CFA ESG Certification - Chapter 1
Correct 100%
Chapter 1 Structure (update) - ANSWER What 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 - ANSWER An 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 - ANSWER Factors pertaining to the natural world. Including the use
of and interacting with, renewable and non-renewable resources
(S) Social - ANSWER Factors that affect the lives of humans. The category includes the
management of human capital, non-human animals, local communities.
, (G) Governance - ANSWER Factors 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
Thematic Investment - ANSWER Refers to selecting companies that fall under a
sustainability-related theme, such as clean-tech, sustainable ag, healthcare or climate
change mitigation
Green investment - ANSWER Refers to allocating capital to assets that mitigate:
- Climate change
- Biodiversity loss
- Resource inefficiency
- Other environmental challenges
Is a broad subcategory of thematic or impact investing
Green Bonds - ANSWER A type of fixed income instrument that is specifically
earmarked to raise money for climate and environmental projects, are commonly used
in green investing.
Social Investment - ANSWER Refers to allocating capital to assets that address social
challenges. Products that address the Bottom of the Pyramid (BOP) BOP = poorest two
thirds of economic human pyramid
Impact Investment - ANSWER Refers to investments made with the specific intent of
generating positive, measurable social and/or environmental impact alongside a
financial return*
Ethical Investment - ANSWER Investing in line with certain principles, often using
negative screening, to avoid investing in companies whose products and services are
deemed morally objectionable
Shareholder Engagement - ANSWER Active ownership by investors which investors
seek to influence a corporations decision making on matters of ESG, through dialogue
with corporate officers or votes at a shareholder assembly.
UNEP - ANSWER ***
Alpha - ANSWER ***
Financial Stability Board (FSB) - ANSWER International body that monitors and makes
recommendations about the global financial system. Identified climate change as a risk
Stockholm resilience Centre - ANSWER Nine planetary boundaries within which
humanity can continue to develop for generations to come.
Correct 100%
Chapter 1 Structure (update) - ANSWER What 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 - ANSWER An 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 - ANSWER Factors pertaining to the natural world. Including the use
of and interacting with, renewable and non-renewable resources
(S) Social - ANSWER Factors that affect the lives of humans. The category includes the
management of human capital, non-human animals, local communities.
, (G) Governance - ANSWER Factors 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
Thematic Investment - ANSWER Refers to selecting companies that fall under a
sustainability-related theme, such as clean-tech, sustainable ag, healthcare or climate
change mitigation
Green investment - ANSWER Refers to allocating capital to assets that mitigate:
- Climate change
- Biodiversity loss
- Resource inefficiency
- Other environmental challenges
Is a broad subcategory of thematic or impact investing
Green Bonds - ANSWER A type of fixed income instrument that is specifically
earmarked to raise money for climate and environmental projects, are commonly used
in green investing.
Social Investment - ANSWER Refers to allocating capital to assets that address social
challenges. Products that address the Bottom of the Pyramid (BOP) BOP = poorest two
thirds of economic human pyramid
Impact Investment - ANSWER Refers to investments made with the specific intent of
generating positive, measurable social and/or environmental impact alongside a
financial return*
Ethical Investment - ANSWER Investing in line with certain principles, often using
negative screening, to avoid investing in companies whose products and services are
deemed morally objectionable
Shareholder Engagement - ANSWER Active ownership by investors which investors
seek to influence a corporations decision making on matters of ESG, through dialogue
with corporate officers or votes at a shareholder assembly.
UNEP - ANSWER ***
Alpha - ANSWER ***
Financial Stability Board (FSB) - ANSWER International body that monitors and makes
recommendations about the global financial system. Identified climate change as a risk
Stockholm resilience Centre - ANSWER Nine planetary boundaries within which
humanity can continue to develop for generations to come.
