16: ESG Considerations in Investment Analysis Flashcards
When evaluating ESG initiatives and the effect of investment opportunities, it is important to consider the:
the time horizon of ESG initiative
&
materiality
if a large ESG initiative is set to take effect after the time horizon of the investment, it isn’t impactful
Corporate ownership structures can be classified as:
Concentrated
Dispersed
Hybrid
Most common globally: concentrated
Special voting arrangements provide an advantage to:
Minority shareholders, with special voting arrangements for board nomination & election
Stewardship codes encourage investors to:
exercise their legal rights and increase their level of engagement in corporate governance
Shareholder activism refers to strategies to:
attempt to compel a company to act in a desired manner
In a dual class structure, the shares that hold the most voting power are owned by:
the firm’s founders or management
Resulting in: Principal-principal problem & concentrated ownership & concentrated voting power
CEO Duality occurs when the CEO is also the:
chairperson of the board
Dispersed ownership includes:
many shareholders, none with ability to exercise control
Principal-agent
Concentrated ownership:
Vertical is when ownership involves:
a company/group that has controlling interest in 2 or more holding companies
Concentrated ownership:
Horizantal involves companies with:
mutual business interests (key customers, suppliers) that have cross-holding share arrangements
Board member tenure is considered too long when:
> 10 years
may negatively impact the independence of the board (no new changes)
Weak majority shareholders
&
Strong minority shareholders
principal-principal
In equity analysis, ESG integration is used to identify:
potential opportunities
&
mitigate downside risk
In fixed income analysis, ESG integration is used to identify:
mitigate downside risk
