A typical starting point for ESG integration is the identification of material qualitative and quantitative ESG factors that pertain to a company or its industry. An analyst can identify these factors using forecasts and historical data relating to the company and make the necessary adjustments to the company's financial statements. For example, capital expenditures, operating margins, earnings, operating costs, and revenues are ESG-related adjustments made in a company's cash flow and income statements.

On the balance sheet, ESG-related adjustments take the form of estimates of impaired assets. Equity and valuation ESG-related adjustments include terminal value or cost of capital using the discount rate. For bonds, the issuer's credit or CDS is adjusted to reflect the effects of ESG considerations.

A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects. Green bonds may offer tax advantages, providing incentives for investing in sustainable projects that do not apply to other, comparable types of bonds.

Greenwashing is the risk that the green bond's proceeds will not benefit climate or environmental projects. This will result in an investor who paid a premium for the green bond to pay more for the bond or hold a bond that does not satisfy its environmental or climate objective.