The UN Principles for Responsible Investing (PRI) defines ESG Integration as the explicit and systematic inclusion of ESG issues in investment analysis and investment decisions. The academic literature around the case for ESG integration in investment strategies has steadily grown since the Hamburg University/Deutsche Asset Management Meta Study was published in 2015. The list of benefits continues to expand beyond the surface opportunity for enhanced risk-adjusted returns. ESG investing can lead to better alignment of investment values, the reduction of large drawdowns, a higher level of social/environmental impact, and potential for Scope 3 emissions reporting improvement to name a few. While the opportunity is appealing, it should be noted that ESG integration is still largely dependent on the strength and quality of the investment process.
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