QUESTION: 261

Which of the following is the most important type of diversity in a boardroom?

Diversity of skill
Diversity of gender
Diversity of thought

Answer(s): C

Explanation:

The most important type of diversity in a boardroom is diversity of thought.

Diversity of Thought: This encompasses a range of perspectives and approaches to problem-solving and decision-making. It is driven by different backgrounds, experiences, skills, and viewpoints.

Enhanced Decision-Making: Diversity of thought leads to more robust discussions and better decision-making as it prevents groupthink and encourages innovative solutions to complex problems.

Other Types of Diversity: While diversity of skill (A) and gender (B) are crucial and contribute to diversity of thought, the overarching goal is to bring a variety of perspectives to the boardroom to enhance governance and strategic decision-making.

CFA ESG Investing

Reference:

The CFA Institute's materials on corporate governance emphasize the value of diversity of thought in the boardroom, highlighting that it leads to more effective oversight and better organizational outcomes by incorporating a wide range of perspectives and expertise.

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QUESTION: 262

The process of ESG portfolio optimization requires:

targeting sustainability-aligned themes as means to construct a portfolio
applying a fixed decision on specific securities based on the ESG variable chosen
defining an upper and lower bound for a given ESG variable and applying it on an absolute or benchmark relative basis

Answer(s): C

Explanation:

ESG portfolio optimization involves incorporating ESG factors into the portfolio construction process. This process typically requires setting specific constraints or targets related to ESG variables to ensure the portfolio aligns with sustainability objectives.

Defining upper and lower bounds (C): This approach involves setting limits for specific ESG variables, such as carbon emissions or governance scores, either in absolute terms or relative to a benchmark. These bounds help to optimize the portfolio by ensuring it meets predefined ESG criteria while still aiming for financial performance.

Targeting sustainability-aligned themes (A): While targeting specific themes can be part of the strategy, it is not the core process of optimization, which focuses on balancing ESG constraints with financial objectives.

Applying a fixed decision on specific securities (B): This approach is more rigid and does not offer the flexibility required for portfolio optimization, which seeks to balance various factors and constraints.

Reference:

CFA ESG Investing Principles

MSCI ESG Ratings Methodology (June 2022)

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QUESTION: 263

Which of the following most likely outlines an investment firm's ESG integration approach?

ESG policy
Statement of Investment Principles
Corporate social responsibility report

Answer(s): A

Explanation:

An investment firm's ESG integration approach is most likely outlined in its ESG policy. This document provides a detailed framework of how the firm incorporates ESG factors into its investment process.

ESG policy (A): This policy typically includes the firm's principles, strategies, and methodologies for integrating ESG factors into investment decisions. It outlines the firm's commitment to ESG considerations and provides guidance on how these factors are incorporated at different stages of the investment process.

Statement of Investment Principles (B): This document may include high-level investment principles, but it does not specifically focus on the detailed ESG integration approach.

Corporate social responsibility report (C): This report highlights the firm's CSR activities and impacts but is not focused on the investment process itself.

Reference:

CFA ESG Investing Principles

Investment firm ESG policy examples

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QUESTION: 264

Globalization has led to a reduction in:

regulation
market efficiency
social structural inequality

Answer(s): C

Explanation:

Globalization has contributed to a reduction in social structural inequality. By integrating economies and increasing access to global markets, globalization has created opportunities for economic growth and development in many regions, helping to reduce poverty and inequality.

Reduction in social structural inequality (C): Globalization has enabled the transfer of technology, capital, and skills across borders, leading to job creation and economic development in less developed regions. This has helped to reduce structural inequalities by providing more equal opportunities for people in different parts of the world.

Regulation (A): Globalization has often led to an increase in regulation, particularly in areas such as trade, finance, and environmental standards, as countries cooperate to manage global issues.

Market efficiency (B): Globalization typically enhances market efficiency by increasing competition, improving resource allocation, and fostering innovation.

Reference:

CFA ESG Investing Principles

Economic studies on the impacts of globalization

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Free ESG-Investing Exam Braindumps (page: 66)

QUESTION: 261

Explanation:

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QUESTION: 262

Explanation:

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QUESTION: 263

Explanation:

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QUESTION: 264

Explanation:

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