49 Questions
What company acquired Sustainalytics in 2020?
Morningstar
What does the Sustainalytics' ESG Risk Rating measure?
The degree to which a company's economic value is at risk driven by ESG factors
How many risk categories are companies sorted into in the Sustainalytics' ESG Risk Rating?
5
Which of the following is NOT a strategic partner of Sustainalytics?
Glass Lewis
Which of the following statements is true about the evolution of credit and ESG analysis by Credit Rating Agencies (CRAs)?
CRAs started considering ESG analysis after the release of the PRI statement in 2016–2017
Which of the following is an example of how ESG risk management can protect lives?
The 2013 landslide at a Rio Tinto mine in Utah
According to the text, what are the two factors that CRAs typically assess when evaluating sovereign debt?
Economic growth and governance
According to the text, credit investors argue that downside risk is more important than any upside or opportunity risk because:
Upside is limited for most credit investors
What is the main focus of the debate among investors regarding the relationship between ESG ratings and credit ratings?
Whether there is a link between ESG ratings and credit ratings
According to the text, what are some challenges faced by credit investors in assessing ESG ratings?
All of the above
According to the text, what factors do credit rating agencies (CRAs) typically assess when analyzing an issuer's ability to generate future cash flow to meet its debt obligations?
All of the above
What are the three key types of bias typically encountered in ESG ratings in the credit area?
Environmental bias, social bias, governance bias
What is a key characteristic of a CRA rating?
A statement of the relative likelihood of default
Which of the following is NOT a potential bias in ESG ratings?
Investor bias
What is the purpose of integrating ESG techniques in investment processes?
All of the above
What is materiality assessment in ESG analysis?
Distinguishing between important and nonimportant ESG factors
What type of data do ESG rating agencies use to give ESG ratings?
Both primary and secondary ESG data
According to Sustainalytics, what is the criteria for an issue to be considered 'material' within the ESG Risk Rating?
Its presence or absence in financial reporting is likely to influence the decisions made by a reasonable investor.
What is the additional dimension incorporated in the ESG Risk Rating?
Exposure
Why does Sustainalytics consider management in the ESG Risk Rating?
To identify whether companies are managing ESG risks.
Which of the following is NOT a factor that credit investors consider when assessing the credit risk of fixed-income securities?
Quantitative ESG scores
What are quantitative ESG scores (QESGs) based on?
Judgments based on data and/or policy
What makes a bond 'green' in the context of green bonds?
All of the above
What factors are typically considered in a sovereign credit risk assessment?
All of the above
Which of the following credit rating agencies (CRAs) incorporated ESG as part of its credit assessments in 2019?
Standard & Poor's (S&P)
When did the World Bank launch its Sovereign ESG database?
2019
Which factor remains more important to credit investors than E and S, according to surveys?
Governance (G) factor
Which of the following is NOT a factor that credit investors consider when assessing the credit risk of fixed-income securities?
ESG ratings
What is the purpose of integrating ESG techniques in investment processes?
To align investments with personal values
What does the Sustainalytics' ESG Risk Rating measure?
The overall financial risk of an issuer
What factors are typically considered in a sovereign credit risk assessment?
Competitiveness, growth, governance, and political stability
Which of the following is a key factor that credit rating agencies (CRAs) typically consider when assessing sovereign debt?
Economic growth
What is a more direct assessment that CRAs use when evaluating sovereign debt?
Governance
What are the two factors that CRAs typically consider when assessing the impact of E and S factors on economic growth and potential?
Economic growth and social factors
What are the three key types of bias typically encountered in ESG ratings in the credit area?
Recency bias, confirmation bias, and anchoring bias
Which of the following is NOT a strategic partner of Sustainalytics?
Morningstar
What is the criteria for an issue to be considered 'material' within the ESG Risk Rating?
The issue must have a significant impact on a company's economic value
What is the main focus of the debate among investors regarding the relationship between ESG ratings and credit ratings?
The impact of ESG ratings on credit ratings
Which of the following is NOT a challenge faced by credit investors in assessing ESG ratings?
Cultural bias
What is the purpose of integrating ESG techniques in investment processes?
To maximize risk-adjusted returns
What type of data do ESG rating agencies use to give ESG ratings?
Both primary and secondary ESG data
What is materiality assessment in ESG analysis?
Distinguishing between important and nonmaterial ESG factors
Which of the following is NOT a challenge faced by credit investors in assessing ESG ratings?
The lack of comparability through time and between providers and companies
What factors do credit rating agencies (CRAs) typically assess when analyzing an issuer's ability to generate future cash flow to meet its debt obligations?
Bankruptcy risk
What is a key characteristic of a CRA rating?
It is forward-looking
What do CRAs typically focus on when assessing the impact of changing yields due to an ESG event on the cost of capital?
Interest coverage ratio and capital structure analysis
According to Sustainalytics, an issue is considered 'material' within the ESG Risk Rating if its presence or absence in financial reporting is likely to influence the decisions made by a reasonable investor.
An issue is considered 'material' if it has a potentially substantial impact on the economic value of a company.
The ESG Risk Rating’s emphasis on materiality incorporates an additional dimension—the exposure dimension. It reflects the extent to which a company is exposed to material ESG risks identified at the industry level and affects the overall rating score for a company as well as its rating score for each material ESG issue.
Exposure
Sustainalytics considers management in the ESG Risk Rating because company commitments and actions provide signals about whether companies are managing ESG risks.
To assess how a company approaches and handles ESG issues
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