1 | P a g e CFA ESG Exam Exam Elaboration 2024/2025 {GRADED A} QUESTIONS AND ANSWERS {100% CORRECT} LATEST UPDATE What is the typical role of the portfolio manager in ESG integration in the portfolio management process? A. Perform credit and ESG analysis of the individual security. B. Estimate the security's intrinsic value based on the security's earnings growth and ESG cash flow profile. C. Widen the focus of research for security analysis and understand how ESG factors contribute to risk -adjusted returns in asset allocation. - CORRECT Widen the focus of research for security analysis and understand how ESG factors contribute to risk -adjusted returns in asset allocation. Which of the following is one of the popular approaches institutional investors appl y to appraise portfolio performance? A. Risk mitigation B. Bayesian inference 2 | P a g e C. Brinson attribution - CORRECT Brinson attribution If an investor believes ESG risk represents a top -down risk factor, then it should be integrated at the: A. asset allocati on level. B. security -selection level. C. company -selection level. - CORRECT asset allocation level. If a portolio includes different asset classes, which of the following statements about ESG integration is most accurate? A. The manager will be using a discretionary approach to portfolio construction. B. ESG integration is marked by a high degree of variation depending on asset class. C. The asset classes will be limited to public equity, fixed income, and infrastructure. - CORRECT ESG integration is marked by a high degree of variation depending on asset class. At the request of the asset owner, an asset manager has revised the equity portion of a client's portfolio to exclude companies involved in the extraction and processing of fossil fuels. The f ossil fuel sector makes up a significant portion of 3 | P a g e the economy and equity markets in the client's country. In light of the revision, the manager should: A. create a new custom benchmark. B. continue to use the current equity market benchmark for consisten cy purposes. C. adopt the ESG equity benchmark from a major market data provider, such as FTSE Russell. - CORRECT create a new custom benchmark. A portfolio manager is creating a bond fund with an ESG tilt. In constructing the portfolio, the manager wil l: A. be limited to short -term maturities to avoid climate risk. B. be able to select green bonds based on a universally accepted ranking system. C. have a smaller investable universe to select from for sovereign bonds compared to corporate bonds. - CORRECT have a smaller investable universe to select from for sovereign bonds compared to corporate bonds A hedge fund manager wanting to offer a sec tor-neutral portfolio has decided to adopt a quantitative ESG long -short equity strategy. To implement this strategy, her exposures will include going: 4 | P a g e A. long the top decile of ESG -rated stocks. B. short the top decile of ESG -rated stocks. C. long the bot tom decile of ESG -rated stocks. - CORRECT long the top decile of ESG -rated stocks. Which of the following statements concerning full ESG integration in a portfolio is most accurate? A. It can be accomplished using negative screening. B. It is based on i nternally developed research and data. C. It may combine quantitative approaches and active engagement. - CORRECT It may combine quantitative approaches and active engagement. Compared to a traditional index - based portfolio, an index -
based portfolio co nstructed by excluding meaningful sectors or industries in an index will most likely have a lower: A. fee structure. B. tracking error. C. level of diversification. - CORRECT level of diversification. Which of these does not describe an approach to ESG integration in a portfolio?
based portfolio co nstructed by excluding meaningful sectors or industries in an index will most likely have a lower: A. fee structure. B. tracking error. C. level of diversification. - CORRECT level of diversification. Which of these does not describe an approach to ESG integration in a portfolio?
