CFA ESG - Chapter 2 Exam Questions With Correct Answers

What did the Brundtland Report of 1987 show and what else was it referred to as? - Answer The Brundtland Report of 1987 showed that if you want good, long term economic growth, then you need to consider the environment and social progress. It was also called "Our Common Future". What did the Brundtland Report lay the foundations for and in what year? - Answer The Rio de Janeiro Earth Summit. 1992. What did the Rio de Janeiro Earth Summit lead to? What does this mean? - Answer The creation of the UN Commission on Sustainable Development and the Rio Declaration. What is the Rio Declaration? - Answer It states that businesses have a responsibility to ensure that activities within their own operations do not cause harm to the environment as businesses gain their legitimacy through meeting the needs of society. Which religious groups began the trend of responsible investing? Around what time was this? What type of ESG investing is this? - Answer Quakers and Methodists laid out guidelines to their followers over the types of activities in which they should or should not invest in the 17th/18th century. This is an example of negative screening. What created the modern institutionalisation of ethical exclusions in the 20th century? How was this different from before? - Answer The creation of the Pax World Fund during the Vietnam War in 1971, the first ethical mutual fund. It meant that everyone could use it, not just the Quakers. What was the Sullivan Campaign? - Answer Created the Sullivan Principles in the late 1970s in protest at South Africa's system of apartheid, it pushed the divestment movement. What ushered in modern ESG investing and when? - Answer In 2004, Un Secretary General, Kofi Annan, engaged financial institutions to take part in an initiative under the UN Global Compact to integrate ESG. Initiative brought about a report entitled 'Who Cares Wins' Combined with the Who Cares Wins report, which other report formed the basis for the launch of two bodies? What are these bodies? - Answer The Freshfields Report launched by the UNEP FI in 2004. These together led to the creation of the PRI at the New York Stock Exchange in 2006 and the Sustainable Stock Exchange Initiative (SSEI) in 2007. What created the Stern Report 2006? What did the report outline? - Answer The Stern Review on the Economics of Climate Change. With no action, the overall cost of climate change would be equivalent to losing at least 5% of GDP each year, now and forever.