ESG-Investing Exam, New ESG-Investing Study Guide

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CFA Institute ESG-Investing Exam Syllabus Topics:

Topic	Details
Topic 1	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 2	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 3	ESG Analysis, Valuation, and Integration: Targetted for ESG Consultants, this domain covers methods for embedding ESG factors into the investment process, the obstacles that may arise, and the impact of ESG considerations on valuations across various asset classes.
Topic 4	Overview of ESG Investing and the ESG Market: This section tests ESG Investment Managers and delves into responsible investment strategies, examining how environmental, social, and governance (ESG) elements shape the investment ecosystem.
Topic 5	Environmental Factors: This section examines environmental elements, covering systemic links, material impacts, and major trends for ESG Consultants. This section also reviews techniques for evaluating environmental impacts at the national, sectoral, and organizational levels.

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New ESG-Investing Study Guide | ESG-Investing Latest Questions

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CFA Institute Certificate in ESG Investing Sample Questions (Q379-Q384):

NEW QUESTION # 379
When integrating ESG analysis into the investment process, deriving correlations on how ESG factors might impact financial performance over time is an example of a:

A. systematic approach.
B. thematic approach.
C. passive approach.

Answer: A

Explanation:
When integrating ESG analysis into the investment process, deriving correlations on how ESG factors might impact financial performance over time is an example of a systematic approach. This approach involves incorporating ESG data into financial models and investment strategies in a structured and consistent manner. It enables investors to systematically assess the impact of ESG factors on financial performance and make informed investment decisions based on these insights.

NEW QUESTION # 380
According to the Taskforce on Nature-related Financial Disclosures (TNFD), the four realms of nature include

A. land
B. biodiversity
C. pollution.

Answer: A

Explanation:
According to the Taskforce on Nature-related Financial Disclosures (TNFD), the four realms of nature include land, which is a critical aspect of the natural environment that businesses must consider in their sustainability and risk management strategies.
Step-by-Step Explanation:
TNFD Framework:
The TNFD was established to develop a framework for organizations to report and act on evolving nature- related risks. This framework is intended to help financial institutions and companies manage risks related to biodiversity and natural capital.
The CFA Institute highlights that the TNFD framework is essential for integrating nature-related financial risks into corporate and investment decision-making processes.
Four Realms of Nature:
The TNFD identifies four realms of nature that are critical for understanding and managing nature-related risks:
Land
Oceans
Freshwater
Atmosphere
These realms encompass the major natural systems that support life on Earth and are crucial for maintaining biodiversity and ecosystem services.
Significance of Land:
Land is a fundamental realm as it encompasses terrestrial ecosystems, forests, and agricultural areas. It is crucial for biodiversity, carbon sequestration, and providing resources for human activities.
The CFA Institute notes that sustainable land management practices are vital for mitigating risks related to deforestation, habitat loss, and soil degradation, which can have significant financial and environmental impacts.
Integration into ESG Strategies:
Companies and investors are increasingly recognizing the importance of integrating land-related risks into their ESG strategies. This includes assessing the impacts of their operations on land use, biodiversity, and ecosystem health.
The TNFD framework provides guidance on how to assess and report on land-related risks, helping organizations to enhance their sustainability practices and improve transparency.
References:
CFA Institute, "Environmental, Social, and Governance Issues in Investing: A Guide for Investment Professionals." Taskforce on Nature-related Financial Disclosures (TNFD) documents, which outline the four realms of nature and their significance for ESG integration.

NEW QUESTION # 381
Which of the following statements best describes the greenium?

A. The increased return required by investors to hold green bonds
B. The lower yield investors accept to hold green bonds compared to conventional bonds
C. The premium paid by investors to exclude fossil fuel stocks from their portfolio

Answer: B

Explanation:
Thegreeniumrefers to thelower yield ("green premium") investors accept when purchasing green bonds, as they prioritize sustainability over purely financial returns.
* Green bonds often trade at lower yields than conventional bonds due to high demand from ESG- conscious investors.
* Increased return required (A) is incorrect because green bonds generally offer lower yields.
* Excluding fossil fuels (C) is part of negative screening, not greenium.
References:
* Climate Bonds Initiative Greenium Research
* Principles for Responsible Investment (PRI) Green Bond Market Analysis
* CFA Institute ESG Fixed Income Report
========

NEW QUESTION # 382
Avoiding long term transition risk can most likely be achieved by:

A. reducing exposure to companies exposed to extreme weather events
B. investing in companies with stranded assets.
C. divesting highly carbon-intensive investments in the energy sector.

Answer: C

Explanation:
Avoiding long-term transition risk can most likely be achieved by divesting highly carbon-intensive investments in the energy sector. Here's why:
Long-term Transition Risk:
Transition risk refers to the financial risks associated with the transition to a low-carbon economy. Carbon-intensive investments are particularly vulnerable as regulations and market preferences shift towards cleaner energy.
Divesting from these investments reduces exposure to potential losses from stranded assets and regulatory penalties.
This strategy aligns with the need to mitigate long-term transition risks, ensuring portfolio resilience as the global economy transitions to sustainable energy sources.
CFA ESG Investing Reference:
The CFA ESG Investing curriculum discusses strategies for managing transition risks, highlighting divestment from carbon-intensive sectors as an effective approach to mitigate long-term risks and align with sustainable investment practices.

NEW QUESTION # 383
Which of the following investor types most likely prefers exclusions as an ESG approach?

A. General insurers
B. Life insurers
C. Foundations

Answer: C

Explanation:
Step 1: Understanding ESG Approaches
ESG approaches include exclusions, where certain investments are excluded from a portfolio based on ethical, moral, or ESG criteria.
Step 2: Investor Types and ESG Preferences
* Life Insurers: Focus more on long-term liabilities and often integrate ESG factors without strict exclusions.
* Foundations: Tend to have strong ethical and mission-driven mandates, leading them to prefer exclusions to ensure investments align with their values.
* General Insurers: Similar to life insurers, they may integrate ESG factors but do not typically rely on exclusions as their primary approach.
Step 3: Verification with ESG Investing References
Foundations are mission-driven and often prefer exclusions to ensure their investments align with their ethical and social objectives: "Foundations are more likely to adopt exclusionary approaches to ensure their investments reflect their mission and ethical values".
Conclusion: Foundations most likely prefer exclusions as an ESG approach.

NEW QUESTION # 384
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ESG-Investing Exam, New ESG-Investing Study Guide

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CFA Institute Certificate in ESG Investing Sample Questions (Q379-Q384):

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