Chapter 2 Test Flashcards
Which regions manage the highest proportion of sustainable and responsible investing assets?
(c) USA and Europe.
What is the largest sustainable investment strategy globally?
(d) Negative screening.
The largest and second largest asset classes, which implement responsible investment, are respectively…
(a) …public equities and fixed income.
Why are investment mandates important for ESG investing?
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(b) They are contracts which define the requirements of the asset manager with regards to ESG.
Which of the following is not an outcome of short-termism?
(b) Companies are more willing to take on projects, such as research and development.
How are pension fund members most likely to influence responsible investment?
(d) Their ethical preferences may be taken into account.
Which of the following is not among the challenges limiting the development of ESG investing?
(a) Lack of regulation and voluntary initiatives.
In what way can an investment consultant be a barrier to the growth of the ESG investing market?
(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?
(b) It leads to investors challenging the assertion that ESG integration is a requirement.
What is the highest risk to the industry regarding greenwashing?
(c) The negative impact on the industry’s credibility.
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.
Which matters does the EU Taxonomy address?
(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.
In what way can stock exchanges support the advancement of ESG investing?
(b) By increasing the requirement on the disclosure of ESG data by listed securities.
What is the least likely reason why a pension fund trustee may consider ESG investing?
(d) Pension fund trustees are the ultimate beneficiaries of pension funds and, as a result, should act in their interest.
