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

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What effect does an ESG controversy have on a company's share price, compared to its bond prices?

Greater impact on share price (correct)
Equal impact on both
No impact on either
Greater impact on bond prices

Which market is more affected by client demand for equity products with ESG mandates?

Equity market (correct)
Credit market
Neither market
Both markets

The ESG Integration Framework developed by CFA Institute and PRI is intended to

Analyze the financial risk exposures and limits of direct investors
Identify suitable ESG integration techniques for practitioners (correct)
Provide a comprehensive guide to implementing ESG integration techniques
Illustrate the perfect ESG-integrated investment process

What is the purpose of the ESG Integration Framework?

To collate ESG integration techniques used by practitioners (D) Signup and view all the answers

The ESG Integration Framework is NOT intended to

Illustrate the perfect ESG-integrated investment process (A) Signup and view all the answers

Which type of analysis is commonly used in ESG integration?

Qualitative analysis (C) Signup and view all the answers

When a company or country is viewed poorly based on its ESG performance and valuation assessment, it could lead to a _______ signal.

Sell (B) Signup and view all the answers

What can influence the maturity of a bond that an investor purchases?

ESG analysis (C) Signup and view all the answers

Which type of analysis uses statistical techniques to identify the relationship between ESG factors and future asset price movements?

Quantitative analysis (A) Signup and view all the answers

Which of the following is NOT a technique used in ESG integration?

Valuation multiples (B) Signup and view all the answers

What is the purpose of company questionnaires in ESG integration?

To collect public ESG disclosure (A) Signup and view all the answers

What is the role of SWOT analysis in ESG integration?

To include ESG factors in analysis (B) Signup and view all the answers

What is the purpose of active ownership voting in ESG integration?

To improve ESG practices and disclosure (C) Signup and view all the answers

Which of the following is NOT a characteristic of ESG integration?

Investment in certain sectors, countries, and companies is prohibited. (C) Signup and view all the answers

What is the fundamental difference between ESG integration and exclusionary screening?

ESG integration is a 'values' approach, while exclusionary screening is a 'value' approach. (B) Signup and view all the answers

What is a key component of ESG integration?

Lowering risk and/or enhancing returns. (A) Signup and view all the answers

When judging whether ESG issues are material, practitioners consider which of the following factors?

All of the above. (D) Signup and view all the answers

Which of the following best defines ESG integration?

The explicit and systematic inclusion of ESG factors in investment analysis and investment decisions. (D) Signup and view all the answers

What is the purpose of duration analysis in ESG integration?

To analyze the impact of ESG issues on bonds of an issuer with different durations/maturities. (B) Signup and view all the answers

Which component of ESG integration involves gathering financial and ESG information, analyzing material factors, and engaging with companies/issuers?

Research (C) Signup and view all the answers

What is the main objective of portfolio scenario analysis in ESG integration?

To assess the impact of ESG factors on portfolio risk and return. (C) Signup and view all the answers

Why did the first application of responsible investment practices focus on equity strategies?

ESG integration in equities started gaining momentum earlier than in fixed income. (C) Signup and view all the answers

Why do most asset owners and investment managers integrate ESG issues into their equity portfolios before their fixed-income portfolios?

ESG integration is easier in equity portfolios than fixed-income portfolios. (C) Signup and view all the answers

Why are ESG factors less frequently impacting bond prices compared to equity prices?

Traditional financial factors have a greater influence on bond prices. (B) Signup and view all the answers

What does the CFA-PRI survey suggest about the impact of ESG issues on bond returns?

ESG factors can be material and affect bond returns. (B) Signup and view all the answers