Best Practices in ESG Investing

Abstract

This article examines the journey from value-based or ethical investing programs to more mainstream approaches integrating socially responsible corporate behaviors into investment processes. This trend has led to a differentiation between negative screening and best-practice ratings for environmental, social, and corporate governance (ESG) performance. The authors detail the methodology behind the Thomson Reuters corporate responsibility ratings, which provide objective and comparable quantifications of ESG performance for some 5,000 companies. They also provide a context for the usefulness of the ratings and the associated benchmarks in research and investing, for both current and future directions.