Flooding, droughts, and storms are examples of physical risks related to climate change. These risks arise from the direct impact of climate change on the environment, as opposed to transition risks, which are associated with the shift to a low-carbon economy.ESG Reference: Chapter 3, Page 147 - Environmental Factors in the ESG textbook.

Inissue-based engagement, investors addressspecific ESG issuesthat affect multiple companies or sectors. These engagements are often supported byexamples of best practice, which may emerge through prior engagements or research.
"Issue-based approaches to engagement are often accompanied by examples of what best practice in a particular area looks like... By expecting all companies in a given sector to adopt these best practices, investors may over time move sector or industry practice forward overall." While active investors may prefer company-specific engagements,issue-based engagementsare more commonly used bypassive or diversified investors.

Both company size and locationaffect ESG disclosure quality:
Larger companieshavemore resourcesfor ESG reporting.
Companies in regions with strong ESG regulations(e.g., EU) mustdisclose more ESG datathan firms inless regulated markets.
Reference:
CFA Institute ESG Reporting Standards
Global Reporting Initiative (GRI) ESG Disclosure Guide
Principles for Responsible Investment (PRI) ESG Data Analysis
========

Discussing French governance, the manual states: "France is the only major market to require two audit firms to look at financial statements rather than the usual one...."

Individual engagement refers to direct and personal interactions between investors and companies. Informal discussions are a form of individual engagement where investors engage directly with company representatives to discuss specific concerns, insights, or feedback related to ESG issues.
Direct Interaction: Informal discussions involve direct communication between the investor and the company. This can be through meetings, phone calls, or casual conversations, providing a platform for open and candid dialogue.
Specific and Personalized: These discussions are tailored to the specific company and the investor's concerns. Unlike generic letters, which are broad and non-specific, informal discussions allow for detailed and nuanced conversations.
Relationship Building: Informal discussions help build and strengthen relationships between investors and company representatives. This can lead to more effective communication and collaboration on ESG matters.
Reference:
MSCI ESG Ratings Methodology (2022) - Highlights the importance of direct engagement and relationship building in effective ESG integration.
ESG-Ratings-Methodology-Exec-Summary (2022) - Discusses various forms of engagement, emphasizing the value of personalized and informal interactions.