CASES ON ETHICS IN SUSTAINABLE INVESTMENTS
Sustainable investment has moved from being a niche activity to become mainstream over the last few years. Environmental, Social and Governance Assets under Management (AuM) are forecast to account for over 20% of all AuM by 2026, as per a PWC study conducted in 2022.
Investing sustainably and ethically is a minefield. Building on the framework provided by the CFA Institute Code of Ethics and Standards of Professional Conduct, CFA UK have created a suite of case studies to help investment professionals navigate awkward or contentious situations in sustainable investment.
To make it easier for you to find what you need, cases are organised by job role. Each case tackles ethical and conduct challenges outside of regulations in any specific jurisdiction. There are eight job roles in total, and we are looking to constantly improve them to make sure they are useful for your day-to-day job. If you have feedback on how we can improve, fill out a quick survey and we'll take into account your suggestions.
CFA UK would like to thank the following members for their contributions towards this document: Jose C Valer, CFA, Emily Barnard, CFA, Jacopo Gadani, CFA, Dmitri Govorov, CFA, David Manuel, ASIP, Stephen Metcalf, CFA, Natalie Gregoire-Skeete, CFA, Yuhan Zhang, CFA
And for their guidance and support, Andy Burton, CFA, Amit Bisaria, CFA, David McClean, CFA, Suzanne Hsu, CFA
PRIVATE WEALTH MANAGER / ADVISER ROLES
Whether wealth advisers have discretion over their private clients’ investments or not, they need to be aware of, and document, their clients’ sustainability related preferences as well as the relative importance of sustainability within the hierarchy of their investment goals. Only when this has been completed can a wealth adviser ensure that their advice, recommendations, and investment decisions comply with their clients’ full wishes.
EXPLORE CASE STUDIES
SPECIALIST ESG ROLES
ESG analysts perform an important role in the investment process across many asset classes ranging from public equities and corporate bonds to private credit and infrastructure assets. In their key function of researching and interpreting ESG data they encounter many ethical issues.
PORTFOLIO AND FUND MANAGER ROLES
Portfolio Managers must consider the sustainability objectives of each portfolio they run and the degree to which ESG issues influence its construction and performance. These need to be accurately described in their fund literature and investor communications. Portfolio managers also need to ensure that the introduction of sustainability objectives does not inappropriately conflict with each of their funds’ other objectives.
SELL SIDE ANALYST ROLES
Sell-side analysts may now need to collect, handle and process ESG data as part of their role or be able to understand and incorporate the conclusions of ESG analyst colleagues in their recommendations. Some clients will place great value on their ESG conclusions and knowledge, and others will place less or no importance on it. ESG data currently has limited influence on short-term market price movements but increasingly sell-side analysts handling ESG data will need to consider whether it is MNPI before disseminating more widely.
INSTITUTIONAL SALES AND MARKETING ROLES
Within institutional investors, communications professionals stand closest to the risk of ‘greenwashing’. They must ensure that sales and marketing literature and communications are accurate and do not exaggerate the sustainability credentials of their firms or its products. Regulations in the US, the EU and the UK have tightened up on the precise terminology that firms can use to describe the sustainability attributes of different investment products, and greenwashing can be a serious and costly breach.
BUY-SIDE ANALYST ROLES
Many buy-side analysts need to collect, handle and process ESG data at scale or rely on colleagues or external service providers to do this for them. This presents a new challenge, as ESG data is often unaudited, qualitative, and comes from a wide range of sources of varying reliability rather than from audited financial accounts or official trade figures. Discover a series of cases for buy-side analysts and comments from CFA UK on how to effectively handle issues which arise from sustainable investing in this role.
EXPLORE CASE STUDIESCORPORATE ISSUERS
Corporate issuers around the globe and across all industries are adapting their strategy and business model to more sustainable pathways. Deciding what ESG-related data to publish, and how to communicate it in a clear and compliant manner, is a critical component in the sustainable investment chain. Explore cases studies that cover making ESG claims in corporate advertising, disclosures in IPO documentation and many more topics that can act as a guide to common problems for corporate issuers.
EXPLORE CASE STUDIES
WE'D LOVE YOUR FEEDBACK
Thank you for your feedback.
We’ve received valuable insights from our members, including the sustainability community, and especially from volunteers Ivy Tang, CFA, and Annabel Gillard, CFA.
Feedback Summary:
New Cases: Suggestions for topics such as stewardship, private assets, fixed income and sovereign bonds, green hushing, and fair dealing. Some noted the cases were too equities-focused, while others wanted firm-level commitment cases.
Less Relevant Cases: Some cases were recommended for deletion as they were too generic rather than ESG-focused.
Commentary: Recommendations included referencing regulatory fines, reducing UK/EU centricity, adding US regulations, aligning roles with CFAI’s framework, and expanding commentaries to highlight all relevant CFAI standards.
We’ve incorporated much of the feedback, adding new cases, deleting less relevant ones, and enhancing commentaries. However, not all suggestions have been adopted—for example, maintaining the UK/EU focus reflects CFA UK’s priorities, and we’ve left some standards for readers to reflect upon.
The updated final versions of cases will be available by the end of the year.
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