Bloomberg ESG Certification - Introduction to ESG and Sustainable Finance Questions & Answers Already Graded A+

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 C. They are outdated.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. A term closely related to sustainability reporting that refers to the measuring of environmental and social performance along with economic performance. This is broken down into what iscalled the "3 Ps": Profit, People and the Planet. A. Sustainability Reporting B. Corporate Social Responsibility C. Sustainability Externality D. Triple Bottom Line - D. Triple Bottom Line Explanation : Triple Bottom Line is a term closely related to sustainability reporting that refers to the measuring of environmental and social performance along with economic performance. This is broken down into what is called the "3 Ps": Profit, People and the Planet. A management concept whereby companies integrate environmental and social concerns into their business. Companies aim to contribute to the well-being of the communities they affect and on which they depend. A. Sustainability Reporting B. Corporate Social Responsibility C. Sustainability D. Triple Bottom Line E. Externality - B. Corporate Social Responsibility Explanation : Corporate Social Responsibility is a management concept whereby companies integrate environmental and social concerns into their business. Refers to the positive or negative effects on third parties arising from manufacturing and consuming goods and services. Ideally, the negative effects of economic transitions on third parties should be reduced. A. Sustainability Reporting B. Corporate Social Responsibility C. SustainabilityD. Externality E. Triple Bottom Line - D. Externality Explanation : Externality refers to the positive or negative effects on third parties arising from manufacturing and consuming goods and services. Ideally, the negative effects of economic transitions on third parties should be reduced. Refers to companies' public disclosure of non-financial performance to communicate their impact, both positive and negative, on the environment and people. A. Sustainability Reporting B. Corporate Social Responsibility C. Sustainability D. Triple Bottom Line E. Externality - A. Sustainability Reporting