The Principles for Responsible Investment (PRI) in their ESG integration in listed equity: A technical guide (2023) defines ESG integration as ‘the process of including ESG factors in investment analysis and decisions to better manage risks and improve returns’ (p.6). (You can read the guide at https://www.unpri.org/listed-equity/esg-integration-in-listed-equity-a-tehnical-guide/11273.article.) In terms of the investment process, ESG considerations can be brought into the processes of fundamental analysis, forecasting, valuation and portfolio construction in a variety of ways.

Required

(a) Provide your interpretation of fundamental analysis.

(b) Referring to the PRI guide, provide an example of how an ESG factor is consided in the forecasting and valuation stage and how that factor could impact financial ratios through a:

i) revenue adjustment ii) operating cost adjustment iii) statement of financial position item adjustment.