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The growing global interest in responsible investment approaches has spawned new ideas and practices, as well as new terminology that may or may not be initially clear or widely understood. Increased interest in responsible investment has prompted a need for standardized terminology to enhance communication among institutional investors, regulators, policymakers, and market participants.
CFA Institute, the Global Sustainable Investment Alliance (GSIA), and the Principles for Responsible Investment (PRI) collaborated to establish harmonized definitions for five responsible investment terms:
- Screening: Applying rules based on defined criteria that determine whether an investment is permissible.
- ESG integration: Ongoing consideration of ESG factors within an investment analysis and decision-making process with the aim to improve risk-adjusted returns.
- Thematic investing: Selecting assets to access specified trends.
- Stewardship: The use of investor rights and influence to protect and enhance overall long-term value for clients and beneficiaries, including the common economic, social, and environmental assets on which their interests depend.
- Impact investing: Investing with the intention to generate a positive, measurable social and/or environmental impact alongside a financial return.
This initiative aims to provide a resource for investors, regulators, policymakers, and market participants, offering clear definitions for responsible investment approaches rather than criteria for product labeling or categorization. Importantly, these responsible investment approaches are not mutually exclusive and are frequently used in combination.
Each of the five terms has its own section featuring:
- A definition of the term,
- Essential elements that outline the core concepts necessary for its definition,
- Practical guidance on using the term, and
- The primary references that influenced the work.
The essential elements serve as a basis for comparing different definitions for the same term, enabling equivalence even when wording differs. They also aid in achieving consistency when translating definitions into other languages.