30 Questions
What does sustainable business refer to?
Economic activity aimed at improving the environment and society
What does sustainable investing (SI) take into account when considering investments?
Environment, social society, and governance of firms (ESG)
What is the distinguishing factor between traditional investing and sustainable investing?
Consideration for environmental, social, and governance factors
In sustainable finance, what does the term 'ESG' stand for?
Environment, Social Society, and Governance
What do financiers contribute to sustainability through ownership right and cost of capital/funding?
They contribute to sustainability by influencing economic activity through ownership rights and cost of capital/funding.
What is the main goal of traditional investing?
To achieve the best possible risk-return trade-off
What are the three main factors of ESG?
Environmental, Social, Governance
What is the main distinction between sustainable investing (SI) and traditional investing?
Long-term orientation
What is impact investing?
Subset of SI aimed at intentional and measurable societal impact
What are the two components of 'Voice' as part of ESG?
Voting at shareholder meetings, Engagement
What is the main reason for considering governance in sustainable investing (SI)?
Seriousness by investment industry and academia
Which of the following is NOT a common way to measure the financial performance of firms/projects in an investment portfolio?
Dividend yield
What do the global goals of sustainability relate to?
ESG goals developed by the United Nations (UN)
ESG investment choices have an impact on which of the following?
ESG results and investment returns
ESG results are measurable performance of ESG indicators at which level?
Firm/project level, summed to portfolio level
What is the main focus of sustainable business?
Improvement of environment and society
In sustainable investing, what factors are taken into consideration when considering investments?
Environment, social society, and governance of firms
What is the distinguishing feature of sustainable finance compared to traditional finance?
Includes investing, insurance, and banking
How does the government usually address the undesirable effects of economic activity on the environment and society?
Regulation and taxes
What is the purpose of sustainable finance/investing?
Provide capital and cash to businesses while considering ESG factors
Why is the distinguishing between business and how it is financed considered important?
To understand whether a business operates in a socially responsible manner
In the context of sustainable investing, what are the main factors of ESG?
Environmental, social, good governance
What does the concept of impact investing aim to achieve?
Additional impact on society through intentional and measurable investment
What is the main distinction between sustainable investing (SI) and traditional investing?
Long-term orientation
What are some examples of social boundaries/foundations as part of the 'Dougnut' concept?
Food security, adequate income, access to health care
What does being an active holder in the context of sustainable investing involve?
Engagement and voting as a shareholder
How are ESG investment choices different from traditional investment strategies?
ESG choices are a combination of various sustainable investment strategies
What are the most common ways to measure the financial performance of firms/projects in an investment portfolio?
Operating profitability, EBITDA, turnover
What does the text suggest about the relationship between ESG investment choices and ESG results?
ESG investment choices affect both ESG results and investment returns
What are some examples of ESG factors that influence sustainable investing strategies?
Human capital management, board effectiveness, climate change
Study Notes
Sustainable Business and Investing
- Sustainable business refers to the practice of creating long-term value for shareholders and stakeholders while minimizing negative impacts on the environment and society.
- Sustainable investing (SI) considers environmental, social, and governance (ESG) factors in addition to financial returns when making investment decisions.
ESG Factors
- ESG stands for Environmental, Social, and Governance factors.
- The three main factors of ESG are:
- Environmental: climate change, natural resource depletion, pollution, and other environmental issues.
- Social: labor standards, human rights, community relations, and other social issues.
- Governance: board composition, executive compensation, auditing practices, and other governance issues.
Sustainable Investing vs. Traditional Investing
- The main distinction between sustainable investing (SI) and traditional investing is that SI considers ESG factors in addition to financial returns.
- The main goal of traditional investing is to maximize financial returns, while sustainable investing aims to maximize both financial returns and positive social and environmental impact.
Impact Investing
- Impact investing aims to generate both financial returns and positive social or environmental impact.
ESG and Sustainable Finance
- ESG results are measurable performance of ESG indicators at the company or portfolio level.
- ESG investment choices have an impact on the environment and society.
- The purpose of sustainable finance/investing is to maximize long-term value for both shareholders and stakeholders while minimizing negative impacts on the environment and society.
Governance and Sustainability
- The main reason for considering governance in sustainable investing (SI) is to ensure that companies are managed in a responsible and transparent manner.
- The government usually addresses the undesirable effects of economic activity on the environment and society through regulations and policies.
Measuring Financial Performance
- The most common ways to measure the financial performance of firms/projects in an investment portfolio include return on equity (ROE), return on assets (ROA), and earnings per share (EPS).
Global Goals and Sustainability
- The global goals of sustainability relate to the United Nations' Sustainable Development Goals (SDGs), which aim to end poverty, protect the planet, and ensure peace and prosperity for all.
Ownership and Voice
- Financiers contribute to sustainability through ownership rights and the cost of capital/funding.
- The two components of 'Voice' as part of ESG are:
- Active ownership: engaging with companies to promote sustainability and responsible business practices.
- Voting: exercising voting rights to influence company decisions.
Sustainable Business and Finance
- The main focus of sustainable business is to create long-term value for both shareholders and stakeholders while minimizing negative impacts on the environment and society.
- The distinguishing feature of sustainable finance compared to traditional finance is its consideration of ESG factors in addition to financial returns.
- The purpose of distinguishing between business and how it is financed is to recognize that the way a business is financed can have a significant impact on its sustainability and social responsibility.
Explore the relationship between sustainability, economic activity, and the impact on the environment and society. Understand the role of government regulation, charitable incentives, and financial mechanisms in promoting sustainable practices.
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