CFA Sustainable Investing study guide
CFA Sustainable Investing · Work through your exam, one topic at a time.
CFA Institute lists Sustainable Investing as one of its specialist certificate programs, appearing in the site's 'Other programs' menu alongside the CIPM® Program, Climate Investing, Private Markets, Private Equity and Investment Foundations®. CFA Institute also groups it under a 'Sustainability' learning path and offers a Chinese-language variant, Principles of Sustainable Investing (可持续投资基础证书). The CFA Sustainable Investing study guide has 9 sections and about 2,735 words.
01Introduction to ESG
ESG investing uses environmental, social, and governance factors alongside traditional financial analysis. Candidates must distinguish related but non-identical terms: socially responsible investing (SRI) historically relied on values-based exclusions; ESG integration embeds material factors into security analysis and valuation; impact investing targets measurable, additional positive outcomes; sustainable investing is the broad umbrella.
278 words, about 1 min02The ESG Market
ESG market participants include asset owners (pensions, endowments, sovereign funds, insurers), asset managers, ESG data and rating providers, index providers, proxy advisers, consultants, and standard setters. Demand is driven by client preferences, regulation, and industry initiatives such as the PRI , whose six principles commit signatories to incorporate ESG into analysis and ownership.
265 words, about 1 min03Environmental Factors
Environmental analysis covers climate (physical risks such as floods, heat, and supply disruption; transition risks from policy, technology, and litigation), natural capital (water stress, biodiversity, deforestation), pollution and waste, and resource efficiency. Under TCFD , companies disclose governance, strategy, risk management, and metrics/targets.
231 words, about 1 min04Social Factors
Social factors concern how companies manage relationships with workers, customers, communities, and society. Core areas: labor standards and human rights (including supply-chain due diligence), health and safety, human capital development, diversity, equity and inclusion, product safety and quality, data privacy and cybersecurity, access to products (financial inclusion, medicine, nutrition), and community relations.
261 words, about 1 min05Governance Factors
Governance factors describe how a company is directed and controlled: board composition, independence, diversity, and committees (audit, compensation, risk, sustainability); executive remuneration and alignment; shareholder rights (one-share-one-vote, ability to call meetings, written consent); takeover defenses; audit quality and disclosure; related-party transactions; controlling shareholders; and business ethics (anti-corruption, tax, lobbying). Governance is generally the most standardized ESG pillar and often the most clearly linked to financial outcomes.
242 words, about 1 min06Engagement and Stewardship
Engagement and stewardship describe active ownership: monitoring investees, voting proxies, and engaging management on material ESG issues to protect and enhance long-term value. Tools include voting against directors or pay, filing or supporting shareholder resolutions, collaborative engagement (e.g., Climate Action 100+), letter-writing and meetings, and escalation to public statements or divestment.
254 words, about 1 min07ESG Analysis, Valuation, and Integration
ESG analysis, valuation, and integration means using material ESG information to adjust forecasts, discount rates, or multiples - or to inform a qualitative judgment - with the aim of better risk-adjusted returns. Approaches range from qualitative scorecards to quantitative overlays, scenario analysis, and full integration into DCF models.
254 words, about 1 min08ESG Integrated Portfolio Construction and Management
ESG-integrated portfolio construction combines investment objectives with ESG preferences: exclusions, best-in-class selection, thematic allocation, ESG tilts, optimization with constraints, and stewardship overlays. Candidates should know the trade-offs: exclusions shrink the opportunity set and can create unintended sector, factor, and regional tilts; constraints raise tracking error and can reduce diversification.
240 words, about 1 min09Investment Mandates, Portfolio Analytics, and Client Reporting
An investment mandate translates client objectives and constraints into guidelines: return target, risk tolerance, liquidity, time horizon, benchmark, permitted and excluded investments, ESG preferences, voting policy, and reporting. The IPS is the governing document.
710 words, about 4 min