QUESTION: 205

Under the disclosure guide for public equities published by the Pension and Lifetime Savings Association (PLSA), fund managers are expected to report on:

ESG integration only
stewardship activities only
both ESG integration and stewardship activities

Answer(s): C

Explanation:

Introduction to the Disclosure Guide:

The Pension and Lifetime Savings Association (PLSA) has developed a disclosure guide for public equities which outlines expectations for fund managers regarding their reporting practices.

Key Reporting Requirements:

The guide explicitly states that fund managers are expected to report on both ESG integration and stewardship activities.

ESG Integration:

This involves the identification, management, and monitoring of ESG risks and opportunities.

Fund managers should provide specific disclosures on how they incorporate ESG factors into their investment processes.

Examples include identifying long-term ESG trends, providing quantitative and qualitative examples of material ESG factors, and explaining how these factors influence stock selection and portfolio management.

Stewardship Activities:

Stewardship refers to the responsible management and oversight of investments.

Fund managers are expected to engage with investee companies on ESG issues and to exercise their voting rights at shareholder meetings to influence corporate behavior positively.

Reporting on stewardship activities should include detailed disclosures of engagement activities and voting records.

Conclusion:

The dual focus on ESG integration and stewardship ensures that fund managers are not only considering ESG risks and opportunities in their investment decisions but are also actively engaging with companies to promote sustainable practices and good governance.

Reference:

The requirements for reporting on both ESG integration and stewardship activities are outlined in the disclosure guide developed by the PLSA.

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QUESTION: 206

Under the UK listing regime, Class 1 transactions:

must be approved via shareholder vote
can be completed at management's discretion
require additional disclosures to shareholders but no approval via shareholder vote

Answer(s): A

Explanation:

UK Listing Regime:

Under the UK listing regime, significant transactions by listed companies are categorized into different classes based on their size relative to the company.

Class 1 Transactions:

Class 1 transactions are substantial transactions that exceed 25% of any of the class tests (assets, profits, value, or capital).

These transactions are significant enough to potentially alter the company's risk profile and financial position materially.

Approval Requirements:

Due to their significance, Class 1 transactions require shareholder approval.

The company must seek approval through a shareholder vote before proceeding with the transaction.

This requirement ensures that shareholders have a say in major corporate decisions that could impact their investment.

Additional Disclosures:

Companies must provide detailed justifications and information about the transaction to shareholders to facilitate informed voting.

This includes comprehensive disclosures about the nature and terms of the transaction, its strategic rationale, and its financial impact.

Conclusion:

The requirement for shareholder approval of Class 1 transactions is a key aspect of shareholder protection under the UK listing regime, ensuring that significant changes to the company's structure or operations are subject to shareholder scrutiny.

Reference:

The requirement for shareholder approval of Class 1 transactions is outlined in the UK listing regime, which mandates that any transaction affecting more than 25% of a company's assets, profits, value, or capital must be approved via a shareholder vote.

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QUESTION: 207

The signatories of the Kyoto Protocol are committed to:

transition their investment portfolios to net-zero greenhouse gas (GHG) emissions by 2050
limit and reduce their greenhouse gas (GHG) emissions in accordance with agreed individual targets
strengthen the response to the threat of climate change by keeping a global temperature rise well below 2°C (3.6°F) above pre-industrial levels

Answer(s): B

Explanation:

Step 1: Understanding the Kyoto Protocol

The Kyoto Protocol is an international treaty that extends the 1992 United Nations Framework Convention on Climate Change (UNFCCC) and commits its parties to reduce greenhouse gas (GHG) emissions, based on the premise that global warming exists and human-made CO2 emissions have caused it.

Step 2: Commitments under the Kyoto Protocol

The Kyoto Protocol was adopted in Kyoto, Japan, in December 1997 and entered into force in February 2005.

It legally binds developed countries and economies in transition to emission reduction targets. The principle of "common but differentiated responsibilities" recognizes that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere.

Step 3: Comparing the Options

Option A: Refers to transitioning investment portfolios to net-zero GHG emissions by 2050, which is not the commitment under the Kyoto Protocol but aligns more with current initiatives like the Paris Agreement.

Option B: This option aligns with the Kyoto Protocol's commitment to limit and reduce GHG emissions according to individual targets.

Option C: This option aligns with the Paris Agreement's goal rather than the Kyoto Protocol.

Step 4: Verification with ESG Investing Reference

The Kyoto Protocol's main aim is to control emissions of the main anthropogenic (human-emitted) greenhouse gases in ways that reflect underlying national differences in greenhouse gas emissions, wealth, and capacity to make the reductions: "The Kyoto Protocol commits its Parties by setting internationally binding emission reduction targets".

Conclusion: Signatories of the Kyoto Protocol are committed to limiting and reducing their greenhouse gas emissions in accordance with agreed individual targets.

Answer(s): B. Limit and reduce their greenhouse gas (GHG) emissions in accordance with

agreed individual targets

Reveal Solution Next Question

QUESTION: 208

Which of the following organizations is not a provider of both ESG-related and non-ESG-related products and services?

S&P
Factset
RepRisk

Answer(s): C

Explanation:

Step 1: Identifying ESG and Non-ESG Providers

S&P (Standard & Poor's): Provides both ESG-related and non-ESG-related products and services, including credit ratings, indices, and analytical services across various sectors.

Factset: Offers a range of financial data and analytics, including ESG data, ratings, and insights, along with other financial products and services.

RepRisk: Specializes in ESG data, focusing on identifying and assessing ESG risks. It does not offer a broad range of non-ESG financial products and services.

Step 2: Understanding the Scope of Services

S&P: Known for comprehensive financial market data, including credit ratings and ESG evaluations.

Factset: Provides integrated financial information and analytical applications, including ESG datasets.

RepRisk: Focuses exclusively on ESG risks and related analytics, providing services like risk assessments and monitoring.

Step 3: Verification with ESG Investing Reference

RepRisk is highlighted as an organization that focuses primarily on ESG-related products and services without extending its offerings to non-ESG financial data or analytics: "RepRisk is a leading research and business intelligence provider, specializing in ESG and business conduct risk".

Conclusion: RepRisk is not a provider of both ESG-related and non-ESG-related products and services.

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