CFA - ESG Chapter 1(100% Correct)
ESG Investing - ANSWERSan approach to managing assets where investors explicitly
incorporate ESG factors. ESG investing aims to correctly identify, evaluate and price
social, environmental and economic risks and opportunities.
Governance Factors - ANSWERSfactors that involve issues tied to countries or are
common practice in industry, as well as the interest of broader stakeholder groups.
Triple Bottom Line - ANSWERSpeople, planet, profit
Corporate Sustainability - ANSWERSan approach aiming to create long term
stakeholder value through the implementation of business strategy that focuses on the
ethical, social, environmental, cultural, and economic dimensions of doing business.
Best in Class Investment - ANSWERSselecting only the companies that overcome a
defined ranking hurdle, established using ESG criteria within each sector or industry.
Sustainable Investment - ANSWERSthe selection of assets that contribute in some way
to a sustainable economy, i.e. an asset that minimizes natural and social resource
depletion.
Thematic Investment - ANSWERSselecting companies that fall under a sustainability-
related theme, such as clean-tech, sustainable agriculture, healthcare or climate change
mitigation.
Social Investment - ANSWERSallocating capital to assets that address social
challenges, things that address the bottom of the pyramid
Impact Investing - ANSWERSinvestments made with the specific intent of generating
positive, measureable soical and/or environmental impact alngside a financial return.
Freshfield report - ANSWERSargued that integrating ESG considerations into an
investment analysis so as to more reliably predict financial performance is clearly
permissibile and is arguablty required in all jurisdictions.
negative externality - ANSWERSPrivate costs < societal costs, resulting in market
outcomes that are not considered efficient
Internalisation - ANSWERSrefers to all measures (public or private) to ensure that
externalities become reflected in the prices of commercial goods and services.
Define Responsible Investment - ANSWERSa strategy and practice to incorporate esg
factors into investment decisions and active ownership. An umbrella term for all of the
investment approaches mentioned in esg sub sections.
ESG Investing - ANSWERSan approach to managing assets where investors explicitly
incorporate ESG factors. ESG investing aims to correctly identify, evaluate and price
social, environmental and economic risks and opportunities.
Governance Factors - ANSWERSfactors that involve issues tied to countries or are
common practice in industry, as well as the interest of broader stakeholder groups.
Triple Bottom Line - ANSWERSpeople, planet, profit
Corporate Sustainability - ANSWERSan approach aiming to create long term
stakeholder value through the implementation of business strategy that focuses on the
ethical, social, environmental, cultural, and economic dimensions of doing business.
Best in Class Investment - ANSWERSselecting only the companies that overcome a
defined ranking hurdle, established using ESG criteria within each sector or industry.
Sustainable Investment - ANSWERSthe selection of assets that contribute in some way
to a sustainable economy, i.e. an asset that minimizes natural and social resource
depletion.
Thematic Investment - ANSWERSselecting companies that fall under a sustainability-
related theme, such as clean-tech, sustainable agriculture, healthcare or climate change
mitigation.
Social Investment - ANSWERSallocating capital to assets that address social
challenges, things that address the bottom of the pyramid
Impact Investing - ANSWERSinvestments made with the specific intent of generating
positive, measureable soical and/or environmental impact alngside a financial return.
Freshfield report - ANSWERSargued that integrating ESG considerations into an
investment analysis so as to more reliably predict financial performance is clearly
permissibile and is arguablty required in all jurisdictions.
negative externality - ANSWERSPrivate costs < societal costs, resulting in market
outcomes that are not considered efficient
Internalisation - ANSWERSrefers to all measures (public or private) to ensure that
externalities become reflected in the prices of commercial goods and services.
Define Responsible Investment - ANSWERSa strategy and practice to incorporate esg
factors into investment decisions and active ownership. An umbrella term for all of the
investment approaches mentioned in esg sub sections.
