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CFA Institute ESG-Investing Exam Syllabus Topics:

Topic	Details
Topic 1	Social Factors: This section focuses on analyzing social factors, including their systemic effects and material impacts. This section also provides methodologies for assessing social risks and opportunities at country, sector, and organizational levels.
Topic 2	Investment Mandates and Portfolio Analytics: This domain explains to ESG Analysts the importance of constructing mandates to support effective ESG investment results. This section highlights key aspects, such as transparency and accountability, which are essential for asset owners and intermediaries to align portfolios with ESG priorities.
Topic 3	ESG Analysis, Valuation, and Integration: Targetted for ESG Consultants, this domain covers methods for embedding ESG factors into the investment process, the obstacles that may arise, and the impact of ESG considerations on valuations across various asset classes.
Topic 4	ESG Integrated Portfolio: This section discusses the application of ESG analysis across multiple asset classes, exploring strategies for incorporating ESG criteria into portfolio management.
Topic 5	Overview of ESG Investing and the ESG Market: This section tests ESG Investment Managers and delves into responsible investment strategies, examining how environmental, social, and governance (ESG) elements shape the investment ecosystem.

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CFA Institute Certificate in ESG Investing Sample Questions (Q252-Q257):

NEW QUESTION # 252
Engagement is best described as a dialogue:

A. To inform incremental buy/hold/sell decisions
B. To understand a company's stakeholders and its performance
C. With a specific and targeted objective to achieve change

Answer: C

Explanation:
Engagement is a dialogue with a specific and targeted objective to achieve change. This form of active ownership allows investors to influence companies' practices, particularly regarding their ESG risks and opportunities. The goal is to improve long-term shareholder value and drive positive change within the company.ESG Reference: Chapter 6, Page 274 - Engagement and Stewardship in the ESG textbook.

NEW QUESTION # 253
Which of the following is an example of a bottom-up ESG engagement approach? An asset manager:

A. initiating dialogue with an investee company's investor relations team
B. sending out a letter to the CFOs of all investee companies
C. joining the PRI Collaboration Platform

Answer: A

Explanation:
A bottom-up ESG engagement approach involves direct interaction with specific investee companies to address ESG issues. Initiating dialogue with an investee company's investor relations team is an example of this approach.
* Direct Communication: Engaging directly with the investor relations team allows asset managers to discuss specific ESG issues relevant to the company. This direct line of communication can lead to more detailed and company-specific insights.
* Targeted Engagement: This method focuses on individual companies, enabling asset managers to address specific concerns and influence company practices more effectively. It allows for a deeper understanding of how ESG issues are managed at the company level.
* Active Ownership: By engaging with companies, asset managers exercise active ownership, encouraging companies to adopt better ESG practices. This can lead to improved ESG performance and, ultimately, better long-term investment returns.
References:
* MSCI ESG Ratings Methodology (2022) - Highlights the importance of direct engagement with companies as part of an effective ESG strategy.
* ESG-Ratings-Methodology-Exec-Summary (2022) - Discusses various engagement approaches and emphasizes the value of direct dialogue with investee companies in improving ESG practices.

NEW QUESTION # 254
When an external auditor's performance materiality level is 60% of its overall materiality threshold, the auditor most likely:

A. Will apply tailored audit procedures for the smallest 40% of the company's segments
B. Uses a sample that covers 60% of the total number of the company's transactions during the financial year
C. Has a low level of confidence in the company's financial controls

Answer: C

Explanation:
If the auditor sets performance materiality at 60% of the overall materiality threshold, it indicates a low level of confidence in the company's financial controls. This suggests that the auditor believes there is a higher risk of misstatements, requiring more conservative thresholds during the audit.ESG Reference: Chapter 5, Page
252 - Governance Factors in the ESG textbook.

NEW QUESTION # 255
Which of the following investor types most likely prefers exclusions as an ESG approach?

A. General insurers
B. Life insurers
C. Foundations

Answer: C

Explanation:
Step 1: Understanding ESG Approaches
ESG approaches include exclusions, where certain investments are excluded from a portfolio based on ethical, moral, or ESG criteria.
Step 2: Investor Types and ESG Preferences
* Life Insurers: Focus more on long-term liabilities and often integrate ESG factors without strict exclusions.
* Foundations: Tend to have strong ethical and mission-driven mandates, leading them to prefer exclusions to ensure investments align with their values.
* General Insurers: Similar to life insurers, they may integrate ESG factors but do not typically rely on exclusions as their primary approach.
Step 3: Verification with ESG Investing References
Foundations are mission-driven and often prefer exclusions to ensure their investments align with their ethical and social objectives: "Foundations are more likely to adopt exclusionary approaches to ensure their investments reflect their mission and ethical values".
Conclusion: Foundations most likely prefer exclusions as an ESG approach.

NEW QUESTION # 256
Which of the following asset classes has the lowest degree of ESG integration?

A. Sovereign debt
B. Emerging markets corporate debt
C. Investment grade corporate debt

Answer: A

Explanation:
Sovereign debt has the lowest degree of ESG integration compared to investment-grade corporate debt and emerging markets corporate debt. This is due to several factors:
Limited ESG Data: There is generally less ESG data available for sovereign issuers compared to corporate issuers. Sovereign ESG assessments rely on country-level indicators, which may not be as detailed or specific as corporate ESG disclosures.
Complexity of ESG Factors: The ESG factors affecting sovereign debt are more complex and broader in scope, encompassing issues like political stability, governance, human rights, and environmental policies. This complexity makes it challenging to integrate ESG factors effectively.
Market Practices: The integration of ESG factors into sovereign debt investment processes is less advanced compared to corporate debt markets. While there is growing interest, the methodologies and frameworks for assessing sovereign ESG risks are still developing.
Reference:
MSCI ESG Ratings Methodology (2022) - Discusses the challenges and current state of ESG integration across different asset classes, highlighting the relative lag in sovereign debt.
ESG-Ratings-Methodology-Exec-Summary (2022) - Provides insights into the varying degrees of ESG integration in different asset classes and the factors contributing to these differences.

NEW QUESTION # 257
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Reliable ESG-Investing Guide Files - ESG-Investing Exam Price

CFA Institute ESG-Investing Exam Syllabus Topics:

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CFA Institute Certificate in ESG Investing Sample Questions (Q252-Q257):

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