Chapter 8 –ESG Integrated Portfolio Construction and Management Flashcards
Which of these does NOT describe an approach within ESG portfolio integration?
(a) Impact investing.
(b) Positive screening.
(c) Green securitisation.
(d) Negative screening.
(c) Green securitisation.
Which of these topics are not generally expected to be addressed by the portfolio management-related section of an ESG policy?
(a) Stewardship and active engagement efforts.
(b) Corporate social responsibility activities such as community volunteering.
(c) ESG risk within the risk management function.
(d) All of the above.
(b) Corporate social responsibility activities such as community volunteering.
Which of the following is NOT a challenge surrounding ESG?
(a) Data availability and credibility.
(b) Diversification of portfolio.
(c) Characterisation of risk–return profile of ESG funds.
(d) Standardisation of cross-industry ESG definition and measurability metrics.
(b) Diversification of portfolio.
Classes of ESG-oriented fixed income debt issuance include:
(a) Green bonds.
(b) Blue bonds.
(c) Green collateralised loan obligations (CLOs).
(d) All of the above.
(d) All of the above.
A portfolio manager would optimise their portfolio for ESG considerations for the purpose of:
(a) Enhancing the risk–return profile.
(b) Eliminating correlations between risk premia.
(c) Benchmarking.
(d) Tackling skewness in ESG datasets.
(a) Enhancing the risk–return profile.
Which of the following is NOT a reason for an asset owner to implement an exclusionary screening approach?
(a) Reflects a fundamental value of the asset owner’s beneficiaries.
(b) Reflects a global or regional norm.
(c) To improve the portfolio’s diversification benefits.
(d) Simplest approach.
(c) To improve the portfolio’s diversification benefits.
Which of the following does NOT represent the function(s) of ESG indices?
(a) Investing to facilitate cash management at the multi-asset level.
(b) To measure sustainability of non-conventional ESG companies.
(c) To allow seamless deconstruction and reconstruction of benchmarking tools to include ESG
screening.
(d) All of the above.
(d) All of the above
Which of the following is an active quantitative approach to embed ESG within a portfolio?
(a) Weighting ESG as an idiosyncratic factor in a multi-factor stock selection algorithm.
(b) Consideration of ESG scoring and relevant metrics in security-specific investment decisions.
(c) Minimising tracking error against benchmark indices.
(d) Solving the mean-variance optimisation problem to arrive at the best sectors for asset allocation.
(a) Weighting ESG as an idiosyncratic factor in a multi-factor stock selection algorithm.
Amongst 1) Black-Litterman model, 2) Brinson attribution model 3) risk factor attribution, which is/are metric(s) to measure the effectiveness of ESG integration?
(a) 1 and 3.
(b) 2 and 3.
(c) None.
(d) All three.
(b) 2 and 3.
Which of the following statements is false?
(a) ESG integration at the equity selection level, automatically ensures ESG compliance at portfolio and asset-allocation levels.
(b) Lack of standardisation of ESG measurability methods negatively impacts unified investor consensus.
(c) There is little academic proof of positive correlations between ESG integration in the portfolio
and positive returns.
(d) Sub-components of ESG are uncorrelated, orthogonal factors.
(a) ESG integration at the equity selection level, automatically ensures ESG compliance at portfolio and asset-allocation levels.
Which of the following statements is true?
(a) Sovereign debt is susceptible to distortion effects based on ESG ratings.
(b) ESG is a standalone component within the entire investment process.
(c) It is well understood that the long-term returns on equities outweigh the short-term risks associated with the adoption of ESG by companies as well as funds.
(d) Proprietary ESG data is often a real differentiator for investment firms
(a) Sovereign debt is susceptible to distortion effects based on ESG ratings.
Which of the following is NOT a macro-economic climate consideration?
(a) Asset class sensitivity to interest rates.
(b) Heterogeneity and wide-ranging risk/return profile.
(c) Weighted-average carbon intensity for a single issuer position.
(d) Ability to add low or inverse correlation relative to market returns.
(c) Weighted-average carbon intensity for a single issuer position.
What ESG feature is often overlooked in screening approaches for collective investment funds?
(a) Negative screening approaches like ‘socially conscious’.
(b) Position-weighted ESG portfolio score.
(c) Portfolio carbon exposure.
(d) Stewardship.
(d) Stewardship.
Why have passive ESG indices been criticised as being more active than they are presented?
(a) Higher costs than traditional passive indices.
(b) Opaque methodology and construction of ESG indices may include space for human judgment and bias.
(c) Index inclusion may create crowding and overvaluation in specific securities.
(d) Carbon constraints represent a higher tracking error than ESG score constraints.
(b) Opaque methodology and construction of ESG indices may include space for human judgment and bias.
Which of the following by itself is the LEAST naturally-suited investment strategy to accommodate the United Nations’ Sustainable Development Goals (SDGs)?
(a) Thematic investment fund.
(b) Impact fund.
(c) Negative screening.
(d) Positive screening.
(c) Negative screening.
