25 Questions
What effect does an ESG controversy have on a company's share price, compared to its bond prices?
Greater impact on share price
Which market is more affected by client demand for equity products with ESG mandates?
Equity market
The ESG Integration Framework developed by CFA Institute and PRI is intended to
Identify suitable ESG integration techniques for practitioners
What is the purpose of the ESG Integration Framework?
To collate ESG integration techniques used by practitioners
The ESG Integration Framework is NOT intended to
Illustrate the perfect ESG-integrated investment process
Which type of analysis is commonly used in ESG integration?
Qualitative analysis
When a company or country is viewed poorly based on its ESG performance and valuation assessment, it could lead to a _______ signal.
Sell
What can influence the maturity of a bond that an investor purchases?
ESG analysis
Which type of analysis uses statistical techniques to identify the relationship between ESG factors and future asset price movements?
Quantitative analysis
Which of the following is NOT a technique used in ESG integration?
Valuation multiples
What is the purpose of company questionnaires in ESG integration?
To collect public ESG disclosure
What is the role of SWOT analysis in ESG integration?
To include ESG factors in analysis
What is the purpose of active ownership voting in ESG integration?
To improve ESG practices and disclosure
Which of the following is NOT a characteristic of ESG integration?
Investment in certain sectors, countries, and companies is prohibited.
What is the fundamental difference between ESG integration and exclusionary screening?
ESG integration is a 'values' approach, while exclusionary screening is a 'value' approach.
What is a key component of ESG integration?
Lowering risk and/or enhancing returns.
When judging whether ESG issues are material, practitioners consider which of the following factors?
All of the above.
Which of the following best defines ESG integration?
The explicit and systematic inclusion of ESG factors in investment analysis and investment decisions.
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.
Which component of ESG integration involves gathering financial and ESG information, analyzing material factors, and engaging with companies/issuers?
Research
What is the main objective of portfolio scenario analysis in ESG integration?
To assess the impact of ESG factors on portfolio risk and return.
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.
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.
Why are ESG factors less frequently impacting bond prices compared to equity prices?
Traditional financial factors have a greater influence on bond prices.
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.
Test your knowledge on the impact of ESG controversies on market liquidity, share prices, and bond prices, as well as the ESG Integration Framework developed by CFA Institute and PRI.
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