A sustainable investment framework provides a standardized set of metrics for measuring the impact of investments. These metrics are often used in combination with other measures, and they are closely related to each other. The different approaches play different roles, and a sustainable investment strategy can combine all of them. In some cases, sustainable investment strategies will practice active ownership while limiting ESG risk. Others may combine all six approaches. Here’s a quick overview of the different approaches.
The Fourth Swedish National Pension Fund, for example, discloses all of its investments using this framework. This includes the strategies it employs, the companies it excludes, ESG performance measures, and accounts of management dialogues. It also assesses companies’ direct environmental impact. Disclosures vary, and some investors are less forthcoming than others. The Fourth Swedish National Pension Fund, for example, reports on excluded companies and their direct environmental impact. These reports are available online.
To measure the impact of an investment, the Framework provides a dashboard that allows investors to compare the performance of various funds against benchmarks. The Framework emphasizes the relative performance of investment portfolios against multiple issues, such as climate change. It also aims to align investment portfolios with the Paris consensus that aims to limit global temperature rise to two degrees Celsius. The Framework also promotes efficient circular use of resources and the preservation of natural resources. Overall, a sustainable investment framework is the best choice for any financial institution.
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