What is ESG investing?
a. An approach to managing companies that explicitly acknowledges the relevance of environmental, social, and governance factors in corporate decision making
b. An approach to managing assets where investors explicitly acknowledge the relevance of environmental, social, and economic factors in investment decision making
c. An approach to managing assets where investors explicitly acknowledge the relevance of environmental, social, and governance factors in their investment decisions
d. An approach to managing assets where investors explicitly acknowledge the relevance of environmental, social, and economic factors in corporate engagement
c. An approach to managing assets where investors explicitly acknowledge the relevance of environmental, social, and governance factors in their investment decisions
The efficiency of shareholder engagement does not depend on:
a. the scale of ownership of the individual investor or the collective initiative.
b. the quality of the engagement dialogue and the method used.
c. whether divestment is known to be a possible sanction.
d. the amount of security in free float.
d. the amount of security in free float.
In what sense are ESG considerations non-financial?
a. They are difficult to value precisely and difficult to time.
b. They are issues that will never turn into financials.
c. They reside in a different category of performance.
d. They can only ever be measured qualitatively.
a. They are difficult to value precisely and difficult to time.
For which of the following sectors will the management of greenhouse gas emissions be most material?
a. Software
b. Recruitment
c. Power generation
d. Fund management
c. Power generation
Which of the following is not a form of ESG investment?
a. Valuation investment
b. Ethical investment
c. Thematic investment
d. Impact investment
a. Valuation investment
What kinds of situations does the term “negative externality” best describe?
a. Situations where the production of goods induces costs to others that are not reflected in the prices charged for them
b. Situations where the consumption of services induces benefits to others that are not reflected in the prices charged for them
c. Situations where the production or consumption of a product or service’s private price equilibrium cannot reflect the true costs of that product or service for society as a whole
d. Situations where the production or consumption of a product or service’s private price equilibrium cannot reflect the true benefits of that product or service for society as a whole
c. Situations where the production or consumption of a product or service’s private price equilibrium cannot reflect the true costs of that product or service for society as a whole
What is the most probable reason why an investor would engage with policy
makers on ESG issues?
a. The consideration of ESG-related matters can contribute to the proper functioning of the financial markets.
b. Asset owners need regulators to level the playing field in order to be able to increase their percentage of ESG investments.
c. Policy consultations on ESG investing are mandatory in order to ensure that
all perspectives are taken into consideration.
d. ESG investors require a sound and stable financial system in order to create alpha from ESG megatrends.
a. The consideration of ESG-related matters can contribute to the proper functioning of the financial markets.
Which of the following is not a typical method by which ESG factors are reflected
in investment approaches?
a. Integrating ESG factors into investment decision making
b. Engaging actively with companies on ESG matters
c. Engaging in public policy debates on ESG issues
d. Disclosing the investor’s corporate social responsibility activities
d. Disclosing the investor’s corporate social responsibility activities
Which regions manage the highest proportion of sustainable and responsible
investment assets?
a. Asia and North America
b. Australia and the United States
c. Canada (or USA) and Europe
d. Asia and Europe
c. Canada (or USA) and Europe
What is the largest sustainable investment strategy globally?
a. Impact investing
b. Best-in-class
c. ESG integration
d. Negative screening
d. Negative screening
The largest and second largest asset classes that implement responsible investment are, respectively:
a. public equities and fixed income.
b. passive equities and active equities.
c. fixed income and infrastructure.
d. hedge funds and commodities.
a. public equities and fixed income.
Why is ESG investing a concern for investors who are cautious of high tracking error?
a. The perception that exclusion resulting from ESG will distort the weight of sectors and countries in the portfolio in comparison to the benchmark
b. The understanding that exclusion results in fewer available securities to invest in and thus a more limited investment universe
c. The belief that high-performing stocks may be excluded due to negative ESG characteristics, resulting in underperformance in comparison to the
benchmark
d. The awareness that ESG investing requires a redefinition of active risk.
a. The perception that exclusion resulting from ESG will distort the weight of
sectors and countries in the portfolio in comparison to the benchmark
Why are investment mandates important for ESG investing?
a. They define the expectations of asset owners who are signatories of the PRI.
b. They are contracts that define the requirements of the asset manager with regard to ESG issues.
c. They require asset managers to report on the ESG rating of their funds.
d. They have limited the implementation of stewardship.
b. They are contracts that define the requirements of the asset manager with regard to ESG issues.
Which of the following is not an outcome of short-termism?
a. Disproportionate focus on quarterly returns
b. Companies are more willing to take on projects, such as research and development.
c. “Patient capital” is less likely to develop.
d. Less investment in long-term assets, such as infrastructure.
b. Companies are more willing to take on projects, such as research and development.
Which of the following is not among the challenges limiting the development of
ESG investing?
a. Lack of regulation and voluntary initiatives
b. The availability of expertise and skilled individuals
c. The quality of data, research, and analysis
d. Limited tools to assist with portfolio construction and management
a. Lack of regulation and voluntary initiatives
What is the least likely reason why a pension fund trustee may consider ESG investing?
a. Pension fund trustees should act in the interests, including non-financial interests, of pension fund members, and the members have voiced their interest in social and environmental impacts.
b. Pension fund trustees have the fiduciary duty to consider factors that are financially material to the long-term returns of the pension fund.
c. Pension fund trustees risk legal action by not managing climate change–related risks.
d. Pension fund trustees are the ultimate beneficiaries of pension funds and, as a result, should act in their interest.
d. Pension fund trustees are the ultimate beneficiaries of pension funds and, as a result, should act in their interest.
In what way can investment consultants be a barrier to the growth of the ESG investing market?
a. By not considering ESG characteristics of the funds in their screening
b. By setting poor standards for ESG fund labels
c. By short-listing only ESG funds
d. By helping trustees understand their fiduciary duties
a. By not considering ESG characteristics of the funds in their screening
What is the main challenge with policies that are “comply or explain” regarding ESG issues?
a. It is the sole indication that the policy has not reached maturity.
b. It leads to investors challenging the assertion that ESG integration is a requirement.
c. It allows investors to explain all kinds of behavior away.
d. It completely excuses investors from reporting on ESG practices.
b. It leads to investors challenging the assertion that ESG integration is a requirement.
Which matters does the Technical Expert Group (or EU Taxonomy) address?
a. Green bonds and engagement
b. Green bonds and low-carbon benchmarks
c. Carbon disclosure and long-termism
d. Climate risk and fiduciary duty
b. Green bonds and low-carbon benchmarks
Why was the US Department of Labor’s clarification of fiduciary duty in 2015
welcomed by the ESG investing industry?
a. It allowed plans to invest in generating societal benefits in addition to financial return, as long as they were deemed appropriate for the plan’s investment objectives, return, and risk.
b. It provided a standard for economically targeted investments (ETIs).
c. It specified that as long as the expected rate of return was commensurate with the rates of return offered by alternative investments with similar risk characteristics, ETIs were compatible with fiduciary duty.
d. It incentivized pension funds subject to ERISA to invest in ETIs.
a. It allowed plans to invest in generating societal benefits in addition to financial return, as long as they were deemed appropriate for the plan’s investment objectives, return, and risk.
What is the highest risk to the industry regarding greenwashing?
a. The overestimate of the ESG investing market
b. The disappointment of clients with quarterly financial returns
c. The negative impact on the industry’s credibility
d. The increased challenge to standardization
c. The negative impact on the industry’s credibility
Which of the following has the highest potential to contribute to global decarbonization?
a. The electrification of industrial processes, powered by clean energy sources
b. Coal gasification combined with carbon capture and storage
c. A global shift to a flexitarian diet
d. Shifting all passenger cars to hydrogen fuel cells
b. Coal gasification combined with carbon capture and storage
What is the most common method of waste management globally?
a. Recycling
b. Incineration
c. Landfills
d. Treatment
c. Landfills
In relation to shadow carbon pricing, which of the following is incorrect?
a. Shadow carbon pricing is used to understand the potential impact of external prices on the profitability of a project.
b. Shadow carbon pricing is used to reduce a business’s carbon footprint.
c. Shadow carbon pricing is used to reveal hidden risks and to factor these into future valuations and estimates of capital expenditure.
d. Shadow carbon pricing is used to create a theoretical cost per tonne of carbon emissions by establishing a business’s internal price on carbon.
b. Shadow carbon pricing is used to reduce a business’s carbon footprint.
