Accounting Assignment: Discussion On Effectiveness Of Sustainable Investment

Question

Task: Write an accounting assignment answering the following questions How effective do you think Sustainable Investing is or could be? What would it take for Sustainable Investing to really make a meaningful difference to things like climate change, inequality and other ESG issues of risk and opportunity, and do you have a related Theory of Change in mind that you could express in this paper?
If you think Sustainable Investing isn’t effective, what is your Theory of Change for solving the sustainability challenges of our time?
Do you have related work experiences that might have informed this opinion or is this an area you are considering as a career? *considering it for a career*
What are you most excited to learn about in this class, i.e.; is there one particular Environmental, Social, Governance (ESG) issue that is most important to you and why?

Answer

Introduction to Accounting Assignment
Even known as an investment that is socially responsible or ESG investing, is a medium of making an investment where an investor powerfully takes into consideration the corporate governance, environmental and social factors before making any contribution in regards to resources and money to a specified venture or organization (Talan & Sharma, 2019). In this section, I could understand how refugee displacement can be reduced or refugee settlement can be encouraged by proper sustainable investment.

How effective do you think sustainable investing is or could be?
Any time if I make investment sustainably my investment would be termed effective if I choose to do so in an organization, funds and companies with the intention of producing measurable environmental and social influences along with the financial return. With sustainable investment, I would have the option to choose investments depending on personal priorities and values. Asset and wealth managers have noticed a considerable incursion of funds from clients flowing into investments of sustainable nature (Vanwalleghem & Mirowska, 2020). Demand for investments of sustainable nature is being motivated by millennials who have the preference of making an investment in configuration with personal worth. Hence, fund managers are progressively apportioning resources to progress products and apprehend this segment of the emerging client.
I could comprehend that in present years, although the investors have applied positive screening of the risk factors of ESG to generate a modern investment approach "best in class" that creates a performance that is in alignment with or have often been found to be exceeding the benchmarks of market. This shift toward outperformance of market in numerous products of the nature of the sustainable investment has made a contribution in the enhancement of these product’s demand as fiduciaries look towards the option of serving their consumers by not just producing a return, but even evaluating the influence (Bachrach et al., 2018). In my opinion, offering sustainable opportunities allows the companies or firms to not just capture the returns from finance for consumers but even to realize returns of intrinsic nature not reflected elsewhere. Even in case of refugee displacement, as per my findings, in the year 2019-2020, Australia could grant the status of refugee to around 14 993 people either through the procedure of resettlement or by safeguarding people who made an application for asylum in the country if Australia (Karlsen, 2016). What would it take for sustainable investing to really make a meaningful difference to things like climate change and equality and other ESG issues of risk and opportunity and do you have related theory of change in mind?
By following the descriptive statistics, I can draw out the fact that the ESG investable size indicates that the market penetration of the scoring of ESG is still considerably lower depending on the number of organizations. On the contrary, it is much higher when evaluated by the viewpoint of market capitalization, which better indicates the investable universe. This indicates that there is enough room for the purpose of investing in applying revenues tilting and exclusion approaches in the course of maintenance of diversification of sufficient degree. Even there is proof of biasness in the rating of ESG in the case of SMEs for certain providers (oecd.org, 2021).

Figure 1: Sustainable development and adaptation to climate change
(Source: ipcc.ch, 2021)

Sustainability in terms of climate change can have variation across different regions, but their ultimate theme is to modify the manners in which there occurs resource exploitation or the way the hazards are administered so that the negative influences downstream or are reduced for the subsequent generations (ipcc.ch, 2021). Proper sustainable investment offers an approach to making better decisions on the problems that influences all lives. By integrating health schemes into the planning of communities that are new, one can make sure that the residents have easy and proper access to leisure and healthcare facilities. In this way, the sustainable investment would help in bringing down the social inequalities existing in the society by equally distributing the resources and amenities among all the classes of the society.The risk of sustainable investment basically refers to be comprehended as something that has a financially material influence on the anticipated investment's return. The financial influence may be on the target or the investment company itself, generating from governance, environmental and social considerations. Loss of the social license for conducting operations, scandals connected to governance practice of bad nature or corruption and extreme weather.

Sustainable risk is clearly a noticeably distinct procedure from simply applying the strategies of sustainable investment. Among the sustainability risks, the climate-related risks are the types of financial risk modelled by the exposure to any kind of investment that may have a potential contribution to or would be impacted by the change in climate (robeco.com, 2021). The social and environmental risks have a close connection. The constant deterioration of the environmental situation indicates elevated risks of social nature, for example, when the physical modification occurs in relation to climate or stress of water influence deprived sections of a geographical area and the disadvantaged populations. In such a situation, reputational influence is even possible. Governance practices of poor nature and considerable social problems may even have a material impact of financial nature on the portfolio investments in case the possibility of their happenings is not priced enough into the worth of impacted liabilities or assets.

The sustainability revolution is on and presents numerous opportunities. However, many would deny taking it as a revolution in any true sense (Botha, 2021). The emergence of the realization that the investments of ESG can attain has been prompted by Alpha about the enhanced demand for the opportunities amidst chief banks, family offices and fund selectors. As anticipated by Bloomberg, the ESG assets of global nature are on the record to surpass around $ 53 trillion by the year 2025, indicating about one-third of $140.5 trillion in anticipated entire assets under administration. As per my opinion, there are opportunities in the section of refugee displacement also where elongated operations can be conducted for physical and legal protection requirements of the refugees in the refugee's country (cgdev.org, 2021). The opportunity to improve the girls and women at risk in the country. Further, it would mitigate the absence of predictable substitute solutions that generally is appropriate only when numerous other solutions can be applied strategically in the situation of opening probability for solutions of comprehensive nature.

What is the theory of change for solving the sustainability challenge?
The impact of sustainable investment is expected to be sector or regional focused. Hence, in my opinion, The Path to Impact theory of change can be applied to make sustainable investment effective and solve the existing challenges. This would demonstrate the way the activities of the fund are anticipated to result in the discussed and envisioned influence. Its concentration would be on "in-between", the plotting of procedures that are anticipated to be triggered by the actions and how these would finally take to the absolute socio-economic and environmental influence (Mayne, 2017). The theory of change takes into consideration the following level:

Final Impact
This level constitutes the concluding influence at the socio-economic and environmental level that the fund focuses on making a contribution to.

Outcome
This level inculcates modifications that are anticipated to happen in the long term and short term depended on the output that is an activity included (Mayne, 2017). In the situation of short term, the anticipation of the eco-business fund is anticipated for (i) enhanced incorporation of the considerations of sustainability in the practices of production and investment (ii) a robust environment for financing conservation. In the situation of long term, this is anticipated to aid (i) enhancing practices of production and sustainable investment (ii) enhancement of the financing of conservation.

Outputs
This level summarises the tangible consequences that the actions of funds generate (i) enhanced funding applied for practices of sustainability (ii) operating towards a permitting ambience for the financing of conservation.

Activities
This level consists of distinct activities of funds (i) raising private and public capital, (ii) offering dedicated funding, (iii) offering assistance of technical nature (iv) promotion of cooperation and stakeholder dialogue. The activities of funds are geared towards businesses, financial institutions and conservation finance stakeholders, with their own route towards attaining the resulting influence. These procedures are connected and reinforce to drive systematic and transformational modification in the economy or market.

Where do you get this opinion from (work experience or career consideration)?
I could get this opinion and observationsthrough the research work performed while completing my education for becoming Associate Resettlement Officer.

What could important lessons be learnt from the issue related to social, governance and environmental situations?
Sustainable investment has numerous stages during the period of evolution. Each of these has led to methodologies and tools that sustainability concentrated investors still present today. Most remarkably, there has been an alteration from moral or ethical evaluation of business actions to the incorporation of financially material ambience, governance and social opportunities and risks (Shi, Qian & Dong, 2017). The essential segment to me in this section is refugee displacement. The reason for this mass refugee displacement that takes place every year, and the privileged class survive the consequences by applying their influential power. The consequences largely have to be borne by the weaker segment of the society, and the resultant violence, human rights violations, natural hazards, and persecution force them to leave their place of birth or residence, and this procedure is termed as refugee displacement. Taking into consideration the complex ambience, each year, millions of people become a target of refugee displacement due to numerous reasons and the change management theory would help in making the sustainable displacement effective in such a way that it enables the refuge settlement by offering them proper employment and affordable housing. Moreover, I feel it would bring a reduction in social issues such as the influence of disrupted schooling or education.

Conclusion
Hence, from the above discussion, I can conclude that any kind of investment in case of sustainable investment must make a contribution to mitigating refuge displacement and encouraging refugee settlement. The strategies from investment range from positive to negative screening to the engagement of the investors.

Reference
(2021). Retrieved 2 October 2021, from https://www.ipcc.ch/site/assets/uploads/2018/02/ar4-wg2-chapter20-1.pdf
(2021). Retrieved 2 October 2021, from https://www.oecd.org/finance/ESG-Investing-Practices-Progress-Challenges.pdf
(2021). Retrieved 2 October 2021, from https://www.robeco.com/docm/docu-robeco-sustainability-risk-policy.pdf
Bachrach, D., Guyer, J., Meier, S., Meerschaert, J., & Brandel, S. (2018). Enabling sustainable investment in social interventions: a review of Medicaid managed care rate-setting tools. Commonwealth Fund, January. www. commonwealth fund. org/sites/default/files/documents/___media_files_publications _fund_report_2018_jan_bachrach_investment_social_interventions_medicaid_rate _setting. pdf. https://www.commonwealthfund.org/sites/default/files/documents/___media_files_publications_fund_ report_2018_jan_bachrach_investment_social_interventions_medicaid_rate_setting.pdf

Botha, F. (2021). Missed Opportunities In ESG & Sustainable Investing Today. Retrieved 2 October 2021, from https://www.forbes.com/sites/francoisbotha/2021/05/27/missed-opportunities-in-esg--sustainable-investing-today/sh=6b82b481eb58 Mayne, J. (2017). Theory of change analysis: Building robust theories of change. Canadian Journal of Program Evaluation, 32(2). https://dev.journalhosting.ucalgary.ca/index.php/cjpe/article/download/31122/pdf

Shi, X., Qian, Y., & Dong, C. (2017). Economic and environmental performance of fashion supply chain: The joint effect of power structure and sustainable investment. Accounting assignmentSustainability, 9(6), 961. https://www.mdpi.com/2071-1050/9/6/961/html

Talan, G., & Sharma, G. D. (2019). Doing well by doing good: A systematic review and research agenda for sustainable investment. Sustainability, 11(2), 353. https://www.mdpi.com/2071-1050/11/2/353/pdf Vanwalleghem, D., & Mirowska, A. (2020). The investor that could and would: The effect of proactive personality on sustainable investment choice. Journal of Behavioral and Experimental Finance, 26, 100313. https://www.sciencedirect.com/science/article/am/pii/S2214635020300162

Karlsen, E. (2016). Refugee resettlement to Australia: what are the facts. https://apo.org.au/sites/default/files/resource-files/2015-02/apo-nid52632.pdf
(2021). Retrieved 2 October 2021, from https://www.cgdev.org/sites/default/files/Using_Innovative_Finance_to_Increase_Refugee_Resettlement.pdf