CFA ESG Certification - Chapter 1(100%
Correct!!)
Chapter 1 Structure (update) - ANSWERSWhat is ESG
Types of Responsible Investment
- SRI
- Best-in-class
- Sustainable investment
- Thematic investment
- Green investment
- Social investment
- impact investment
- ethical investment
Why integrate ESG
Macro Debate: Risk Perspective
- Fiduciary Responsibility Perspective
- Economics Perspective
- Impact and Ethics Perspective
- Client Demand Perspective
- Regulatory Perspective
Financial Materiality
- Efficiency and productivity
- Reduced risk of fines and intervention
- Reduced negative Externalities
- Improved ability to benefit from sustainable megatrends
Challenges
Financial Performance
Putting ESG into practice
Key initiatives
ESG Investing - ANSWERSAn approach to managing assets where investors explicitly
incorporate environmental, social, and governance factors in their investment decisions
with the long-term return of an investment portfolio in mind
(E) Environmental - ANSWERSFactors pertaining to the natural world. Including the use
of and interacting with, renewable and non-renewable resources
(S) Social - ANSWERSFactors that affect the lives of humans. The category includes
the management of human capital, non-human animals, local communities.
, (G) Governance - ANSWERSFactors that involve issues tied to countries and or
jurisdictions, or are common practice in an industry, as well as the interest of broader
stakeholder groups
Stakeholder - ANSWERSMembers of groups without whose support an organization
would cease to exist, as well as communities impacted by companies and regulators
Triple Bottom Line (TBL) - ANSWERSCoined by John Elkington. States that the
generation of long-term sustainable returns is dependent on stable, well-functioning,
and well-governed social and economic systems.
Was later recalled
Also became an accounting framework known as the 'Three Ps' People Planet Profit
Corporate Social Responsibility - ANSWERSBroad business concept that describes a
company's commitment to conducting its business in an ethical way. Commonly
achieved through philanthropy
Corporate Sustainability - ANSWERSAn approach aiming to create long-term
stakeholder value through the implementation of a business strategy that focuses on the
ethical, social, environmental, and cultural dimensions of doing business
Responsible investment - ANSWERSA strategy and practice to incorporate ESG factors
into investment decisions and active ownership Used as an umbrella term for some/all
investment approached below
Socially Responsible investment (SRI) - ANSWERSRefers to approaches that apply
social and environmental criteria in evaluating companies. Hurdle = established for a
qualification within investment universe. Based either on the full universe or sector by
sector. The first screen for SRI qualified companies
Best-in-class Investment - ANSWERSInvolves selecting only the companies that
overcome a defined ranking hurdle, established using ESG criteria within each sector or
industry.
Sustainable investment - ANSWERSRefers to the selection of assets that contribute in
some way to a sustainable economy, ie. an asset that minimizes natural and social
resource depletion
Thematic Investment - ANSWERSRefers to selecting companies that fall under a
sustainability-related theme, such as clean-tech, sustainable ag, healthcare or climate
change mitigation
Green investment - ANSWERSRefers to allocating capital to assets that mitigate:
- Climate change
- Biodiversity loss
- Resource inefficiency
Correct!!)
Chapter 1 Structure (update) - ANSWERSWhat is ESG
Types of Responsible Investment
- SRI
- Best-in-class
- Sustainable investment
- Thematic investment
- Green investment
- Social investment
- impact investment
- ethical investment
Why integrate ESG
Macro Debate: Risk Perspective
- Fiduciary Responsibility Perspective
- Economics Perspective
- Impact and Ethics Perspective
- Client Demand Perspective
- Regulatory Perspective
Financial Materiality
- Efficiency and productivity
- Reduced risk of fines and intervention
- Reduced negative Externalities
- Improved ability to benefit from sustainable megatrends
Challenges
Financial Performance
Putting ESG into practice
Key initiatives
ESG Investing - ANSWERSAn approach to managing assets where investors explicitly
incorporate environmental, social, and governance factors in their investment decisions
with the long-term return of an investment portfolio in mind
(E) Environmental - ANSWERSFactors pertaining to the natural world. Including the use
of and interacting with, renewable and non-renewable resources
(S) Social - ANSWERSFactors that affect the lives of humans. The category includes
the management of human capital, non-human animals, local communities.
, (G) Governance - ANSWERSFactors that involve issues tied to countries and or
jurisdictions, or are common practice in an industry, as well as the interest of broader
stakeholder groups
Stakeholder - ANSWERSMembers of groups without whose support an organization
would cease to exist, as well as communities impacted by companies and regulators
Triple Bottom Line (TBL) - ANSWERSCoined by John Elkington. States that the
generation of long-term sustainable returns is dependent on stable, well-functioning,
and well-governed social and economic systems.
Was later recalled
Also became an accounting framework known as the 'Three Ps' People Planet Profit
Corporate Social Responsibility - ANSWERSBroad business concept that describes a
company's commitment to conducting its business in an ethical way. Commonly
achieved through philanthropy
Corporate Sustainability - ANSWERSAn approach aiming to create long-term
stakeholder value through the implementation of a business strategy that focuses on the
ethical, social, environmental, and cultural dimensions of doing business
Responsible investment - ANSWERSA strategy and practice to incorporate ESG factors
into investment decisions and active ownership Used as an umbrella term for some/all
investment approached below
Socially Responsible investment (SRI) - ANSWERSRefers to approaches that apply
social and environmental criteria in evaluating companies. Hurdle = established for a
qualification within investment universe. Based either on the full universe or sector by
sector. The first screen for SRI qualified companies
Best-in-class Investment - ANSWERSInvolves selecting only the companies that
overcome a defined ranking hurdle, established using ESG criteria within each sector or
industry.
Sustainable investment - ANSWERSRefers to the selection of assets that contribute in
some way to a sustainable economy, ie. an asset that minimizes natural and social
resource depletion
Thematic Investment - ANSWERSRefers to selecting companies that fall under a
sustainability-related theme, such as clean-tech, sustainable ag, healthcare or climate
change mitigation
Green investment - ANSWERSRefers to allocating capital to assets that mitigate:
- Climate change
- Biodiversity loss
- Resource inefficiency
