QUESTION: 249

Philanthropy is most likely associated with:

impact investing
shareholder engagement
corporate social responsibility

Answer(s): C

Explanation:

Philanthropy is most likely associated with corporate social responsibility (CSR).

Impact investing (A): Impact investing focuses on generating social or environmental impact alongside financial returns.
While philanthropy can be a form of impact investing, it is more commonly linked to CSR.

Shareholder engagement (B): This involves shareholders actively engaging with companies to influence their ESG practices. Philanthropy is not a direct form of shareholder engagement.

Corporate social responsibility (C): CSR encompasses a company's efforts to contribute positively to society, including philanthropic activities such as donations and community involvement.

Reference:

CFA ESG Investing Principles

Definitions and distinctions between CSR, impact investing, and shareholder engagement

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QUESTION: 250

According to the Global Sustainable Investment Alliance (GSIA), as of 2020, the largest sustainable investment strategy globally is:

ESG integration
exclusionary screening
corporate engagement and shareholder action

Answer(s): A

Explanation:

According to the Global Sustainable Investment Alliance (GSIA), as of 2020, the largest sustainable investment strategy globally is ESG integration.

Definition of ESG Integration: ESG integration involves the systematic and explicit inclusion of environmental, social, and governance (ESG) factors into financial analysis by investment managers.

GSIA Reports: The GSIA's Global Sustainable Investment Review highlights that ESG integration has become the dominant strategy among sustainable investment practices. This approach is favored due to its comprehensive consideration of ESG factors in traditional financial analysis.

Growth Trends: The increasing awareness of ESG risks and opportunities has driven the growth of ESG integration, making it the largest strategy in terms of assets under management (AUM).

CFA ESG Investing

Reference:

The CFA Institute's resources on ESG integration emphasize the importance and prevalence of this strategy among investors. It outlines how ESG integration helps in identifying material risks and opportunities that could impact financial performance, thus supporting better investment decisions.

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QUESTION: 251

Which of the following is an example of a climate adaptation measure?

Investment in wind energy
Increased use of public transport
Use of more drought-resistant crops

Answer(s): C

Explanation:

An example of a climate adaptation measure is the use of more drought-resistant crops.

Climate Adaptation: Climate adaptation refers to adjustments in practices, processes, and structures to mitigate potential damage or take advantage of opportunities associated with climate change.

Drought-Resistant Crops: Using more drought-resistant crops is a direct adaptation measure that helps agriculture withstand periods of reduced rainfall, thereby maintaining productivity and food security in the face of changing climate conditions.

Other Examples: While investment in wind energy (A) and increased use of public transport (B) are important climate actions, they are primarily considered climate mitigation measures aimed at reducing greenhouse gas emissions rather than adapting to existing climate impacts.

CFA ESG Investing

Reference:

The CFA Institute's materials on climate risk management highlight various adaptation strategies that businesses and investors can adopt to reduce vulnerability to climate change impacts. Using drought-

resistant crops is specifically mentioned as a vital adaptation practice in the agricultural sector.

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QUESTION: 252

Which of the following statements about ESG integration in fixed income is most accurate?

ESG factors cannot affect credit risk at geographic level
Equity investors generally focus more on the risk of default than fixed-income investors
Municipal bonds have ESG integration considerations similar to those of sovereign debt

Answer(s): C

Explanation:

The most accurate statement about ESG integration in fixed income is that municipal bonds have ESG integration considerations similar to those of sovereign debt.

Municipal Bonds and Sovereign Debt: Both types of bonds are issued by public entities (municipal governments and national governments, respectively) and are influenced by similar ESG factors, such as governance quality, environmental policies, and social services.

ESG Factors in Fixed Income: For municipal and sovereign debt, ESG integration involves assessing the issuer's ability to manage ESG risks and opportunities that could affect creditworthiness. This includes evaluating fiscal policies, social infrastructure, and environmental regulations.

Credit Risk: ESG factors are crucial in determining the long-term financial stability and credit risk of public issuers, influencing both municipal and sovereign bond markets.

CFA ESG Investing

Reference:

The CFA Institute's guidance on ESG integration in fixed income underscores the importance of considering ESG factors in public debt instruments. It notes that the evaluation of municipal bonds shares similarities with sovereign debt analysis, particularly regarding governance and social factors.

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Free ESG-Investing Exam Braindumps (page: 63)

QUESTION: 249

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QUESTION: 250

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QUESTION: 251

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QUESTION: 252

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