From ESG Integration to Impact Investing Erasmus Project

Project Title

From ESG Integration to Impact Investing

Project Key Action

This project related with these key action: Cooperation for innovation and the exchange of good practices

Project Action Type

This project related with this action type : Strategic Partnerships for higher education

Project Call Year

This project’s Call Year is 2019

Project Topics

This project is related with these Project Topics: New innovative curricula/educational methods/development of training courses; Environment and climate change; Social entrepreneurship / social innovation

Project Summary

Because of environmental and social problems, the concept of sustainability is constantly gaining popularity and importance worldwide. Governments are convinced that the societal transformation towards sustainability needs an active promotion. Based on a firm conviction that financial markets could increase or impede the speed of transformation, governments try to regulate financial markets, in order to mobilize finance for the sustainable growth. Therefore, EU commission puts measures in place like establishing a unified sustainable finance taxonomy, creating new benchmarks to compare environmental, social and corporate governance (ESG) characteristics of investments, improving disclosure requirements on how institutional investors integrate ESG factors as well as information offered to investors in financial products.

Before talking about sustainable investments or socially responsible investments (SRI), we need a common understanding on this issue.
The earliest understanding of “sustainable” was the use of natural resources without negatively harming the life of future generations. Step by step this was enriched by social issues, reduction of unequal wealth distribution worldwide, and governance issues guaranteeing rights and influence of different stakeholder groups.
Especially in the last years, when Sustainable Development Goals (SDGs) have been proclaimed by the United Nations, poverty and worldwide economic development received more attention. Our project is dedicated to the question, how to use the beneficial of capital markets in order to finance socially responsible projects. Socially responsible investments nowadays could be realized by choosing specific investment strategies like exclusions, engagement and voting, ESG integration, norms-based screening, best-in-class, sustainability themed, and impact investing.

To point it out, ESG integration shows the highest growth rate in Europe, as it is based on traditional, exchange traded stocks and bonds. Specialized ESG rating agencies deliver ESG ratings, thus ESG ratings are easily to apply to entire wealth positions.
Impact investing is the opposite, as based on sustainable, single and new sustainable projects. Social impact knows many different forms, thus this concept lacks measurability and comparability across investments and is difficult to apply.

In a first intellectual output (IO) of this project, the relationship between sustainable development goals and socially responsible investing is discussed. It is explained, why – according to empirical studies – socially responsible investments show a superior risk-adjusted return compared to traditional investments. Target of this IO are European citizens in order to strengthen their financial literacy.
Based on this introduction, the second intellectual output analyses more in detail socially responsible investments, and opposes ESG-rating to social impact. Regarding the level of impact, we will discover high differences depending on investment strategy applied. We will try to explain, why investment strategies with low impact levels register extremely high assets under management and vice versa, and we try to develop strategies to improve this situation. Target of this second IO are graduate students in Finance.
Finally, in our last IO, we discuss practical approaches for financial markets how to strengthen – in terms of assets under management – strategies delivering higher impact levels. High social impacts by financial markets is definitely the goal of the European Union, as this would positively affect the transformation towards a sustainable society. The result will be a practical guide for people active in financial markets. Here, target groups are project developers, issuers of financial products, retail and institutional investors, state agencies etc.
All IOs are based on a literature review. Different parts of the analysis will be received step by step based on a critical analysis and comparison between sustainable investment strategies, types of projects to be financed and financial instruments in use.

The overall objective of this project is to depict the differences in impact across sustainable investment strategies. Participants will learn, that – although sustainable investment strategies are used – resulting impact levels can be very different. Our IOs will put participants in a position to make their own responsible decision in investing and to look out for higher impact levels.

The long term benefit of this project is the support for investors to become mature and responsible, as well as for issuers of financial products and for advisers to retail and institutional investors.The overall target group for this project are millions of people holding responsible positions in financial markets.

EU Grant (Eur)

Funding of the project from EU: 333622 Eur

Project Coordinator

UNIVERSITAT LIECHTENSTEIN & Country: LI

Project Partners

• UNIVERSIDAD NACIONAL DE EDUCACION A DISTANCIA
• UNIVERSITA DEGLI STUDI DI ROMA LA SAPIENZA
• Università degli Studi di Roma “Unitelma Sapienza”