Bloomberg ESG Certification - Introduction to ESG and Sustainable Finance Questions and Answers 100% Solved

Bloomberg ESG Certification - Introduction to ESG and Sustainable Finance Questions and Answers 100% Solved Why do traditional valuation models, like discounted cash flow, fail at capturing the full range of risks companies face today? Choose one. A. They do not consider compliance risk. B. They offer limited, deterministic and potentially misleading insights. C. They are outdated. D. They do not consider reputational risk. ️️B. They offer limited, deterministic and potentially misleading insights. Explanation : Traditional valuation models. like discounted cash flow, do not take into account environmental social and governance factors and therefore offer limited, deterministic and potentially misleading insights. This is because companies with poor ESG metric scores will likely have a higher risk profile on average Due to this, when using discounted cash flow analysis one could argue for using a higher discount rate (resulting in a lower valuation) in the discounted cash flow.