ESG groups unite on words amid fight against sustainable investing

investmentnews.com:

If there is one thing that supporters and opponents agree on about ESG, it might be that there are too many interpretations of its meaning.

This week, several groups, including the CFA Institute, gave a list of definitions that they want to be standard across the industry. That includes common meanings for terms like “screening,” “ESG integration,” “thematic investing,” “stewardship” and “impact investing.”

A lack of clarity can hinder communication and contribute to perceptions of greenwashing, the CFA Institute stated.

“Words matter. How we describe things matter. And the nuances of conversation matter. We want to be understood for what we are saying,” said Maria Lettini, CEO of US SIF: The Sustainable Investment Forum. “Having some consensus on definitions on some of the key areas we refer to … is really important.”

Defining ESG integration and impact investing could be crucial in ensuring that supporters have a unified meaning to present to critics. Numerous Republican state governors and members of Congress have held inquisitions on ESG as part of a wider push against sustainable investing. Often, ESG is equated by opponents with impact investing or socially responsible investing, rather than a means of assessing financially material risk and opportunity.

In the definitions the groups issued this week, “ESG integration” means “ongoing consideration of ESG factors within an investment analysis and decision-making process with the aim to improve risk-adjusted returns.”

Meanwhile, “impact investing” means “investing with the intention to generate a positive, measurable social and/or environmental impact alongside a financial return.”

Further, “screening” means “applying rules based on defined criteria that determine