontmatter

Chapter 4. Sustainability as Part of Qualitative Analysis

Abstract
Investors assess the risks and opportunities related to ESG aspects: the environment, social responsibility and governance. This is commonly referred to as the integration of sustainability into investment decisions. The goal is to achieve better returns with a more controlled risk (improving the risk-to-return ratio) and/or manage the investor’s reputation. In practice, this means that the return potential may otherwise be the same for different companies, but some companies are subject to higher ESG risks. In other words, an investor benefits if they can identify an investment that offers similar returns with a lower risk.
Hanna Silvola, Tiina Landau

Chapter 5. ESG Analysis Tools for Assessing Listed Shares

Abstract
Numerous tools are available for sustainability analysis that makes it possible to systematically compare ESG aspects between investments. Analysis tools have their strengths and weaknesses, which is why the use of several different sustainability analysis tools and a diverse range of information sources may provide a more comprehensive understanding of the sustainability of investments.
Hanna Silvola, Tiina Landau

Chapter 6. Sustainability of Various Investment Products

Abstract
To assess the sustainability of funds, investors compare the funds’ sustainability principles and practices with their own principles and practices.
Hanna Silvola, Tiina Landau

The Link Between Sustainability and Returns

Frontmatter

Chapter 7. The Nordic Perspective on Integrating ESG

Abstract
For our research project (The situation report on sustainable investment in Finland that is presented in the book is part of a more extensive academic research project by Silvola in 2017, the publication process of which was still in progress at the time of writing this book. For reasons related to research ethics, the interviewees are anonymous, and their identities are not known by anyone outside the research team.), we interviewed representatives of 18 investment organisations that are publicly committed to sustainable investing. In practice, the material covers the views of Finland’s largest institutional investors on the state of sustainable investing in Finland.
Hanna Silvola, Tiina Landau

Chapter 8. Is Sustainable Investing Profitable?

Abstract
Several extensive summary analyses of published scientific articles have come to the conclusion that there is a statistically significant positive association between sustainability and financial profitability.
Hanna Silvola, Tiina Landau

Chapter 9. What Is the Profitability of Sustainability Based on?

Abstract
A company’s sustainability has a significant association with financial profitability. Investors must be able to identify the financial impacts of aspects related to sustainability, so they can comprehensively assess the risk-to-return ratio of the investment.
Hanna Silvola, Tiina Landau

Sustainability Trends and the Future of ESG

Frontmatter

Chapter 10. Changes in International Politics and Legislation

Abstract
The short-term perspective of the financial system is increasingly considered problematic. At the same time, the transition to a low-carbon society is posing an immense challenge that requires the assessment of the impacts of climate risks on the finance system.
Hanna Silvola, Tiina Landau

Chapter 11. Sustainability Trends and International Frameworks

Abstract
The responsibilities of institutional investors such as pension companies for returns on investment are long term, and therefore the need to form views of the future and assess how successfully companies will manage and be able to adapt to future changes is emphasised in investing activities.
Hanna Silvola, Tiina Landau

Chapter 12. Global Investment Trends and Impacts on Sustainable Investing

Abstract
Passive (index) investing has become more common in recent years, along with factor investing, which is based on quantitative criteria.
Hanna Silvola, Tiina Landau

Backmatter

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