ESG-Investing Exam Dumps - Certificate in ESG Investing

The UK’s Green Finance Strategy identifies the policy lever of financing green as directing private sector financial flows to economic activities that support an environmentally sustainable and resilient growth.

Encouraging Private Investment: The strategy aims to mobilize private sector investment into green projects and technologies that contribute to environmental sustainability and climate resilience.

Supporting Green Growth: By directing financial flows towards sustainable economic activities, the strategy supports the transition to a low-carbon economy and promotes long-term economic growth that is resilient to environmental and climate risks.

Policy Framework: The strategy outlines a framework for aligning financial flows with sustainability goals, including setting standards, enhancing disclosures, and providing incentives for green investments.

References:

MSCI ESG Ratings Methodology (2022) - Discusses the role of financial flows in promoting sustainable growth and the importance of directing investments towards green activities​​.

ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the objectives of the UK’s Green Finance Strategy in supporting environmentally sustainable economic growth​​.

Greenhushing occurs when a company is reluctant to publicly share its sustainability achievements or goals due to fears of backlash or misunderstanding from stakeholders. (ESGTextBook[PallasCatFin], Chapter 7, Page 364)

Among the listed governance initiatives, the Dodd-Frank Act is specifically focused on increasing oversight of banks.

1. The Dodd-Frank Act: Enacted in response to the 2008 financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced comprehensive reforms to increase oversight and regulation of the financial industry, particularly banks. It aimed to reduce risks, enhance transparency, and protect consumers by implementing stricter regulatory standards and oversight mechanisms for financial institutions.

2. Other Governance Initiatives:

The Greenbury Report (Option B): This report, published in the UK in 1995, focused on executive remuneration and corporate governance but did not specifically address bank oversight.

The Sarbanes-Oxley Act (Option C): Enacted in 2002 in the US, this act aimed to enhance corporate governance and financial reporting transparency across all sectors, not specifically focusing on banks.

References from CFA ESG Investing:

Bank Oversight Regulations: The CFA Institute discusses the impact of the Dodd-Frank Act on the financial industry, emphasizing its role in strengthening oversight and regulatory standards for banks and other financial institutions.

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Governance criteria have historically been the main focus of ESG integration in strategic asset allocation, as governance is directly linked to corporate performance, risk management, and long-term value creation. (ESGTextBook[PallasCatFin], Chapter 5, Page 236)

Norms-based screening is the largest investment strategy in Europe. This approach involves screening investments against specific social, environmental, and governance criteria based on international norms and standards. Europe has a strong regulatory and cultural emphasis on responsible investing, which is reflected in the widespread adoption of norms-based screening​​.

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EU Regulation on Audit Independence:

EU regulators have implemented measures to ensure the independence of audits for public companies. One of the key measures is the mandatory rotation of auditors.

1. Auditor Rotation: EU regulations require that audit firms rotate their auditors after a maximum of ten years. This is intended to prevent long-term relationships between auditors and clients that could compromise the independence and objectivity of the audit process.

2. Other Measures:

Monetary Limit on Advisory Services (Option B): While limiting the extent of advisory services provided by audit firms can help maintain independence, the primary regulatory focus in the EU has been on auditor rotation.

Preventing Audit Partners from Joining Audit Committees (Option C): This measure could also contribute to audit independence, but it is not the primary mechanism used by EU regulators.

References from CFA ESG Investing:

Audit Independence Regulations: The CFA Institute details the importance of auditor independence in maintaining the integrity of financial reporting. The EU’s requirement for auditor rotation is highlighted as a significant regulatory measure to enhance audit quality and independence.

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CDP (formerly known as the Carbon Disclosure Project) is a nonprofit organization. Here’s a detailed explanation:

Nonprofit Organization:

CDP is a non-governmental organization (NGO) that supports companies, financial institutions, and cities in disclosing and managing their environmental impacts. It runs a global environmental disclosure system, which involves nearly 10,000 companies, cities, states, and regions reporting on their risks and opportunities related to climate change, water security, and deforestation​​​​.

CFA ESG Investing References:

The CFA ESG Investing curriculum recognizes CDP as a key player in environmental disclosure and management, emphasizing its role as a nonprofit organization facilitating transparency and accountability in environmental impacts​​​​.

The first step in the effective design of an investment mandate is determining the client's ESG investment beliefs.

Client's ESG investment beliefs (A): Understanding the client's values, preferences, and beliefs regarding ESG factors is essential for creating an investment mandate that aligns with their objectives. This step ensures that the investment strategy and mandate are tailored to the specific ESG priorities of the client.

Impact of ESG factors on risk and return characteristics (B): This step is important for analyzing how ESG factors influence financial performance but comes after understanding the client's ESG beliefs.

Fund manager's investment approach to reflect ESG issues (C): The investment approach should reflect ESG issues identified in alignment with the client's beliefs and priorities, making this a subsequent step in the mandate design process.

References:

CFA ESG Investing Principles

Best practices for creating investment mandates

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