CFA Institute Sustainable-Investing Exam Dumps

Policy engagement refers to efforts by investors to influence regulatory frameworks. An example of this would be responding to a regulator's public consultation on ESG issues, therebycontributing to the development of ESG policies that can drive broader change across markets and industries.ESG Reference: Chapter 6, Page 280 - Engagement and Stewardship in the ESG textbook.

The Corporate Governance Committee (Option C) ensures the board:

Has diverse, skilled, and independent directors.

Follows best practices in governance, ethics, and oversight.

Option A (Audit committee) focuses on financial reporting and risk management.

Option B (Compensation committee) oversees executive pay and incentives.

OECD Corporate Governance Guidelines

PRI Board Effectiveness and ESG Governance Report

Harvard Law School: Corporate Board Oversight Trends

TheWorld Bank's Worldwide Governance Indicators (WGI)cover governance dimensions such as:

Voice and accountability

Political stability

Government effectiveness

Regulatory quality

Rule of law

Control of corruptionThese indicators provide aglobal benchmark for governance qualityand help investors incorporate governance risks into ESG assessments. They do not include climate change (A) or financial stability scores (C).

Externalities refer to the unintended consequences of a project or asset, such as pollution, that affect its surrounding environment and society. These factors often have social or environmental impacts that are not reflected in the financial costs of the project. (ESGTextBook[PallasCatFin], Chapter 3, Page 114)

Negative Screening Definition:

Negative screening is the practice of excluding companies or sectors that perform poorly on ESG criteria from an investment portfolio.

It focuses on avoiding the worst performers in terms of environmental, social, and governance practices.

Application in ESG Investing:

Investors use negative screening to mitigate risks associated with poor ESG performance, such as regulatory penalties, reputational damage, and financial losses.

Common exclusions include industries like tobacco, fossil fuels, and weapons manufacturing.

Comparison with Other Screening Methods:

Positive screening involves selecting the best-performing companies on ESG criteria.

Norms-based screening applies international standards and norms to exclude companies that do not comply.

Reference:

The concept of negative screening is detailed in ESG investment frameworks and is widely recognized as a primary method for integrating ESG considerations into investment processes.

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