ESG-Investing Exam Dumps - Certificate in ESG Investing

Thematic fundsfocus onspecific investment themes(e.g., renewable energy, clean tech, diversity-focused companies), often leading toconcentration riskandlimited portfolio diversification. Because they focus on anarrow subsetof industries or trends, their risk profile ishigherthan broadly diversified funds.

While some thematic funds may outperform in certain cycles (C),performance is not guaranteed, and they can underperform in downturns. Poor cash flow profiles (A) depend on the companies selected, not a universal characteristic of thematic funds.

References:

MSCI Thematic Investing Report

Morningstar Thematic Fund Analysis

CFA Institute ESG Fund Characteristics Report

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TheInternational Corporate Governance Network (ICGN)requirescomprehensive engagement reporting, which goes beyond justvoting activity. Investors must discloseengagement outcomes, stewardship efforts, and ESG considerations in investment decisions.

PRI signatories (A)must submitmandatoryESG reports, not voluntary ones.

Disaggregating ESG drivers (C)is actuallymore difficult, as ESG factors are deeply interconnected.

References:

ICGN Global Stewardship Principles

Principles for Responsible Investment (PRI) Reporting Framework

UK Stewardship Code 2020

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General insurerstypically have theshortest investment time horizonbecause theirliability structureis shorter-term, requiring liquidity to pay claims quickly. For example,property and casualty (P&C) insurersmust hold liquid assets to cover unexpected claims fromnatural disasters or accidents.

In contrast,life insurers (A)manage long-term liabilities and have extended investment horizons, whilefoundations (B)invest with long-term endowment strategies.

References:

CFA Institute Report on ESG Investing for Insurers

OECD Guidelines on Insurance Investment Strategies

PRI ESG Integration in Insurance Asset Management

Firms with agovernance heritageprioritizeengagement at the board levelbefore escalating issues to senior management. This approach aligns withbest practices in corporate governance, where oversight and decision-making originate at theboard levelrather than operational management.

Firms with asocial heritage (A)focus on labor rights and diversity, while those with anenvironmental heritage (C)prioritize sustainability and climate-related engagements.

References:

CFA Institute Corporate Governance Framework

UK Stewardship Code 2020

OECD Guidelines on Corporate Governance

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Universal exclusionapplies to sectors that investorscompletely exclude, such astobacco, weapons, or controversial industries.

Idiosyncratic exclusions (B)arecase-by-case exclusionsbased on specific client preferences.

Conduct-related exclusions (C)focus oncompanies violating ethical norms, rather than entire sectors.

References:

Principles for Responsible Investment (PRI) ESG Screening Guide

MSCI ESG Exclusionary Strategies Report

CFA Institute Guide to Negative Screening

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A major challenge in ESG integration iscultural resistance and biases within investment firms. Sometraditional investment managersview ESG as non-financialorirrelevant to performance, leading to resistance in fully embedding ESG into decision-making.

WhileESG reporting complexity (B)is a challenge, it does not outweigh the fundamentalorganizational and mindset barriersthat slow adoption. Standardized disclosures (C) actually help rather than hinder ESG integration.

References:

CFA Institute ESG Integration Framework

Principles for Responsible Investment (PRI) Survey on ESG Adoption Barriers

MSCI Research on ESG Culture in Investment Firms

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Asset managers actively engage with investee companiestoimprove ESG performance through stewardship, proxy voting, and direct engagement.

Fund labellers (A) certify funds but do not engage.

Investment platforms (C) provide access but do not influence corporate ESG strategy.

References:

Principles for Responsible Investment (PRI) Stewardship Best Practices

CFA Institute Active Ownership & ESG Integration Report

MSCI ESG Engagement Framework

Greenwashing risk is highest when ESG integration is used primarily to attract ESG-conscious capital without genuine commitment to sustainability.

Value creation (A) and risk management (B) are legitimate ESG integration strategiesthat contribute tolong-term business improvement.

However, if ESG is used mainly for marketing purposes (C) without meaningful impact, it leads to greenwashing.

References:

CFA Institute Greenwashing Risks in Private Equity Report

Principles for Responsible Investment (PRI) ESG in Private Markets

EU Green Claims Directive & ESG Transparency Regulations

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