CFA ESG Glossary Exam Questions With Correct Answers

Active Ownership - Answers Active ownership represents actively exercising ones right as the shareholder of a company, particularly active engagement with management, and discussion on both financial and non-financial ESG factors. Active Risk - Answers The risk that a portfolio assumes in an effort to compete against and beat its benchmark index. It represents how closely as portfolio tracks to or deviates from its benchmark. Activism - Answers A form of investing where the fund manager (often referred to as an activist) buys into a company with the express intention of generating additional returns by catalysing change. AGM, EGM - Answers - Respectively, annual general meeting and extraordinary general meeting. - The formal gatherings of shareholders to agree official business of a company. The shareholders have the right to take some decisions about the future of the company and these are the occasions when those decisions are taken. The agendas very much depend on the law of the state or country of incorporation of the company. Alpha Generation - Answers The risk-adjusted contribution of the value that a portfolio manager contributes - either adding or subtracting - to the fund's investment returns. Animal Welfare - Answers How an animal copes with the conditions in which it lives Automation - Answers Technology by which a process or procedure is performed with minimum human assistance. It is associated with faster production and cheaper labour costs, replacing hard, physical or monotonous work. Bayesian Inference - Answers A statistical methodology based on Bayes's theorem commonly used to treat or update the probability of an outcome of a given hypothesis as more information become available. Best-in-Class Investment - Answers Involves selecting only the companies that overcome a defined ranking hurdle, established using ESG criteria within each sector or industry. Carbon Dioxide - Answers A colourless, odourless, non-poisonous gas that results from fossil fuel combustion, and it normally part of the ambient air. Carbon Footprint - Answers The annual amount of greenhouse gas emissions, mainly carbon dioxide, that result from the activities of an individual or a group of people, especially their use of energy and transport and consumption of goods and services. It is measures as the mass, in KG or tonnes per year, either of carbon dioxide emissions alone, or of the carbon dioxide equivalent affect of other greenhouse emissions. Carbon Market - Answers A market that is created from the trading of carbon emission allowances to encourage or help countries and companies to limit their carbon dioxide emissions. This is also known as emissions or carbon trading. Carbon Sequestration - Answers The long-term storage of carbon in plants, soils, geologic formations and the ocean. Carbon sequestration occurs both naturally and as a result of anthropogenic activities, and typically refers to the storage of carbon that has the immediate potential to become CO2 gas. In response to growing concerns about climate change resulting from increased carbon dioxide concentration in the atmosphere, considerable interest has been drawn to the possibility of increasing the rate of carbon sequestration through changes in land use and forestry, and also through geoengineering techniques such as carbon capture and storage. Carbon Tax - Answers Directly sets a price on carbon by defining a tax rate on greenhouse gas emissions or - more commonly- on the carbon content of fossil fuels. CDP - Answers (Formerly known as the Carbon Disclosure Project) is NGO that supports companies, financial institutions and cities to disclose and manage their environmental impact. It runs a global environmental disclosure system in which nearly 10,000 companies, as well as cities, states, and regions, report on their risks and opportunities on climate change, water security and deforestation. Climate Change - Answers A change of climate, directly or indirectly attributed to human activity, that alters the composition of the global atmosphere and which is, in addition to natural climate variability, observed over comparable time periods. Climate Change Adaptation - Answers About adapting to a changing climate-involving adjusting to actual or expected future climate events- thereby increasing society's resilience to climate change and reducing vulnerabilities to its harmful effects.