The CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) have released a new resource designed to enhance comprehension and consistency in the terminology used in responsible investment. The resource addresses the following terms:
- Screening
- ESG integration
- Thematic investing
- Stewardship
- Impact investing
For each of these terms, the CFA Institute, GSIA, and PRI have provided a definition, a detailed explanation, a list of primary reference definitions, and practical guidance on their use. The intended audience for this paper includes investors, regulators, policymakers, and other participants in the financial market.
The impetus for this collaboration arose from calls by regulatory authorities for standard-setting bodies to create common terms and definitions, ensuring uniformity within the global asset management and wealth management sectors. This endeavour aims to promote precise and consistent usage of terminology, thereby contributing to the fight against “greenwashing.”
Furthermore, harmonizing the terminology serves to deepen the understanding of the nuances of responsible investment strategies. It dispels confusion surrounding the objectives of different responsible investment approaches, such as distinguishing between ESG integration and impact investing.
It is essential to note that the harmonized terminology in this joint resource responds to the evolving landscape of responsible investment. Previous definitions were sometimes specific to investments in publicly listed companies. However, the updated definitions acknowledge that responsible investment approaches can be applied across various investment styles and asset classes, encompassing both public and private markets.
The three organizations stress that this resource focuses on clarifying and aligning existing terms and definitions rather than introducing new terminology or meanings.
Marg Franklin, President and CEO at CFA Institute, comments:
“Technical terminology is an important part of professional practice. New terms are always emerging alongside new ideas, and definitions evolve over time. It’s important to standardise terms and definitions as practices mature so that professionals can communicate efficiently and effectively with each other as well as with clients, regulators, and other market participants. We believe this work will serve as a valuable resource for CFA charterholders, members, and candidates.”
Simon O’Connor, Former Chair of the GSIA, comments:
“For many years, our organisations have been working to define and clarify the language of responsible investment. This foundation of experience and expertise enabled us to come together with a common purpose to clarify and harmonize these definitions on a global scale. We now encourage the investment industry and regulators to adopt these definitions to create greater consistency.
David Atkin, CEO at PRI, comments:
“Responsible investment has grown significantly, and so have the expectations for clear and transparent communication. Investors need language that enables them to communicate their responsible investment practices accurately, succinctly, and consistently. By unifying around common definitions, we support our signatories and members to communicate with confidence.”
The paper is available to read on each of the respective organisation’s websites: