Words matter: Setting standards for responsible investing terms

INNOVATION often comes with new words and terminology; developments in responsible investments are no exception. As people strive to communicate new sustainable investing concepts and strategies, they sometimes use different words to express similar ideas or the same words to express different ones.

This has led to confusion, particularly around five key approaches:

• Screening
• ESG integration
• Thematic investing
• Stewardship
• Impact investing

The International Organization of Securities Commissions (IOSCO) has issued a call to action, challenging global volunteer standard-setters to develop common sustainable finance-related terms and definitions. The CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) answered IOSCO’s call and teamed up to harmonise their definitions of these critical responsible investment concepts.