Sustainable Investing What Everyone Needs to Know

An accessible introduction to sustainable investing for investors

Can investors do well financially and do good for the world? Should they try? A common assumption about investors is that they don't care who wins as long as they're making money. For some investors, this mindset still rings true. Yet, many investors today want to make money and do good. Sustainable investing has gained considerable momentum in the last few decades. It delivers value by balancing traditional investing with environmental, social, and governance-related (ESG) insights to improve long-term outcomes.

Sustainable Investing: What Everyone Needs to Know ® demystifies sustainable investing for investors. Using a user-friendly question-and-answer format and insights from noted investment professionals, this book explores some of sustainable investing's most critical questions in a clear and concise manner. The book explains how this approach involves investing in sustainable companies or funds and can include any investment approach that considers ESG criteria when selecting and managing investments. It demystifies sustainable investing specifically for average investors and examines whether such investments have a place in their portfolios. By covering everything from the changing investment landscape and the roles of social and religious values in finance to how to build a portfolio with purpose, H. Kent Baker, Hunter M. Holzhauer, and John R. Nofsinger provide an essential introduction to sustainable investing.

H. Kent Baker is University Professor of Finance in the Kogod School of Business, American University. He is one of the most prolific authors in finance, with 40 books and over 200 peer-reviewed journal articles. He is also the editor of The H. Kent Baker Investments Series at Emerald Publishing.
Professor Baker is internationally known for his work in behavioral finance, survey research, and dividend policy and has consulting experience with more than 100 organizations. He has received many research, teaching, and service awards, including the American University's Scholar/Teacher of the
Year and Southern Finance Associations' 2019 Distinguished Scholar.

Hunter M. Holzhauer is the Robert L. Maclellan and UC Foundation Associate Professor of Finance in the Rollins College of Business at the University of Tennessee at Chattanooga. Professor Holzhauer is an award-winning professor in research, teaching, and service. Since 2013, he has authored seven
book chapters and published 16 peer-reviewed articles primarily focused on socially responsible investing, behavioral finance, and alternative investments. Professor Holzhauer is also the creator and Director of the prestigious Student Managed Investment Learning Experience (SMILE) Fund and the
faculty advisor for multiple award-winning student investment teams.

John R. Nofsinger is Professor of Finance and Dean of the College of Business and Public Policy at the University of Alaska Anchorage. He is an award-winning author who has written 15 finance trade books, textbooks, and scholarly books and published 73 articles in academic and practitioner journals.
Professor Nofsinger is widely known in behavioral finance, socially responsible investing, and the biology of finance.

Who Are the Authors?
Why Did We Write This Book?
Whom Do We Want to Thank?
What is the Book About?
Introduction

Chapter One: The Changing Investment Landscape: The Past, Present, and Future

1.1. What are the earliest origins of socially responsible investing (SRI) and corporate social responsibility (CSR)?
1.2. Who were the first drivers of SRI and CSR, and how did their efforts help establish the ways social responsibility activists affect corporate behavior?
1.3. What is screening, and why is it important?
1.4. What are the most critical milestones in the 20th century for SRI?
1.5. How did these earlier milestones in the 20th-century help establish how SRI activists could affect corporate behavior?
1.6. Who created the first modern SRI index?
1.7. How did environmental, social, and governance (ESG) criteria become the three primary social responsibility factors?
1.8. What are other vital issues in the 21st century for SRI and CSR besides ESG criteria?
1.9. What are the main ways that investors can participate in SRI and SDG efforts?
1.10. What are the similarities and differences between sustainable investing and green investing?
1.11. What are the similarities and differences between impact investing and community investing?
1.12. How have risk tolerances and investment preferences changed from a generational perspective?
1.13. What impact are Millennials and progressive politics making on sustainable investing?
1.14. What are the conservative politics of sustainable investing in terms of advocacy agenda?
1.15. What is the divide between progressive and conservative investors?
1.16. What trends are likely to drive the future of the sustainable investing industry?
Takeaways

Chapter Two: Corporate Social Responsibility: Delivering Both Profit and Purpose

2.1. What's corporate social responsibility?
2.2. What's business ethics?
2.3. Who are a firm's stakeholders?
2.4. How can a firm demonstrate its social responsibility?
2.5. How can firms be environmentally sustainable?
2.6. How do firms demonstrate social responsibility to society?
2.7. What firm governance characteristics are responsible?
2.8. How can firms exhibit social responsibility to employees?
2.9. How can a firm be socially responsible in some areas and not in others?
2.10. How does doing good differ from avoiding doing harm?
2.11. What is corporate philanthropy, and should firms be engaged in it?
2.12. How can firms become involved in community engagement?
2.13. How can investors determine whether a firm is socially responsible?
2.14. How are firms held accountable for CSR?
2.15. What is a non-governmental organization, and how does it interact with companies?
2.16. How can a firm have a social purpose and earn a profit?
2.17. How is CSR viewed around the world?
2.18. What companies are known as leaders in CSR?
2.19. What online resources are available for researching socially responsible firms?
Takeaways

Chapter Three: Social and Religious Values: Aligning Values and Portfolio Assets

3.1. What is values-based investing?
3.2. What community values can investors use to select investments?
3.3. How can investing include human and civil rights values?
3.4. What is environmental sustainability, and how can investors incorporate it into a portfolio?
3.5. What firm products are inconsistent with social responsibility?
3.6. What religious values affect investing?
3.7. How can investors consider Christian values?
3.8. How can investors consider Islamic values?
3.9. How can investors consider Jewish faith-based values?
3.10. How might socially progressive values affect investment choice?
3.11. What is patriotic investing?
3.12. How are stocks found using negative and positive social screens?
3.13. What stock indices benchmark socially responsible firms?
3.14. What are Morningstar's Sustainability Scores?
3.15. What are Morningstar's Carbon Risk Scores?
3.16. Where can investors find socially responsible mutual funds?
3.17. What exchange-traded funds have socially responsible portfolios?
3.18. Where can investors find sustainable bonds and other fixed-income funds?
3.19. What are online resources available for researching a values-based investment approach?
Takeaways

Chapter Four: Sustainable Investing: Making Money While Doing Good

4.1. How does traditional investing differ from sustainable investing?
4.2. What are the potential concerns about sustainable investing?
4.3. What is the screening approach to sustainable investing?
4.4. What is the ESG integration approach to sustainable investing?
4.5. What is the socially responsible investing approach?
4.6. What are the shareholder engagement and activism approaches to sustainable investing?
4.7. What is the sustainable thematic investing approach?
4.8. What is the impact investing approach to sustainable investing?
4.9. What types of investors engage in sustainable investing?
4.10. How large is the sustainable investing marketplace?
4.11. How can investors get started with sustainable investing?
4.12. What vehicles are available for aligning values with investments?
4.13. What are the sources available for evaluating the social responsibility of a good versus bad company?
4.14. What are the pros and cons of investing in ESG stocks?
4.15. What are some examples of the largest ESG stocks?
4.17. What are the similarities and differences between mutual funds and ETFs engaged in sustainable investing?
4.18. What are the different types of funds engaging in sustainable investing, and examples of each?
4.19. What options are available for socially responsible investors interested in fixed-income investments?
4.20. What are green bonds and their pros and cons?
4.21. What are social impact bonds and their benefits and challenges?
4.23. What are the advantages and disadvantages of ESG TDFs?
4.24. What are some tips in selecting an ESG TDF?
4.25. What are the trade-offs between investing in stocks or bonds of socially responsible companies, mutual funds, and ETFs?
4.26. What are robo-advisors and the trade-offs of using them for sustainable investing?
4.27. What are some examples of robo-advisors for sustainable investing?
4.28. What is community investing?
4.29. What are online sources of information for sustainable investing?
Takeaways

Chapter Five: Performance Implications of Sustainable Investing: Can You Have Your Cake and Eat It Too?

5.1. What are the supply and demand dynamics for performance data for sustainable investing?
5.2. What are the concerns about the performance data for sustainable investing?
5.3. What is the total number of sustainable investment funds?
5.4. Have sustainable investment funds outperformed traditional funds?
5.5. How has the performance of sustainable funds changed over time?
5.6. What are the performance implications of sustainable investment indices?
5.7. How fast is investor demand for sustainable investing growing?
5.8. What factors are likely to affect the demand for sustainable investing going forward?
5.9. Has the growth in investor demand driven the recent outperformance in sustainable investing??
5.10. Which of the three ESG criteria has historically performed better?
5.11. What are the performance implications of sustainable investing when analyzing the fixed-income market?
5.12. What performance critiques or implications relate to screening?
5.13. Do sin stocks outperform sustainable stocks?
5.14. Is sustainable investing ethical window dressing?
5.15. How has sustainable investing had a positive benefit on changing society or corporate behavior?
5.16. Can sustainable investors have their cake and eat it too?
Takeaways

Chapter Six: Building a Portfolio with a Purpose: How to Benefit You and Society
6.1. What are common misconceptions about sustainable investing?
6.2. Why should sustainable investors take a portfolio perspective?
6.3. What steps are in the portfolio management process?
6.4. What is an investment policy statement?
6.5. Why should sustainable investors have an investment policy statement?
6.6. What role does asset allocation play in the investment decision-making process?
6.7. What types or classes of assets are available to sustainable investors?
6.8. What are the main determinants of asset allocation?
6.9. What are the two most common strategies for asset allocation and their advantages and
6.11. What are other types of asset allocation strategies available?
6.12. What are some guidelines of asset allocation for “average” investors?
6.13. What choices are available for determining your asset allocation?
6.14. How does asset allocation differ from diversification?
6.15. Why should sustainable investors diversify their portfolios?
6.16. What pitfalls should sustainable investors avoid involving portfolio diversification?
6.16. How can investors incorporate sustainability into their portfolios?
6.17. Why should sustainable investors regularly monitor their portfolios?
6.18. Should sustainable investors rebalance their portfolios?
6.19. What types of asset allocation rebalancing strategies are available and their benefits and drawbacks?
6.20. How can sustainable investors evaluate their portfolios?
Takeaways