ESG Investing and Analysis - A Practitioner's Guide

Marie Lehmann, Martina Macpherson and Daniel Ung - Editors

Co-authored by a distinguished and notable group of ESG experts and scholars across the investment value chain.

The ESG editors’ and co-authors’ respective biographies are as follows:

Jill Atkins is a Professor in Accounting at Cardiff Business School and a visiting professor at the University of the Witwatersrand, South Africa. Her research focuses on corporate governance, responsible investment, sustainability, integrated reporting and extinction accounting. Jill is series editor for the de Gruyter Studies in Corporate Governance, and edited The Business of Bees: An Integrated Approach to Bee Decline and Corporate Responsibility. She also wrote and edited Around the World in 80 Species: Exploring the Business Case for Extinction Prevention, co-edited Extinction Governance, Accounting and Finance and co-authored Chief Value Officer: Accountants Can Save the Planet. Jill’s leading textbook, Corporate Governance and Accountability, is now in its 5th edition. She has a BA hons (first class) in European economics with a Licence ès Sciences Economiques from the University of Nantes, an MSc in corporate and international finance from the University of Durham, and a PhD in finance from the University of Manchester.

Arthur Carabia is Director, ESG Policy Research, at Morningstar Sustainalytics, where he is in charge of identifying, analysing and engaging on proposed laws, rules, regulations and prescribed practices applicable to the company and its clients. He previously worked for the International Capital Market Association (ICMA), Aviva, the French Asset Management Association (AFG), and the European Parliament. Arthur holds a master’s degree in European affairs from Sciences Po Lyon and an advanced master’s degree in financial markets from Solvay Brussels School.

Lucy Carmody helps institutional investors allocate capital at scale to global carbon projects for Climate Impact Partners, a leading player in the global voluntary carbon market. She has over two decades of operational, communications, strategy and board experience in public and private equity investment, has been involved in launches of funds in impact and emerging market ESG, and has curated and hosted events on sustainability themes for investors. In 2012 Lucy sold her business, Responsible Research, to Sustainalytics and exited in 2020 when Sustainalytics was bought by Morningstar. She has published research on topics as wide ranging as the future of fish, green building in Asia and palm oil in Asia. Lucy is Chair of the Friends of Grantham Institute, and holds a masters in climate change management and finance from Imperial College Business School and the Grantham Institute, and an MSc in geography from St John’s College, University of Cambridge.

Kartik Chawla is a senior quantitative research analyst within the model portfolio solutions at one of the biggest global asset managers, where he is responsible for providing research on asset allocation using ETFs in investment portfolios. Previously, he worked at Credit Suisse’s Delta One, Prime Services desk, where he worked on quantitative index and ETF trading, market making, replication and rebalance strategies across EMEA and APAC equity product line. Before that, Kartik led the Index Research and Design functions of Nasdaq and S&P Dow Jones Indexes, where he worked extensively on smart beta, ESG and new generation thematic strategies across different client segments. He has also worked at a proprietary high frequency trading firm in India, and holds a bachelor’s of technology degree in computer science and engineering from Kurukshetra University, India.

Christine Chow is the global head of stewardship at HSBC Asset Management and a board member of HSBC Asset Management UK. Christine is a board member of the International Corporate Governance Network, an honorary adviser to the Financial Reporting Council Hong Kong, and the convenor of the FRC Sustainability and Climate Action Task Force. She is also an emeritus governor of the LSE, was a member in the Data Governance Task Force of the UK All Party Parliamentary Group on artificial intelligence, and an adjunct professor in finance at the Hong Kong University of Science and Technology. Christine was named as in the top 30 Inspirational Women in the City of London, and has won the Finance Monthly “Women in Finance” award. She is a graduate of the LSE and the University of Melbourne, and has completed an executive education course on financial engineering at Stanford University.

Marc Olivier Dines is the Head of Listed Investments at the Velux Foundations in Denmark. He previously served in various roles as a senior portfolio manager at PensionDanmark, where he worked on implementing a Paris Agreement-aligned investment portfolio, and as Senior Treasury Manager in FIH, a Danish bank, covering most listed asset classes. Marc has increasingly worked with integrating ESG considerations into the investment process. He holds an MSc in economics from the University of Copenhagen, where he has also lectured as External Associate Professor. Marc is a CFA charterholder and also holds the Certificate in ESG Investing.

Carol Nolan Drake is the CEO and founder of Carlow Consulting, is the Governance and Stewardship Policy Manager for the International Corporate Governance Network, and a facilitator for training programmes. She previously represented the School Employees Retirement System of Ohio as its federal liaison in Washington, D.C. Carol’s career began as an assistant county prosecutor and assistant city attorney, and she has served as a cabinet director of the Department of Administrative Services and as chair/vice chair on several boards and commissions. She was the co-chair of the ICGN Shareholder Responsibilities Committee, is a licensed attorney, and has authored many articles on governance and ESG best practices, and regularly speaks on corporate governance, ESG and investor issues. Carol is a cum laude graduate of Ohio Wesleyan University and the Claude W. Pettit College of Law, Ohio Northern University.

Caroline Escott leads Railpen's global stewardship and corporate governance activities across £37 billion of assets under management and on behalf of 350,000 members of the UK railways pension schemes. She was previously in charge of the investment, stewardship and collective engagement programme at the Pensions and Lifetime Savings Association (PLSA) and Head of Public Policy at the UK Sustainable Investment and Finance Association (UKSIF). Caroline is an accredited professional trustee at the Standard Life Master Trust, winner of Investment Week’s “Investment Woman of the Year 2019” award and was one of Financial News’ 2020 “Top 25 Rising Stars of Asset Management in Europe”. She is chair of pensions industry organisation NextGen and a trustee at the Social Market Foundation (SMF).

Jens Güldner is Head of Wealth and Foundation Management at Johannesstift Diakonie. He previously held the same role at Paul Gerhardt Diakonie, and has also been chairman of the board, and before that CFO, at the Werner and Maren Otto Foundation. Jens has also been Head of Wealth Management and Head of Treasury at Evangelisches Johannesstift, and Head of Finance/Controlling at Erinnerung, Verantwortung und Zukunft. He also previously worked in the Corporate Clients Department at Commerzbank and in the Private Clients Department at Berliner Commerzbank. Jens also had the role of Foundation Advisor at Universität für Wirtschaft und Recht, worked in marketing at Martin-Luther Universität Halle-Wittenberg, and has won numerous industry awards, and been published in a range of industry magazines and books.

Lydia Harvey is an executive director, ESG specialist, Global Index Research at JP Morgan Chase. Born in Sydney, Australia, she developed her passion for the environment and sustainability by exploring the extraordinary, diverse and often remote natural landscapes of her country. Lydia completed a bachelor of resource economics (hons) from Sydney University and a master’s degree in environmental management from the University of New South Wales. Initially focusing on environmental issues as a senior consultant for S&P Trucost, she later worked as a risk manager for Merian Global Investors with a strong focus on ESG. Lydia has extensive experience in assisting financial institutions to meaningfully integrate ESG.

Andreas G. F. Hoepner is Full Professor of Operational Risk, Banking & Finance at the Michael Smurfit Graduate Business School and the University College Dublin Lochlann Quinn School of Business. He also serves on the schools’ management team, and is a named supervisor for UCD’s SFI Centre for Research Training in Machine Learning. Andreas works on the EU’s Platform on Sustainable Finance and was previously an independent member of their Technical Expert Group on Sustainable Finance. He is on independent advisory/assessment committees for many organisations, is co-founder and chair of two socially motivated enterprises, and has consulted for international organisations. Andreas has also been published in many journals, his research has won several awards and been covered in international media, and he co-organises conferences with policy makers such as the EU Science Hub Summer Schools on Sustainable Finance. He received his PhD from the University of St Andrews.

Christian Kjær is Senior Vice President and ATP’s Head of Liquid Markets, an in-house risk balanced multi-asset investment team with overall responsibility for the liquid part of ATP’s investment portfolio. He is a member of the investment committee, the committee for social responsibility and the corporate governance forum within ATP. Christian has previously held responsibility for global equities, inflation and volatility in ATP, which he joined in 2015 as portfolio manager. Prior to joining ATP, he was Head of Inflation Trading in Nordea Markets, and before that held positions in the Insurance and Pension Solutions Group at Credit Suisse, the Institutional Solutions group at Nordea Markets, and McKinsey & Company. Christian holds a MSc in economics and a PhD in economics (game theory) from the University of Aarhus, Denmark.

Karl Lange is ESG and Risk Analyst for EFG Asset Management, where he works with the ESG and quant team and assists in risk assessments and portfolio optimisations from an ESG, climate and traditional risk perspective. He is also responsible for development of the in-house ESG rating software. Prior to joining EFG Asset Management, Karl worked in investment banking with a focus on developing ESG analysis for research teams, and he has also worked on ESG assessments and risk modelling for a large pension fund in Sweden. He holds a master’s degree in financial mathematics and an engineering diploma in industrial economics from the Royal Institute of Technology in Sweden. As a master’s thesis project, Karl developed a quantitative risk measure for sustainable portfolios taking into account the slightly different risk structures in the ESG portfolios.

Marie Lehmann is Head of Global Partnerships – Banking Solutions at Moody’s Analytics, where she is responsible for defining and delivering the global partner strategy for the banking division of Moody’s Analytics. She has extensive experience in relationship and partnership management within the investment banking, asset management and insurance sectors. Previously, Marie worked as Advisor – Capital Markets for HRH The Prince of Wales’s Accounting for Sustainability Project at St. James’s Palace, a charitable organisation that aims to inspire action by finance leaders to drive a fundamental shift towards resilient business models and a sustainable economy. She also held senior relationship and managerial roles for Thomson Reuters and Dow Jones, and contributed to the Handbook on Species Extinction Accounting and Biodiversity. Marie holds an MBA from Warwick Business School with a specialisation in corporate citizenship, as well as an MBA from Montpellier Business School in France. She has also completed an MSt in sustainability leadership at the University of Cambridge Institute for Sustainability Leadership.

Michael Leithead is Head of Fixed Income and Senior Portfolio Manager at EFG Asset Management, which he joined in 2007. He manages the New Capital Wealthy Nations Bond Fund and the New Capital Global Value Credit Fund. Michael focuses primarily on global fixed income fund management, credit research, fixed income strategy and trading. He previously worked at Fidelity International, where he held a number of roles within risk management and both equity and fixed income derivative valuations. Michael holds a BSc in economics from Birmingham University, the IMC, the CFA UK certificate in ESG investing and is a CFA charterholder.

Callum Macpherson is Head of Commodities at Investec Bank in London, where he has built up a commodity hedging capability to help clients manage their commodity exposures with a particular focus on energy markets. He is also Chair of Investec’s Sustainable Business Forum, whose purpose is to help support business areas across the bank to increase their sustainability-related revenues. Callum has been in the financial services industry since 1999, having previously worked with commodity derivatives at Nomura and Lehman Brothers. He graduated from the University of Cambridge with an MA in computer science.

Martina Macpherson is a board and senior management level financial services strategy, product and engagement expert, with a track record and passion for developing ESG and fintech solutions across segments and asset classes. She has held several global leadership roles in ESG strategy, product development and innovation, and is head of product management at SIX, Swiss Exchanges Group and a board member of the Network of Sustainable Financial Markets. Martina was previously head of ESG strategy and on the executive management team at ODDO BHF Asset Management, senior vice president ESG and engagement strategy at Moody’s, global head of ESG index products and research at S&P DJI and managing director of Sustainable Investments Partners, among other roles. She is a visiting fellow at University of Zurich and Henley Business School. Martina has an MBA certificate in finance and business from LSBF/UK, and an MA in law and human sciences from University of Frankfurt. She is a fellow member of the Institute for Corporate Responsibility and Sustainability UK, a honorary doctoral fellow of the Institute for Certified Risk Management Professionals UK, and an alumnus of the German National Academic Foundation. Martina is a public speaker in sustainable investing and has co-authored a range of ESG and fintech books.

Joachim Merten is an experienced finance professional. He has worked for the last 15 years in private investment, holding various roles such as COO and CFO in venture capital and private equity. Joachim has been a strong advocate of ESG compliance and integration into the investment process since 2008. He developed an ESG reporting tool internally and has since kept his interest on how digitalisation can drive the ESG efforts of the industry. Joachim holds a master’s degree in economics from Goethe university, and he is a CFA and CAIA charterholder.

Stefano Montobbio is Research Director and Global Head of Investment Governance and ESG for EFG Asset Management, where he oversees the ESG analysis and integration processes. Previously, he was Head of Investment Coordination and ESG for BSI Bank, and before that built the advisory business for Credit Agricole (Suisse) in Ticino and was fund manager for a S&P 4 stars European equity fund. Stefano has also developed an ESG rating system to assess companies and sovereigns sustainability performance, and lectures on sustainable finance at Centro Studi Villa Negroni. He is Chairman at cenpro, a Swiss foundation contributing to the promotion and development of the non-profit sector and philanthropy in Italian-speaking Switzerland. Stefano holds a master in economics from the University of Genova, a CAS in asset management from the University of Bern/Rochester and an ESRA certificate from INCAE Business School/UNEP.

Jens-Jakob Kratmann Nissen is a senior portfolio manager in ATP’s Liquid Markets team. Prior to joining Liquid Markets, he worked in ATP’s risk department, which he joined in 2014. Jens-Jakob holds a MSc and a PhD in mathematics from the University of Aarhus, Denmark.

Alexis Royer is a quantitative analyst specialising in high yield, credit strategies and ESG. Prior to joining a global asset manager in 2017, he was a financial engineering assistant at Lyxor ETF, where he was heavily involved in the development of fixed income, short and leveraged ETFs. Prior to that, Alexis was a financial engineering assistant at Amundi ETF, where he worked in the product development process of equity and smart beta ETFs. He holds a master’s degree in capital markets and asset management from Neoma Business School. Alexis has passed all three levels of the CFA programme and is a CFA charterholder.

Carlos Sanchez is Executive Director for the Coalition for Climate Resilient Investment, and also the Climate Resilience Investment Director at Willis Towers Watson, where he focuses on the integration of physical climate risks in asset valuation and investment decision-making processes. Additionally, he is a member of California’s Climate-Related Risk Disclosure Advisory Group, and vice-Chair of CFA UK’s Climate and Investing Certification Panel. Carlos was previously a climate resilience finance facility at the Multilateral Investment Fund, and has worked at the Economic Office of the Spanish Embassy in Angola as Foreign Direct Investment Advisor and later as Business Development Manager for a project finance advisory firm. He holds a masters in finance from the London Business School, where he contributed to the drafting of the ESG chapter within their private equity textbook, and a masters in global affairs from Georgetown University.

Michael Sheren is a fellow at the Cambridge Institute for Sustainability Leadership, Cambridge University and a senior advisor at the United Nations Development Programme Sustainable Finance Hub. Michael was previously a senior advisor at the Bank of England, where he led their green finance and fintech work.  He was the co-chair of the G20 Sustainable Finance Study Group and member of G20 Infrastructure Group, as well as being delegate to the NGFS market dynamics committee and advisor to the BIS Innovation Hub. He is a governor emeritus at the LSE, a non-executive director on various boards, and has spent over 25 years in the debt capital markets in New York and London. He has master degrees from Harvard University, the London School of Economics and New York University, and a BA from the George Washington University.

Anne Schoemaker is Director of ESG products and oversees a number of compliance and regulatory-driven ESG research products at Morningstar Sustainalytics. She has also been spearheading the product strategy and development of EU Sustainable Finance Action Plan related solutions for Sustainalytics’ investor clients. Anne is a member of the ESMA Consultative Working Group on Sustainable Finance, providing technical advice on ESMA sustainable finance work streams and expertise on ESG topics. She was also a member of the EUROSIF Advisory Group, creating policy recommendations for SFDR. Anne previously worked in ESG in development finance, after having started her career in the asset management industry. She holds a master’s degree in business mathematics and informatics.

Edmund Shing is the CIO of BNP Paribas Wealth Management, and has over 25 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris. Since 2015, he has held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London, where he is responsible for piloting investment strategy and continues to rollout recommendations and themes with actionable advice. Edmund is an EFFAS-certified financial analyst, and has authored the book The Idle Investor, published in 2015, which proposed three simple investment strategies that take only a few minutes to execute per month. He has a PhD in cognitive and computing science from the University of Birmingham, and has done advanced studies in knowledge-based systems and in experimental psychology.

Daniel Ung is the head of quantitative research and analysis, ETF model portfolio solutions at one of the world's largest global asset managers, where he is responsible for research on asset allocation using ETFs. Previously, he was a senior smart beta strategist and in charge of conducting product research and analysis of ETFs, with a particular focus on smart beta. Before joining his current employer, Daniel was a director of global research and design at S&P Dow Jones Indices, and worked in the Structured Products Group at Barclays Wealth and Investment Management and the Commodities Investor Derivatives Group at BNP Paribas Fortis Bank. He has published extensively in journals, is an associate editor of the Journal of Beta Investment Strategies and has co-authored books on ESG and smart beta investing. In addition, Daniel is also active in academia, and was a guest lecturer at the Imperial College Business School and an examiner of the Chartered Alternative Investment Association (CAIA) exams. He holds a masters from the Ecole Supérieure de Commerce de Paris and is a CFA, CAIA and FRM charterholder.

Beate Van Loo-Born is Global Head of Business Management at SIX Financial Information, and is a seasoned C-Level executive in the financial services and data space. She spent 15 years at UBS, where her last role was Head of Strategic Programs. With a background in risk, compliance and capital markets, Beate manages geopolitical change for the organisations she serves, and is an ESG thought leader with particular expertise in sustainable investing and ESG disclosure, She also leads the European chapter of Women Data Professionals and the global Enterprise Data Management Council ESG Regulatory Group. Beate is a member of the board of trustees at First Light, and is a published author and keynote speaker and panelist on various financial services and data topics, with a focus on regulatory developments and the effects of ESG paradigm shifts. She has a master’s degree from Cambridge at the Institute for Sustainability Leadership.

Pei Shan Yu is the data scientist at Smart Data Foundry (previously known as GOFCoE), where she is responsible for data analytics in the data Safe Haven, mainly for Covid-19 impacts on citizen and SME projects. She was previously post-doctoral research fellow of Smurfit Graduate Business School, University College Dublin, and worked on an anti-money laundering project at a top global asset manager, conducting research on a rule-based suspicious activity detection system, and analysing real transaction data, to establish a predictive model with machine-learning techniques. Pei has a PhD in finance, and is a keen and experienced researcher, with a focus on most financial data-related topics and econometrics, with particular emphasis on carbon finance, carbon data science and the integration of ESG aspects into investment decision-making.

Foreword
0 Linking ESG scenarios to real economy outcomes
'Michael Sheren' PDF Download

Part I: Introduction to ESG in Portfolio Construction
1 Analysing ESG policy, market and portfolio construction considerations
'Kartik Chawla, Martina Macpherson, Alexis Royer and Daniel Ung'

2 Case Study 1: Applying ESG concepts in a pension fund's equity portfolio
'Christian Kjær and Jens-Jakob Kratmann Nissen'

3 Case Study 2: Applying ESG concepts to wealth management portfolios
'Edmund Shing'

Part II: Environmental and Climate Risks
4 Managing environmental and climate transition risks and opportunities within portfolio
'Karl Wilhelm Lange, Michael Leithead and Stefano Montobbio'

5 Considering physical climate risks and resilience in real asset investment
'Lucy Carmody and Carlos Sanchez'

6 Case Study 3: Practical issues and considerations for implementing a Net Zero emissions strategy for asset owners
'Marc Olivier Dines'

Part III: Social Risks and Impact Investing
7 Evaluating social criteria in fundamental and thematic investment portfolios
'Lydia Harvey'

8 Case Study 4: Defining impact investing for today’s ethical investor – evaluating the efforts of Evangelisches Johannesstift
'Jens Gueldner'

Part IV: Governance and Active Ownership
9 Developing governance and active ownership frameworks for investment analysis
'Christine Chow and Carol Nolan Drake'

10 Case Study 5: Applying active ownership and stewardship to a pension fund portfolio
'Caroline Escott'

Part V: Alternatives
11 Identifying ESG risks and opportunities in alternative investments
'Callum Macpherson and Joachim Merten'

Part VI: Data, Taxonomies and Regulation
12 Reviewing the EU regulatory framework for ESG investors
'Arthur Carabia and Anne Schoemaker'

13 Assessing data and disclosure challenges in ESG investing
'Marie Lehmann and Beate van Loo-Born'

Part VII: Past, Present and the Future in ESG
14 Corporate social responsibility across industries: When and who can do well by doing good?                                                            'Andreas Hoepner and Pei-Shan Yu'

15 Reflecting on how ESG investing, accounting and governance have evolved over time
'Jill Frances Atkins'