Browsing by Subject "Financial Analysis"

In the last few decades, socially responsible investing has taken a significant position in the financial market. Asset managers that have a responsible investment strategy can be considered to have an advantage on the market. This is because e.g. institutional investors have gotten more pressure from society and stakeholders to invest responsibly and therefore seek asset managers who can do this for them. Megatrends like global warming, urbanization, and air and water pollution, are part of the reason why investors seek more responsible investment opportunities. Socially responsible investing is in practice analysis of environmental, social and governance factors, so called ESG analysis. Companies are given scores based on their performance in each of these sectors. There is no one right way to do this, so investors can choose to do their own ESG analysis or buy it from ESG rating agencies, e.g. Morningstar or MSCI. In Finland, socially responsible investing has made progress in the last years. Finland, together with the other Nordic countries, can be considered to be forerunners in the field of responsible investing. The United Nations has set up principles for companies and investors on how to operate responsibly, the PRI (principles for responsible investment), and 38 companies/investors in Finland are signatories to the United Nations PRI. There is a prejudice, that in order to invest responsibly, one has to give up returns. In fact, many researches show that with a responsible investment strategy and by doing ESG analysis, an investor can get better risk-return-ratios in their portfolio. One reason for this is that, companies that operate responsibly, and have considered environmental, social and good corporate governance factors in their management, are doing better and have a better possibility to prevent and deal with crises. In this research, I show, that ESG analysis bring added value to managing portfolios and doing investment decisions. I do this by covering previous researches on the subject, as well as showing trough case studies how an investor could benefit from ESG analysis to avoid big losses. The conclusion is, that the benefits from integrated ESG analysis outweighs the costs of it.