Ch08 Instruments_Equity
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Questions and Answers

What are the three main approaches used to compute ESG ratings?

  • Fundamental, technical, and macroeconomic
  • Top-down, bottom-up, and thematic
  • Momentum, value, and growth
  • Qualitative, quantitative, and engagement-based (correct)

    • What is a key reason investors have been drawn to passive investment strategies?

  • Improved risk management
  • Higher returns compared to active management
  • Broader diversification
  • Lower fees and expenses (correct)

    • Which type of investment vehicle has seen the fastest growth in ESG-focused assets?

  • Exchange-traded funds (ETFs) (correct)
  • Private equity funds
  • Mutual funds
  • Hedge funds

    • What is a key advantage of using index benchmarks for ESG investing?

    <p>They are used by fund managers to position investor selections and redirect investment flows</p> Signup and view all the answers

    Which of the following is NOT a potential benefit of passive ESG investing strategies?

    <p>Increased control over investment decisions</p> Signup and view all the answers

    According to the passage, which of the following statements is true about the current state of ESG investing?

    <p>Net flows into actively managed ESG funds have outpaced net flows into passive ESG funds</p> Signup and view all the answers

    What is one approach that can be used to extend negative screens to smart beta strategies?

    <p>Excluding companies involved in tobacco or controversial weapons</p> Signup and view all the answers

    How is the approach of extending negative screens to smart beta strategies normally realized?

    <p>All of the above</p> Signup and view all the answers

    What is one approach that some investors use to integrate ESG factors into their investment strategies?

    <p>All of the above</p> Signup and view all the answers

    What is the reason that an investor may have for an ESG investment?

    <p>Both ethical factors and financial considerations</p> Signup and view all the answers

    What does the text say is required for institutional investors who want to integrate ESG factors into their investment strategies?

    <p>Both the right tools to evaluate portfolio risk features and performance, and a detailed set of technical conditions that enable portfolio construction</p> Signup and view all the answers

    What is one approach that other investors use to integrate ESG factors into their investment strategies?

    <p>Using ESG metrics that they have discovered through quantitative testing to add financial value to traditional factor strategies</p> Signup and view all the answers

    What is the main focus of actively managed ESG funds?

    <p>The portfolio manager decides which stocks to include based on ESG criteria</p> Signup and view all the answers

    What is the primary characteristic of passively managed ESG funds?

    <p>The fund follows a specified index and its composition of securities</p> Signup and view all the answers

    Which of the following is a common approach for excluding certain industries in ESG investing?

    <p>Passively managed funds follow indexes that exclude stocks in industries like fossil fuels, tobacco, and arms</p> Signup and view all the answers

    What is the primary difference between actively and passively managed ESG funds?

    <p>Actively managed funds select stocks based on ESG criteria, while passively managed funds follow market indexes</p> Signup and view all the answers

    What is the measure of risk associated with actively managed ESG funds?

    <p>Active risk</p> Signup and view all the answers

    Which party is responsible for selecting the portfolio of companies in passively managed ESG funds?

    <p>The index company</p> Signup and view all the answers

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