ESG-INVESTING STUDY TOOL - DUMPS ESG-INVESTING DISCOUNT

ESG-Investing Study Tool - Dumps ESG-Investing Discount

ESG-Investing Study Tool - Dumps ESG-Investing Discount

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CFA Institute ESG-Investing Exam Syllabus Topics:

TopicDetails
Topic 1
  • Social Factors: This section focuses on analyzing social factors, including their systemic effects and material impacts. This section also provides methodologies for assessing social risks and opportunities at country, sector, and organizational levels.
Topic 2
  • ESG Integrated Portfolio: This section discusses the application of ESG analysis across multiple asset classes, exploring strategies for incorporating ESG criteria into portfolio management.
Topic 3
  • Investment Mandates and Portfolio Analytics: This domain explains to ESG Analysts the importance of constructing mandates to support effective ESG investment results. This section highlights key aspects, such as transparency and accountability, which are essential for asset owners and intermediaries to align portfolios with ESG priorities.
Topic 4
  • Engagement and Stewardship: This section explores the foundations of investor engagement and stewardship, emphasizing their importance and practical application.

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CFA Institute Certificate in ESG Investing Sample Questions (Q106-Q111):

NEW QUESTION # 106
Which of the following transition risks is most likely associated with increased environmental standards?

  • A. Policy risks
  • B. Legal risks
  • C. Technology risks

Answer: A

Explanation:
Policy risks are most likely associated with increased environmental standards. Here's a detailed explanation:
* Definition of Transition Risks: Transition risks refer to the financial risks that result from the transition to a lower-carbon economy. These can arise from policy changes, legal actions, technology developments, and market shifts.
* Policy Risks and Environmental Standards: Policy risks specifically relate to changes in regulations and policies aimed at addressing climate change and environmental issues. Increased environmental standards often involve stricter regulations on emissions, waste management, resource use, and other environmental impacts.
* Impact of Policy Risks: Companies may face increased costs of compliance, the need for new investments to meet regulatory requirements, and potential fines or sanctions for non-compliance. These policy changes can significantly affect business operations and financial performance.
* Comparison with Other Risks:
* Legal Risks: Legal risks involve litigation and legal actions related to environmental damages or failure to comply with environmental laws. While related, they are distinct from policy risks, which are driven by regulatory changes.
* Technology Risks: Technology risks involve the adoption of new technologies and the potential for current technologies to become obsolete. While technology plays a role in meeting increased
* environmental standards, policy risks are more directly linked to regulatory changes.
* CFA ESG Investing References:
* The CFA Institute explains that policy risks are a significant component of transition risks, particularly when governments implement stricter environmental standards to combat climate change (CFA Institute, 2020).
* Increased environmental standards often lead to policy risks as companies must adapt to new regulatory landscapes, making it the most relevant type of transition risk in this context.
By understanding these risks and their implications, investors can better manage their portfolios in the face of evolving environmental standards and regulatory changes.


NEW QUESTION # 107
To reflect weak governance of a private equity holding, an analyst's model should most likely include a reduction in the holding's:

  • A. Bankruptcy risk
  • B. Terminal value
  • C. Cost of capital

Answer: B

Explanation:
When a private equity holding demonstrates weak governance, it may lead to lower long-term growth potential and higher risk. This is reflected in a reduced terminal value in the analyst's valuation model, indicating lower anticipated future cash flows or exit value.ESG Reference: Chapter 7, Page 259 - ESG Analysis, Valuation & Integration in the ESG textbook.


NEW QUESTION # 108
An advantage of the carbon footprinting approach to environmental risk analysis is that it allows for:

  • A. comparisons to global benchmarks.
  • B. measuring and valuing nature's role in decision-making.
  • C. measuring potential investment risks related to the physical impacts of climate change.

Answer: A

Explanation:
Carbon footprinting allows investors and companies to compare their emissions to global benchmarks, providing a standard metric for measuring environmental performance and identifying areas for improvement.
(ESGTextBook[PallasCatFin], Chapter 3, Page 139)


NEW QUESTION # 109
A challenge to ESG integration at the asset allocation level when using mean-variance optimization is that it:

  • A. requires specialist knowledge to make informed judgments about future risk
  • B. could introduce an additional source of estimation errors due to the need for dynamic rebalancing
  • C. is highly sensitive to baseline assumptions

Answer: C

Explanation:
A challenge to ESG integration at the asset allocation level when using mean-variance optimization is that it is highly sensitive to baseline assumptions.
* Baseline Assumptions: Mean-variance optimization relies on assumptions about expected returns, volatilities, and correlations among assets. Small changes in these inputs can lead to significantly different asset allocation outcomes.
* Estimation Risk: The sensitivity to assumptions increases the risk of estimation errors, which can result in suboptimal asset allocation decisions and increased portfolio risk.
* ESG Data Integration: Integrating ESG factors adds another layer of complexity, as ESG data can be inconsistent or incomplete, further complicating the optimization process.
CFA ESG Investing References:
The CFA Institute's materials on portfolio management and asset allocation discuss the challenges of mean-variance optimization, including its sensitivity to baseline assumptions and the difficulties in integrating qualitative ESG data into quantitative models.


NEW QUESTION # 110
A discount retailer facing a consumer boycott due to its poor working conditions will most likely face:

  • A. greater operating costs
  • B. significant liabilities
  • C. an adverse impact on revenues

Answer: C

Explanation:
A discount retailer facing a consumer boycott due to poor working conditions will most likely face an adverse impact on revenues.
Adverse impact on revenues (C): A consumer boycott directly affects the retailer's sales and revenues. When consumers choose not to purchase from the retailer due to poor working conditions, the retailer experiences a decrease in sales, which negatively impacts its revenue stream. This can also affect the retailer's market share and brand reputation.
Significant liabilities (A): While poor working conditions might eventually lead to liabilities such as legal fines or compensation claims, the immediate effect of a consumer boycott is more directly felt in reduced revenues.
Greater operating costs (B): Poor working conditions can indirectly lead to higher operating costs due to potential inefficiencies, higher turnover, or the need to improve conditions in response to negative publicity.
However, the primary immediate impact of a consumer boycott is on revenues.
References:
CFA ESG Investing Principles
Case studies of consumer boycotts and their financial impacts on companies


NEW QUESTION # 111
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