Chapter 1 – Introduction to ESG Investing Flashcards
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.
Which of the following is not an example of a social factor?
(a) Labour rights.
(b) Local communities.
(c) Product safety.
(d) Biodiversity.
(d) Biodiversity.
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 sit 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 typical method by which ESG is reflected in investment approaches?
(a) Integrating ESG 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 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 are the four broad groupings of issues covered by the UN Global Compact?
(a) Environmental, social, governance and impact.
(b) Human rights, labour, environment and anti-corruption.
(c) Poverty, diversity, sustainability and transparency.
(d) Education, development, fairness and independence.
(b) Human rights, labour, environment and anti-corruption.
What is not one of the three P’s in the triple bottom line concept?
(a) People.
(b) Planet.
(c) Profit.
(d) Principle.
(d) Principle.
Which of the following statements is true about best-in-class investment?
(a) It involves selecting only the companies that overcome a defined ranking hurdle.
(b) It cannot be used to maintain key characteristics, such as regional and sectoral diversification
of an index.
(c) It refers to selecting companies that fall under a sustainability-related theme.
(d) It refers to allocating capital to assets that best mitigate climate change.
(a) It involves selecting only the companies that overcome a defined ranking hurdle.
Which of the following sectors is NOT typically excluded by ethical and faith-based investments?
(a) Tobacco.
(b) Alcohol.
(c) Controversial weapons.
(d) Technology.
(d) Technology.
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 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 which way can ESG matters become financially material for a company, and contribute to
reduced risk and enhanced return?
(a) Increased cost and reduced efficiency.
(b) Increased externality.
(c) Increased risk of fines.
(d) Increased adaptability to sustainability megatrends.
(d) Increased adaptability to sustainability megatrends.
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.
According to Oxfam, “reports show that the richest 1% in the world have more than double the wealth of 6.9 billion people”.20 Which megatrend does this refer to?
(a) Emerging and urban.
(b) Technological disruption.
(c) Demographic changes and wealth inequality.
(d) Climate change and resource scarcity.
(c) Demographic changes and wealth inequality.
What is the most probable reason why an investor would engage with policy makers on ESG?
(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 make alpha from ESG
megatrends.
(a) The consideration of ESG-related matters can contribute to the proper functioning of the
financial markets.
