CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) have issued a new resource that aims to bring greater understanding and consistency to terminology used in responsible investment, specifically:
Screening
ESG integration
Thematic investing
Stewardship
Impact investing
For each term, CFA Institute, GSIA, and PRI have outlined a definition, detailed explanation, a list of definitions that served as the primary inputs, and guidance for using the terms in practice. The paper is intended for investors, regulators, policymakers, and other market participants.
The collaboration was inspired by calls from regulators for voluntary standard setters to develop common terms and definitions to ensure consistency throughout the global asset management and wealth management industries.
Promoting the consistent and precise use of terminology contributes to efforts to address greenwashing, the authors say.
“The work to harmonise terminology also serves to deepen understanding of the nuances of responsible investment approaches. It counters confusion about what different responsible investment strategies seek to achieve by clearly differentiating the objectives of approaches, such as ESG integration and impact investing.
“The harmonised terminology contained in the joint resource responds to shifts that have taken place in the responsible investment landscape. Prior versions of the definitions were, in some cases, specific to investments in listed companies. These updated definitions reflect the reality that responsible investment approaches can be applied to a wide range of investment styles and asset classes, spanning both public and private markets.”
The three organisations emphasise that this resource clarifies and harmonises existing terms and definitions and does not create new terms or meanings.
Marg Franklin, President and CEO at CFA Institute, comments: “Technical terminology is an important part of professional practice. New terms are always emerging alongside new ideas, and definitions evolve over time. It’s important to standardise terms and definitions as practices mature so that professionals can communicate efficiently and effectively with each other as well as with clients, regulators, and other market participants. We believe this work will serve as a valuable resource for CFA charterholders, members, and candidates.”
Simon O’Connor, Former Chair of the GSIA, comments: “For many years, our organisations have been working to define and clarify the language of responsible investment. This foundation of experience and expertise enabled us to come together with a common purpose to clarify and harmonize these definitions on a global scale. We now encourage the investment industry and regulators to adopt these definitions to create greater consistency.
David Atkin, CEO at PRI, comments: “Responsible investment has grown significantly, and so have the expectations for clear and transparent communication. Investors need language that enables them to communicate their responsible investment practices accurately, succinctly, and consistently. By unifying around common definitions, we support our signatories and members to communicate with confidence.”
