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Free ESG-Investing Exam Braindumps (page: 34)

Page 33 of 118
PDF with 468 Questions

Organizing companies according to their sustainability attributes, such as resource intensity, sustainability risks, and innovation opportunities, best describes the:

  1. Morningstar sustainability rating.
  2. Sustainable Industry Classification System (SICS).
  3. Task Force on Climate-related Financial Disclosures (TCFD).

Answer(s): B

Explanation:

The Sustainable Industry Classification System (SICS) organizes companies according to their sustainability attributes such as resource intensity, sustainability risks, and innovation opportunities. SICS is specifically designed to highlight the sustainability aspects of industries and companies, allowing for better comparison and analysis of their ESG performance. The Morningstar sustainability rating and the Task Force on Climate-related Financial Disclosures (TCFD) serve different purposes, with Morningstar providing ratings and TCFD focusing on climate-related financial disclosures.



A hurdle to adopting ESG investing is most likely a:

  1. lack of suitable benchmarks.
  2. focus on short-term performance.
  3. lack of options outside of equities.

Answer(s): A

Explanation:

A significant hurdle to adopting ESG investing is the lack of suitable benchmarks. Investors often need benchmarks to measure performance relative to specific goals or standards. The development of appropriate benchmarks for ESG investing is challenging due to the diverse and evolving nature of ESG factors. According to the MSCI ESG Ratings Methodology, integrating ESG factors into investment processes requires robust benchmarks that accurately reflect ESG risks and opportunities. Without these benchmarks, it is difficult for asset managers to gauge performance and make informed investment decisions.



Negative screening for ESG factors in portfolios:

  1. results in static exclusions.
  2. can exclude an entire country.
  3. is commonly applied to all asset classes.

Answer(s): B

Explanation:

Negative screening in ESG portfolios involves excluding certain sectors, companies, or countries based on specific ethical guidelines or ESG criteria. This approach can result in the exclusion of entire countries if they do not meet the predefined ESG standards. For example, countries with poor human rights records, high levels of corruption, or severe environmental degradation might be excluded from investment portfolios to align with investors' ESG objectives.



The European Union (EU) Ecolabel:

  1. is the official EU voluntary label for environmental excellence.
  2. targets explicit claims made on a voluntary basis by businesses towards consumers.
  3. flags products that have a guaranteed, independently verified, high environmental impact.

Answer(s): A

Explanation:

The European Union (EU) Ecolabel is the official voluntary label for environmental excellence in the EU. It is awarded to products and services meeting high environmental standards throughout their life cycle, from raw material extraction to production, distribution, and disposal. The Ecolabel aims to promote products with a reduced environmental impact, helping consumers make more sustainable choices.






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