Document summary
This white paper introduces the concept of ESG investing and highlights its opportunities to enhance returns and manage risks. ESG investing refers to a process of integrating envi- ronmental, social, and corporate governance (ESG) data into investment decision-making. Four observations are made. First, the field of ESG investment grew nearly tenfold over the last decade, as financial markets have increasingly realised that integrating the environmental, social, and governance concerns of common people in investment decisions makes good business sense. Second, despite their availability and commercial relevance, ESG datasets are not currently covered in many professional finance degrees, and hence insufficiently considered by the average analyst or investment manager. Third, empirical evidence confirms the view that ESG information sets provide attractive return enhancement opportunities. Portfolios of assets with high ESG ratings have been found to outperform their benchmarks in various contexts. Fourth, ESG datasets show strong risk management capabilities at the firm and at the portfolio level.