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Subject 5. ESG Considerations in Portfolio Planning and Construction PDF Download

Environmental, social, and governance (ESG) has become one of the many factors that influence investment decision making. Investors may choose to screen out companies that do not meet specific ESG criteria or seek out best-in-class companies.

Integration of ESG factors into traditional financial analysis and portfolio construction is viewed more as a process enhancement rather than an entire new way to invest. ESG implementation approaches require a set of instructions for investment managers with regard to the selection of securities, the exercise of shareholder rights, and the selection of investment strategies.

Although advocates argue that portfolios benefit from screening out companies with significant exposure to ESG risks, empirical evidence on this topic is mixed.

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