Sustainable Investment: ESG Analysis and Financial Profitability

Introduction:

ESG investing refers to investing in line with ESG considerations; socially responsible investing in companies which are not detrimental to a society, but which contribute towards positive societal change through their positive social and environmental profiles.

Value-based investing adds ESG consideration on top of traditional security analysis, on the contrary, values-based investing screen/filter companies based an investor’s values/beliefs. In between these exist the specific implementations of ESG that we aim to highlight through this training.

Course Objective:

At the end of this course the participants will be able to:

• Determine Negative screening and Positive screening
• Determine Best-in-class screening
• Full integration to explicit inclusion of ESG factors into traditional security analysis.
• Overlay/portfolio tilt
• Look for to prevent Risk factor/risk premium investing
• Analyze ESG information in determination of systematic risk.
• Focus on Thematic investing.

Course Outlines:

Unit 1: Introduction to Analysis of the ESG factor and its impact on financial profitability

• Negative effects of capitalism and production on the world
• Frameworks and actions to drive the change
  • Global Regulation and Governments’ actions: The UNFCC
  • The Kyoto Protocol
  • The Paris Agreement
  • The 2030 Agenda and the SDGs
• Actions from companies: industrial and financial alliances and/or frameworks

Unit 2: ESG and Sustainability in Investments: the concrete side

• Definition of ESG concept
• ESG Scoring: different approaches and their background logic
• Applying the ratings: investment approaches and sustainable financial instruments

Unit 3: Is ESG-Based Investing Profitable?

• Market perspective: historical performance indicators
• Literature’s debate on ESG factor’s impact on credit risk ratings
• Internal perspective: effects on corporate intrinsic valuation
• Net Sales
• Operating Costs
• Financial Costs and DCF valuation
• Transaction perspective: effects on relative valuation

Unit 4: Analysis of ESG Positive Impact on Financial Performances

• Portfolio analysis: Companies

• Data
• Methodology
• Results

Unit 5: Portfolio analysis: Funds

• Data
• Methodology
• Results