Chapter 1 - Objectives

Question 1

The key agency relationship in FM is between?

Answer 1

Shareholders (principal) and directors (agents)

Question 2

What is an agency cost?

Answer 2

When directors act in their own best interests rather than the shareholders

Question 3

Whilst wealth maximisation is a primary objective for a business, there is a recognition of other objectives i.e sustainability. The two fundamental aspects of sustainability are?

Answer 3

Impacts - the impact of an organisations actions/decisions on sustainability

Dependencies - the effects of sustainability on an organisation and its ability to generate value.

Question 4

Define sustainability

Answer 4

The ability to meet needs of the present without compromising the ability of future generations

Question 5

What is double materiality?

Answer 5

Considering sustainability issues that affect financial risks, and also people and its environment.

Question 6

What is the key performance indicator of sustainability?

Answer 6

ESG - a set of criteria used to measure and report sustainability.

Orgs are encourage to report on their environmental impacts and resulting financial risks

Question 7

Give examples of KPIs in relation to ESG.

Answer 7

Environmental - e.g carbon emissions

Social - % of employees attending training courses

Governance - management diversity

Question 8

What are the key challenges with ESG reporting?

Answer 8

Lack of assurance - these are not independently verified

Green washing - false information

ESG is difficult to measure and can sometimes be impossible to quantify