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Free ESG-Investing Exam Braindumps (page: 19)

Page 18 of 118
PDF with 468 Questions

Which of the three ESG factors is most often taken into consideration by traditional investment analysts?

  1. Social
  2. Governance
  3. Environmental

Answer(s): B

Explanation:

Traditional investment analysts most often take into consideration governance factors among the three ESG factors. Governance factors are typically viewed as critical to the operational and financial stability of a company.

Corporate Governance: Governance factors include the structures and processes for the direction and control of companies, such as board composition, executive compensation, audit practices, and shareholder rights. These elements are directly linked to a company's accountability and integrity.

Risk Management: Effective governance practices help mitigate risks related to fraud, mismanagement, and regulatory non-compliance. Analysts focus on governance to ensure that the company is managed in a way that protects shareholders' interests and enhances long-term value.

Performance Indicators: Strong governance is often correlated with better financial performance and reduced volatility. Companies with robust governance structures are perceived as more reliable and are thus more attractive to traditional investment analysts.


Reference:

MSCI ESG Ratings Methodology (2022) - Highlights the importance of governance factors in traditional financial analysis and their impact on company performance.

ESG-Ratings-Methodology-Exec-Summary (2022) - Discusses the emphasis on governance factors by investment analysts due to their direct link to corporate stability and performance.



Which of the following factors is most relevant to the performance outlook of a military equipment manufacturer?

  1. Offshoring
  2. Gender equality
  3. Artificial intelligence

Answer(s): C

Explanation:

The factor most relevant to the performance outlook of a military equipment manufacturer is artificial intelligence (AI). AI plays a critical role in the defense sector, influencing product development, operational efficiency, and competitive advantage.

Technological Advancements: AI is pivotal in developing advanced military technologies such as autonomous vehicles, drones, surveillance systems, and cybersecurity solutions. These advancements can significantly impact the performance and growth prospects of a military equipment manufacturer.

Operational Efficiency: AI can enhance manufacturing processes, improve supply chain management, and optimize maintenance and logistics. These improvements can lead to cost savings and increased production capabilities.

Competitive Edge: Incorporating AI into military equipment provides a competitive edge by offering cutting-edge solutions that meet the evolving needs of defense customers. Staying ahead in technological innovation is crucial for maintaining market leadership and securing contracts.


Reference:

MSCI ESG Ratings Methodology (2022) - Discusses the impact of technological factors, including AI, on the performance outlook of companies in various sectors, including defense.

ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the importance of AI in driving innovation and competitiveness in the defense industry.



Formal corporate governance codes are most likely to

  1. be found in all major world markets
  2. call for serious consequences for non-comphant organizations.
  3. be interpreted by proxy advisory firms when corporate compliance is assessed

Answer(s): A

Explanation:

Formal corporate governance codes are most likely to be found in all major world markets. These codes provide a framework for best practices in corporate governance and are widely adopted to enhance transparency, accountability, and investor confidence.

Global Adoption: Major markets around the world have established formal corporate governance codes to guide companies in implementing effective governance practices. These codes are often developed by regulatory bodies, stock exchanges, or industry associations.

Standardization of Practices: Corporate governance codes help standardize governance practices across markets, making it easier for investors to assess and compare companies. They cover key areas such as board composition, executive remuneration, and shareholder rights.

Regulatory Compliance: Compliance with governance codes is often mandatory or strongly encouraged, with companies required to disclose their adherence to these standards. This promotes consistency and enhances the integrity of the market.


Reference:

MSCI ESG Ratings Methodology (2022) - Highlights the presence of formal corporate governance codes in major markets and their role in standardizing practices.

ESG-Ratings-Methodology-Exec-Summary (2022) - Discusses the global adoption of governance codes and their impact on corporate transparency and accountability.



The offering of indexes and passive funds with ESG integration by asset managers

  1. preceded the offering of actively managed ESG funds
  2. occurred at the same time as the offering of actively managed ESG funds.
  3. followed the offering of actively managed ESG funds

Answer(s): C

Explanation:

The offering of indexes and passive funds with ESG integration by asset managers followed the offering of actively managed ESG funds. Initially, ESG investing was primarily driven by active management strategies, with passive ESG funds emerging later as demand grew.

Initial Focus on Active Management: Early ESG investing efforts were concentrated in actively managed funds, where managers could apply detailed ESG analysis and make discretionary investment decisions based on ESG criteria.

Development of ESG Indexes: As ESG data and methodologies improved, index providers began creating ESG-focused indexes. This allowed for the development of passive investment products that track these indexes, offering investors broad ESG exposure.

Market Demand and Growth: The growing interest in ESG investing led to the expansion of passive ESG funds, providing a cost-effective way for investors to integrate ESG factors into their portfolios. These funds have since gained significant traction in the market.


Reference:

MSCI ESG Ratings Methodology (2022) - Discusses the evolution of ESG investing and the initial focus on active management before the introduction of passive ESG funds.

ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the timeline of ESG fund offerings and the subsequent growth of passive ESG investment products.






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