1153908151


The key challenge for corporates in the 21st century is to understand how environmental and social matters are fundamentally interconnected with an organisationation's financial success. The board and other stakeholders responsible for the organisation’s long-term success must make sustainability considerations central to capital allocation.

ACCA has long championed the need for organisations to integrate sustainability into their long-term strategy and decision making. This report continues that trend drawing on an expanding body of literature on the subject of responsible investment to establish for the first time a comprehensive framework for integrating sustainability considerations into investment decision making.  

Responsible investment has emerged as a way of aligning economic activity with sustainability imperatives. This reflects a fundamental shift in how decisions are made by investors, asset managers and asset owners in the private and public sectors.

The integration of sustainability into investment decision-making has evolved from a niche concern to a mainstream consideration.

This report has sought to reconcile and consolidate a myriad of sources and resources. The result is a comprehensive, yet relatively concise, reference that provides consistency and sets a benchmark for investment practitioners, asset owners and regulators who must navigate an increasingly complex field.  

The framework for responsible investment

Select image to enlarge (opens in a new tab)

The eight components described in this report are part of a comprehensive framework for responsible investment:

  1. ESG integration: Systematically incorporate material environmental, social and governance (ESG) factors into investment analysis and decision-making to improve risk-adjusted returns.
  2. Sustainability frameworks: Leverage established frameworks to identify, measure and report on material sustainability issues.
  3. Screening methods: Use avoidance and adaptive screening approaches to evaluate and assess environmental and social risks and opportunities.
  4. Investor proactivity: Exercise active ownership using stewardship actions, stakeholder engagement, and collaborative initiatives to influence positive sustainability outcomes.
  5. Strategic purpose: Define clear sustainability objectives and develop policies to formalise and ensure consistent application of the investor’s sustainability strategy.
  6. Selection of investment options: Match appropriate financial instruments with specific sustainability goals and investment needs, ensuring alignment with the responsible investment strategy.
  7. Regulatory compliance and standards: Maintain awareness of evolving sustainability regulations, disclosure requirements, industry best practices, and existing sustainability standards to ensure compliance and strategic advantage.
  8. Outcomes: Develop, monitor and report comprehensive metrics that capture both financial returns and broader environmental and social value creation.

While the components are presented as distinct, they are interconnected. A responsible investor considers them holistically.

Application of integrated thinking to responsible investment

Select image to enlarge (opens in a new tab)

Conclusion

ACCA’s aim is for this responsible investing framework to be used widely by boards, their advisers and those responsible for investing.

However, given the dynamic nature of responsible investment, the eight components in the integrated thinking model should not be interpreted as exhaustive. Investment professionals should view this framework as a dynamic foundation rather than a static blueprint – one that requires ongoing engagement with emerging research, standards and best practices.

Further reading