Question Examples, Meta Studies , etc Flashcards
Between 2006 and 2010, compared to control companies, the top 100 sustainable global companies
experienced significantly higher:
Sales Growth
ROA
Profits
Cash flows from certain operations
Inst Inv integrate ESG considerations into their investment decision making by using which factors
1) Strategic Asset Allocation
2) Investment Mandates
3) Applying a filter based on Ratings
4) Integrating into Financial Models
5) Using ESG factors to find investment opportunities
What type of private investors are under the jurisdiction of the Dept of Labor in the US and law are they subject to?
Pension plans are subject to ERISA which influences the private and private sectors as a whole
Where was the Kay review published and what were its two primary findings?
1)emphasised the need for a culture of long-term decision-making, trust
and stewardship to protect savers’ interests.
2) the essential role that
fiduciary duties play in the promotion of such a culture.
Also Short-
termism may leave companies less willing to take on projects (such as research and development) that may take multiple years – and patient capital – to develop. Furthermore, short-term investment strategies tend to ignore factors that are considered more long-term, such as ESG factors.
What was the aim of Technical Report on EU Taxonomy?
Improve the shared investor understanding on which business activities and sectors contribute to climate change mitigation and adaptation.
What is the purpose of the EU Shareholder Rights Directive
Seeks to improve the level and
quality of investor engagement with their investee companies by aligning executive pay with corporate
performance
AND increasing disclosure on how an asset manager’s investment decisions contribute to the long-term performance of investee companies.
IWho introduced the concept of sustainable development and how was it first communicated?
UN through the commissioning of the Brundtlandt Report
Achieving a balance between GHG going in and out of the atmosphere is called what? When must this be reached?
New Zero by 2050 limit the rise in global temps to 1.5 C
Who/when was the first climate change bankrupcy?
PG&E in 2019 from Cali wildfires
What are the 4 broad groupings defined in the UN Global Compact and what is it?
UN Global Compact was launched in 2000
as a collaboration between leading companies and the UN.
claims to be the largest corporate sustainability initiative in the world with over 8,000 corporate signatories
Broad categories include Human rights, labour, environment and anti-corruption.
Which of the following is not among the challenges limiting the development of ESG
investing?
Lack of regulation or voluntary initiatives
What is the highest risk to the industry regarding greenwashing?
Negative impact on credibility of the industry
Environmental social trends with social impact include?
Climate Change, Transition risk, Water Scarcity and Mass Migration
Examples of External Stakeholders?
Stakeholder opposition, product liability, Social Opps, Animal Welfare
What is the Plaform Living Wage Financial?
Coaltion of Dutch Financial Institutions encouraging investee companies to address the non-payment of living wages in the supply chain
A company that plans to develop on ancestral land or use resources of a territory owned by
indigenous people, should establish what?
Free Prior Informed Consent
Different elements of EU Taxonomy screening are?
1) Substantially contribute to one of 6 environmental objectives
2)Do no significant harm to the other 5
3) Comply with minimum safeguards such as OECD for MEs or UN Guiding Principles on Human Rights
Modern UK Slavery Act mandates what?
For medium and large enterprises to provide a slavery and human trafficking statement each year which sets out steps to ensure modern slavery is not occurring in a business or its supply chain
FAIRR
Farm Animal INvestment Risk and Return is an investor initiative focused on particularly on the increased prevalence of antimicrobial resistance due to intensive farming practices and poor antibiotic
stewardship.
Access to Medicine Index
The tool analyses how 20 of the
world’s largest pharmaceutical companies are addressing access to medicine in 106 low- to middle-income
countries for 82 diseases,
What is the Corp Rights Benchmark?
a collaboration led by investors and civil society
organisations dedicated to creating the first open and public benchmark of corporate human rights
performance.
The CHRB provides a comparative snapshot year-on-year of the largest companies on the planet, looking at the
policies, processes and practices they have in place to systematise their human rights approach
Whats included in Labour Rights?
- freedom of association and protection of the right to organise;
- right to organise and collective bargaining;
- forced labour and abolition of forced labour;
- minimum age;
- worst forms of child labour;
- equal remuneration
- Discrimination
The world’s first formal Corporate Governance Code emerged in the UK when and why?
1992 following the Caparo and POlly Peck scandals
What are the two questions investors need to ask regarding a companies board?
1) Is there the right mix of skills and experience to properly oversee the next stage of development at this business?
2)Is there also the right dynamic that enables the views of skilled individuals to be properly heard?
Which tier board structure is most typical, what countries generally have 1 exec on board operating as CEO and Chair? How is Japan unique?
Single Tier is most common globally including USA, UK, France, Japan. USA and FRance have 1 exec in leadership of company and board. Japan’s single tier boards are dominated by Directors with only a handful of non-execs
Shareholders today have more insight than before into the work of auditors because of the new enhanced
auditor reports, what are the three elements of reporting?
1) SCOPE - how many parts of the company have been covered and to what depth
2) MATERIALITY - Quantitative measure of issue and circumstance
3) KEY AUDIT MATTERS - key areas of judgement in the accounts
What element of executive pay is likely to be linked to ESG Performance?
Annual Bonus
What report formally called for the Financial Reporting Council (FRC) to issue a
stewardship code to provide a framework for shareholder engagement? When was it published?
Walker Report in 2008
What are the behavioural challenges in working as part of investor coalitions?
1) Competition
2) Consensus
3) Conflicts of Interests
What is a new area of focus in UK Stewardship Codes 2020?
Outcomes
When might escalation NOT be the right step in an engagement that has made no progress?
When the objective does not warrant excess activity
What is a framework for evaluating different forms of tangible or intangible capital?
IIRC - International Integrated Reporting Council Framework
Companies with High carbon intensity may be subject to the the following financial repurcussions:
1) change in debt rating
2) higher taxes in the future
3)increased cost of debt
4) lower value of debt
5) increased balance sheet risk
Name major ESG ratings providers?
Sustainalytics, MSCI, KLD, Inrate, Bloomberg, Asset4, Morningstar, RealIMpactTracker, RepRisk
What biases are rating subject to?
Geography, Sector, Company Size
What is the Net Zero Benchmark?
The Net Zero Company Benchmark was developed and launched in 2020 by Climate Action 100+,
an investor-led initiative that engages with the world’s largest corporate greenhouse gas emitters to
drive action.
According to statistics maintained by the Global Sustainable Investment Alliance (GSIA), what ESG strategy represents the largest portion of dedicated, ESG-screened assets under management (AUM)?
Execlusionary aka negative screening or ethical.
This is also the oldest form.
What are social bonds?
Social bonds fund projects that provide access to essential services, infrastructure and
social programmes to underserved people and communities. Examples include projects
providing:
* affordable housing;
* microfinance lending;
* healthcare; and
* education
What are the World Bank Governance INdicators?
- Control of Corruption
- Political Stability
- Govt Effectivness
- Rule of Law
- Regulatory Ability
- Accountabiligty
What is the purpose of of EU legislation like the Non-
Financial Reporting Directive (NFRD)?
Improve corporate disclosure
What are the 3 major groupings of EU SFDR in terms of organizing sustainability products?
1) Dark Green - sustainability at its core
2) Light Green - more broadly promote E &S Characteristics
3) Other - does not activitly promote or integrate sustainability
4 commone thematic investing themes and what is the biggest drawback to this type of investing?
clean energy
water
demographic change
healthcare
Lacks portfolio diversification
Whats the appeal of portfolio optimization approach to ESG Integration?
P Optimize alows portfolio managers to target a specific ESG rating or environmental objective, such as carbon emissions reduction, while simultaneously managing the portfolio to tracking error range.
What is not a challenge surrounding ESG?
Diversification of Portfolio
Like equities, what asset class is subject to ESG Distortions?
Sovereign Debt
What is the PLSA and what are the 3 requirements for its Stewardship Checklist?
Pensions and Lifetime Savings Association
1) Be clear about how stewardship fits within their investment strategy, policy and how it helps meet their investment objectives.
2) Seek to ensure that fund managers and other service providers integrate long-term ESG factors into their investment approach.
3) With with managers to consider the level of resource available for stewardship activities, which assets are covered and what the appropriate structure is.
ESG Strats like active ownership are more relevant to which types of strategies?
Fundamental Equities
Issues that may give rise to concern for AO’s that follow Brunel Asset Manager Accords are?
1) Persistent failure to adhere to the stated investment principles
2) Change in style
3) Lack of understanding of reasons for underperformance
4) Failure to manage risk including taking too little risk
5) Loss of key personnel
6) Change to governance
7) Regulatory issues
8) Changes in Conflicts of Interest
What are McKinsey’s proposed dimensions of sustainable investing practices?
1) Investment Mandate
2) Investment Beliefs
3) Investment Operation Enablers including tools, resources, reporting and performance measurement
Example of Climate Change Mitigation?
Retrofitting a Building aka using less energy
Define socially responsible investing?
Investment strategy which seeks to consider both financial return and social/environmental good
Which ESG provider does not provide company level ESG ratings?
Real Impact Tracker
An analyst valuing a company against its peers is most likely to make which of the
following adjustments to the price-to-earnings ratio (P/E) to integrate strong ESG
characteristics?
Add a premium vs its peers
Which ESG index providers considers governance?
Thomson Reuter
3 ESG Engagement Dynamics highlighted by PRI?
1) Learning
2) Communicative
3) Political
