18 Questions
What are the three main approaches used to compute ESG ratings?
Qualitative, quantitative, and engagement-based
What is a key reason investors have been drawn to passive investment strategies?
Lower fees and expenses
Which type of investment vehicle has seen the fastest growth in ESG-focused assets?
Exchange-traded funds (ETFs)
What is a key advantage of using index benchmarks for ESG investing?
They are used by fund managers to position investor selections and redirect investment flows
Which of the following is NOT a potential benefit of passive ESG investing strategies?
Increased control over investment decisions
According to the passage, which of the following statements is true about the current state of ESG investing?
Net flows into actively managed ESG funds have outpaced net flows into passive ESG funds
What is one approach that can be used to extend negative screens to smart beta strategies?
Excluding companies involved in tobacco or controversial weapons
How is the approach of extending negative screens to smart beta strategies normally realized?
All of the above
What is one approach that some investors use to integrate ESG factors into their investment strategies?
All of the above
What is the reason that an investor may have for an ESG investment?
Both ethical factors and financial considerations
What does the text say is required for institutional investors who want to integrate ESG factors into their investment strategies?
Both the right tools to evaluate portfolio risk features and performance, and a detailed set of technical conditions that enable portfolio construction
What is one approach that other investors use to integrate ESG factors into their investment strategies?
Using ESG metrics that they have discovered through quantitative testing to add financial value to traditional factor strategies
What is the main focus of actively managed ESG funds?
The portfolio manager decides which stocks to include based on ESG criteria
What is the primary characteristic of passively managed ESG funds?
The fund follows a specified index and its composition of securities
Which of the following is a common approach for excluding certain industries in ESG investing?
Passively managed funds follow indexes that exclude stocks in industries like fossil fuels, tobacco, and arms
What is the primary difference between actively and passively managed ESG funds?
Actively managed funds select stocks based on ESG criteria, while passively managed funds follow market indexes
What is the measure of risk associated with actively managed ESG funds?
Active risk
Which party is responsible for selecting the portfolio of companies in passively managed ESG funds?
The index company
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