ESG = Environmental, Social, Governance. Responsible investing usually combines traditional financial analysis with consideration of a company’s performance on certain environmental, social and governance (ESG) criteria to make investment decisions.

82% of respondents in RIAA’s recent survey agreed with the statement “I would be more likely to invest in an organisation, fund or product that has been certified by an independent third party for its responsible investment practices.”

Negative screening is the process of finding companies that score poorly on Environmental, Social and Governance factors relative to their peers

SRI stands for Socially Responsible Investing which excludes investing in sectors or companies that are considered to have a negative impact on society or the environment.

An impact investing strategy is an investment strategy that targets companies or industries that produce social or environmental benefits.

According to the 2020 Global Sustainable Investment Review, at the start of 2020, global sustainable investment reached US$35.3Tn in five major markets, a 15% increase in the two years prior (2018-2020).

Scope 1 emissions occur as a direct result of the company’s activity while scope 2 are emissions from the electricity used by the company (which in New Zealand is lower than in most other countries). Scope 3 emissions occur in a company’s value chain – both upstream (for example outsourced manufacturing) and downstream (for example customer use of product).

One aspect within ESG reporting is Diversity & Inclusion, with the most common measure of diversity being female board and executive representation, though this is largely a proxy and by no means covers all facets of diversity.

Auckland Airport currently has the highest percentage of female representation on the board out of the companies on the NZX 50, with 62.5% of its directors being female.

All of the above are among the reasons why people tend to hold off from starting to invest sustainably. At CIP, we have given a sustainability score to all of the stocks in our model portfolio and continue to score the remainder of our coverage list, as well as give a sustainability summary for each company with detail on its Environmental, Social and Governance progress and any issues that investors should be aware of.