CFA ESG Exam Questions With Verified And Updated Solutions.

CFA ESG Exam Questions With Verified And Updated Solutions. ESG investing - answeran approach to managing assets where investors explicitly incorporate ESG factors into their investment decisions with the long-term return of an investment portfolio in mind aims to correctly identify, evaluate, and price social, environmental and economic risks and opportunities SDG goals - answer1 - no poverty 2 - zero hunger 3- good health and well being 4- education 5- gender equality 6 - clean water and sanitation 7 - affordable and clean energy 8- decent work and economic growth 9- industry, innovation and infrastructure 10-reduced inequalities 11- sustainable cities and communities 12-responsible consumption and production 13-climate action 14-life below water 15-life on land 16-peace, justice and strong institutions 17- partnerships for the goals 1-5: social 6-15: environmental 16-17: macro, governments environmental factors - answerfactors pertaining to the natural world. use of and interaction with renewable and non-renewable resources (e.g. water, minerals, ecosystems, biodiversity) social factors - answerfactors that affect the lives of humans. the category includes measurement of human capital, non-human animals, local communities and clients governance factors - answerfactors that involve issues tied to countries and/or jurisdictions or are common practice in an industry, as well as the inherent interest of broad stakeholder groups stakeholders - answermembers of groups without whose support an organization would cease to exist, as well as communities impacted by companies and regulators triple bottom line - answerthe generation of long-term sustainable returns is dependent on stable, well functioning, and well-governed social, environmental, and economic systems corporate social responsibility - answercorporate sustainability is an approach to create long- term stakeholder value through the implementation of a business strategy that focuses on ethical, social, environmental, cultural and economic dimensions of doing business TBL accounting theory - answerexpands the traditional accounting framework focused only on profit to include two other performance areas: the social and environmental impacts of a company the three bottom lines are referred to as the three Ps - people - planet - profit effective management of a company's sustainability can: - reaffirm the company's license to operate in the eyes of government and civil society - increase efficiency - attend to increasing regulatory requirements - reduce of the probability of fines - improve employee satisfaction and profitability - drive innovation and introduce new product lines responsible investment - answeran umbrella term for the various ways in which investors can consider ESG within security selection and portfolio construction - may combine financial with non-financial outcomes and complements traditional financial analysis and portfolio construction techniques - all forms of responsible investment, except for engagement, are ultimately related to portfolio construction consists of mitigating risky ESG practices in order to protect value. considers how ESG might influence the risk-adjusted return of an asset and the stability of the economy, as well as how investment in, and engagement with, assets and invests can impact society and the environment engagement - answerconcerns whether and how an investor tries to encourage and influence an issuer's behavior on ESG matters reflects active ownership in which the investor seeks to influence a corporation's decisions on matters of ESG, either through dialogue with corporate officers or votes at a shareholder assembly (for equity) efficacy usually depends on: - the scale of ownership (individual investor or collective initiative) - the quality of engagement dialogue and methods used - whether the company has been informed by the investor that divestment is a possible sanction traditional philanthropy - answeraddress societal challenges through the provision of grants, social return only venture philanthropy - answeraddress societal challenges with venture investment approaches, social return focused social investing - answerinvestment with a focus on social and/or environmental outcome and some expected financial return; social return and sub-market financial return impact investment - answerinvestment with an intent to have a measurable environmental and/or social return; social return and adequate financial market rate esg investing - answerenhance long-term value by using esg factors to mitigate risks and identify growth opportunities; financial market return focused on long-term value fully commercial investment - answerlimited or no regard for ESG practices; financial market return only socially responsible investment - answerrefers to approaches that apply social and environmental criteria in evaluating companies investors implementing SRI generally score companies using a chosen set of criteria, usually in conjunction with a sector specific weighting - a hurdle is established for qualification within the investment universe, based either the full universe or sector by sector best in class investment - answerinvolves only selecting companies that overcome a defined ranking hurdle, established using ESG criteria within each sector and industry - companies are scored on a variety of factors that are weighted according to the sector - the portfolio is assembled from a list of qualified companies best in class investment is commonly used in investment strategies that try to maintain certain characteristics of an index - security selection seeks to maintain regional and sectoral diversification along with a similar profile to the parent market cap index while targeting companies with higher ESG ratings sustainable investment - answerrefers to the selection of assets that contribute in some way to a sustainable economy - may include best in class or esg integration, which considers how ESG issues impact a security's risk-return profile thematic investment - answerrefers to selecting companies that fall under a sustainability related theme, such as clean tech, sustainable agriculture, healthcare or climate change mitigation - pick companies within various sectors that are relevant to the theme not all thematic funds are considered to be responsible investments or best in class, depends on the theme of the fund and the ESG characteristics of investee companies green investment - answerrefers to allocating capital to assets that mitigate: - climate change - biodiversity loss - resource inefficiency - other environmental challenges (e.g., recycling, low carbon power generation, pollution, waste management, etc.) - can be considered a sub category of thematic investing and/or impact investing