The paper 'Investors’ Perspective and Investment Value Drivers Including Environment, Social and Governance Issues" is a great example of a finance and accounting assignment. A crucial aspect within the performance of the investments is the capability of the investors to identify the drivers of anticipated return and risks of the investments (Hayat and Orsagh 2015, p. 1). Portfolio managers and financial analysts are anticipated to have the knowledge of financial factors which often drive up the investment value. However, factors which are complex to determine in the monetary basis and which do compose part of usual financial factors also impact return and risk of the investments also affect the risk and return of investment.
These factors which affect investments are known as environmental, social, and governance issues. Psaros (2009, p. 45) contended that the ESG factor has normally been of major focus by the media in recent years particularly in the case where investors suffer significant losses on the company’ s listed equities. In the process, investors have been fast attributing such losses to poor management of ESG issues and forgetting they also have a duty to encourage higher standards of ESG performance.
Hayat and Orsagh (2015, p. 1) posited that some of the companies which have collapsed duty poor of management of ESG factors and proved to be costly to the investors include Enron, One. Tel, HIH Insurance, Parmalat and WorldCom. Therefore, this essay will analyze why the integrated issues of environmental, social and governance should be added value to investor’ s decision-making process. In addition, this essay will discuss why investors should encourage higher standards of ESG performance in the companies in which they are invested, and why the investors have a responsibility to support the integrity and stability of the financial system. Why the integrated issues of environmental, social and governance should be added value to investor’ s decision-making process According to Hayat and Orsagh (2015, p. 3) Environmental, social and governance are described as the three key factors used in gauging ethical and sustainability effect of the investment within the business or a company.
When these factors are practised positively the process is referred to as responsible investing. Brian, Singhal and Subramanian (2010, p. 433) stated that over the years, research has focused majorly on how managers should increase shareholders’ return and forgetting the role of investors in responsible investing.
Therefore, in the recent past, studies have been done of the role of investors and why the integrated issues of environmental, social and governance should be added value to investor’ s decision-making process.
Brian, J.W, Singhal, V.R, & Subramanian, R 2010, An empirical investigation of
environmental performance and the market value of the firm, Journal of Operations
Management, Vol.28, pp. 430-441.
Brown, L & Caylor, M 2009, Corporate Governance and Firm Operating Performance, Review of
Quantitative Finance and Accounting, Vol.32, No. 2, pp.129-44.
Dimitrov, D.K & Davey, H 2011, Sustainable development: what it means to CFOs of New
Zealand, Asian Review of Accounting, Vol.19, No.1, pp.86‐108.
Generation Foundation 2015, Allocating Capital for Long-Term Returns: The Strengthened Case
for Sustainable Capitalism, Generation Foundation, London, Viewed 12th June 2016 https://www.genfound.org/media/pdf-genfound-wp2015-final.pdf
Hayat, U & Orsagh, M 2015, Environmental, Social, And Governance Issues In Investing: A
Guide for Investment Professionals, CFA Institute, pp. 1-43.
Hawley, J, Hoepner, A, Johnson, K, Sandberg, J & Waitzer, E 2014, Cambridge Handbook of
Institutional Investment and Fiduciary Duty, Cambridge University Press, Cambridge.
Johnson, K 2014, Introduction to Institutional Investor Fiduciary Duties, IISD, Winnipeg, iewed
12th June 2016 http://www.reinhartlaw.com/Documents/art140402%20RIIS.pdf
Kay, J 2012, The Kay Review of UK Equity Markets and Long-term Decision Making, Final
Report – July 2012, Department for Business, Innovation and Skills, London, Viewed 12th June 2016 http://www.bis.gov.uk/assets/biscore/business-law/docs/k/12-917- kay-review-of-equity-markets-final-report.pdf
Law Commission 2014, Fiduciary Duties of Investment Intermediaries, HMSO, London, Viewed
12th June 2016 http://www.lawcom.gov.uk/wp-content/uploads/2015/03/lc350_ fiduciary_duties.pdf
Picou, A & Rubach, M.J 2006, Does good corporate governance matter to institutional investors?
Evidence from the enactment of corporate governance guidelines, Journal of Business
Ethics, Vol. 65, pp. 55-67.
PRME - Principles for Responsible Management Education 2016, Six Principles, Viewed
12th June 2016 http://www.unprme.org/about-prme/the-six-principles.php
Psaros 2009, Australian corporate governance: A review and analysis of key issues, Pearson
Education Australia, pp.43-53.
Schaltegger, S, Bennett, M & Burritt, R 2006, Sustainability Accounting and Reporting,
Sullivan, R, Martindale, W, Feller, E & Bordon, A 2015, Fiduciary Duty in the Century 21,
United Nations Environment Programme for Finance Initiative, Viewed 12th June 2016 My Documents\Downloads\Documents\fiduciary_duty_21st_century.pdf
United Nations Environment Programme Finance Initiative [UNEP FI] 2009, Fiduciary
Responsibility: Legal and Practical Aspects of Integrating Environmental, Social and Governance Issues into Institutional Investment, UNEP FI, Nairobi, Viewed 12th June 2016 http://www.unepfi.org/fileadmin/documents/fiduciaryII.pdf
United Nations Environment Programme 2015, Aligning the Financial System with Sustainable
Development: Pathways to Scale, UNEP, Geneva, Viewed 12th June 2016 http://apps.unep.org/publications/index.php?option=com_pub&task=download&file=011401_en