2 CFA Guidance and Case Studies for ESG Integration: Equity and Fixed Income

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Which factor is considered by practitioners when analyzing securities backed by general consumer/credit card loans?

Credit scores of individual borrowers

Societal risks such as discriminatory lending (correct)

Interest rates in the consumer lending market

Technological advancements in credit card systems

What is one limitation of quantifying ESG issues in structured credit analysis?

It may not help identify mispriced prepayment assumptions (correct)

It may not consider societal risks

It may not assist with monitoring the performance of the deal

It may not accurately measure the intrinsic value of securities

What does qualitative analysis in structured credit analysis focus on?

Calculating the intrinsic value of securities

Thorough due diligence of parties to the transaction (correct)

Monitoring interest rates in the market

Analyzing credit card transaction data

Which of the following is a potential impact of ESG factors on a company's book value and earnings?

Decrease in book value and earnings Signup and view all the answers

Which factor may lead a company to decrease or increase its future capital expenditure?

ESG factors Signup and view all the answers

How do practitioners adjust the beta or discount rate in company valuation models to reflect ESG factors?

They increase the beta/discount rate for companies considered to possess high ESG risk Signup and view all the answers

Which approach is commonly used to analyze ESG issues in sovereign credit analysis?

Feeding ESG research and/or scores into the credit analysis of an issuer Signup and view all the answers

What factors are typically considered in credit analysis for municipal bonds?

All of the above Signup and view all the answers

How can chronic social and environmental problems affect the credit quality of municipal bonds?

All of the above Signup and view all the answers

What additional ESG factors may be integrated into credit analysis for project revenue bonds?

All of the above Signup and view all the answers

Which of the following aspects should be considered when analyzing ESG risks in fixed-income investing?

Issuer types and credit quality Signup and view all the answers

What is the main approach used by practitioners when assessing the impact of ESG issues on investment decisions?

Using third-party ESG scores and traditional credit analysis Signup and view all the answers

Which of the following is true about the impact of ESG issues on corporate bond prices and share prices?

The order of frequency of impact is the same Signup and view all the answers

What do practitioners use materiality/sustainability frameworks and company ESG research for?

To identify material ESG issues Signup and view all the answers

What factors do Equities and Fixed Income depend more strongly on?

Governance factors Signup and view all the answers

What types of securities are included in the fixed-income market?

Securities backed by financial assets Signup and view all the answers

Why are practitioners just starting to consider how to systematically integrate ESG factors into structured credit analysis?

Lack of available ESG data Signup and view all the answers

What role does ESG analysis play in determining the true risk-adjusted credit profile of a securitization?

Evaluating the originator's reputation Signup and view all the answers

According to the text, why is the adoption of ESG integration in sovereign debt less widespread compared to corporate bonds?

All of the above Signup and view all the answers

What are some examples of ESG data sources used by sovereign debt investors?

All of the above Signup and view all the answers

Why do practitioners believe that ESG integration is not applicable to sovereign debt?

ESG issues are less material for sovereign debt compared to shares and corporate bonds Signup and view all the answers

Which type of issues more frequently affect sovereign debt prices according to the CFA-PRI survey?

Social issues Signup and view all the answers

2 CFA Guidance and Case Studies for ESG Integration: Equity and Fixed Income

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Questions and Answers

Which factor is considered by practitioners when analyzing securities backed by general consumer/credit card loans?

What is one limitation of quantifying ESG issues in structured credit analysis?

What does qualitative analysis in structured credit analysis focus on?

Which of the following is a potential impact of ESG factors on a company's book value and earnings?

Which factor may lead a company to decrease or increase its future capital expenditure?

How do practitioners adjust the beta or discount rate in company valuation models to reflect ESG factors?

Which approach is commonly used to analyze ESG issues in sovereign credit analysis?

What factors are typically considered in credit analysis for municipal bonds?

How can chronic social and environmental problems affect the credit quality of municipal bonds?

What additional ESG factors may be integrated into credit analysis for project revenue bonds?

Which of the following aspects should be considered when analyzing ESG risks in fixed-income investing?

What is the main approach used by practitioners when assessing the impact of ESG issues on investment decisions?

Which of the following is true about the impact of ESG issues on corporate bond prices and share prices?

What do practitioners use materiality/sustainability frameworks and company ESG research for?

What factors do Equities and Fixed Income depend more strongly on?

What types of securities are included in the fixed-income market?

Why are practitioners just starting to consider how to systematically integrate ESG factors into structured credit analysis?

What role does ESG analysis play in determining the true risk-adjusted credit profile of a securitization?

According to the text, why is the adoption of ESG integration in sovereign debt less widespread compared to corporate bonds?

What are some examples of ESG data sources used by sovereign debt investors?

Why do practitioners believe that ESG integration is not applicable to sovereign debt?

Which type of issues more frequently affect sovereign debt prices according to the CFA-PRI survey?

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