An investment firm's aims and objectives for integrating ESG into an investment process - ANSWERS► meeting requirements under fiduciary duty or regulations,
► meeting client and beneficiary demands,
► lowering investment risk,
► increasing investment returns,
► giving inve...
CFA ESG Chapter 7 Exam 100%
Accurate!!
An investment firm's aims and objectives for integrating ESG into an investment process
- ANSWERS► meeting requirements under fiduciary duty or regulations,
► meeting client and beneficiary demands,
► lowering investment risk,
► increasing investment returns,
► giving investment professionals more tools and techniques to use in analysis,
► improving the quality of engagement and stewardship activities, and
► lowering reputational risk at a firm level and investment level.
Qualitative ESG Analysis - ANSWERSQualitative ESG analysis is likely to be used in
investment processes that are based on company-specific research, fundamental
analysis, and stock picking.
► Investment teams analyze ESG data to form an opinion on a firm's ability to manage
certain ESG issues.
► They combine this opinion with their financial analysis by linking specific aspects of
the company's ESG risk-management strategy to different value drivers (e.g., costs,
revenues, profits, and capital expenditure requirements).
► Analysts and portfolio managers then seek to integrate their opinion in a quantified
way into their financial models by adjusting assumptions used in the model (e.g.,
growth, margins, or costs of capital).
Quantitative ESG Analysis - ANSWERSQuantitative ESG (QESG) analysis is likely to
be used in investment processes that use quant models to identify attractive investment
opportunities. In such cases, the ESG data are typically aggregated into an ESG factor
(an ESG score), which is added to the quant models. This could be a screen that
creates the investment universe or a quant model used to adjust valuations based on
several factors (including ESG
AI in ESG - ANSWERSSome practitioners ► focus on using AI techniques to measure
ESG performance tied to measures developed by the Sustainability Accounting
Standards Board (SASB), ► attempt to provide immediate access to scores based on
, material ESG events as they occur, or ► focus on intangible ESG factors, such as
corporate culture, that could drive company value.
Investment strategies are typically classified as - ANSWERS► quantitative (systematic,
algorithmic), ► fundamental, ► active, ► passive, or ► beta
Tools of ESG ANALYSIS *** - ANSWERS► Red flag indicators
► Company questionnaires and management interviews
► Checks with outside experts
► Watch lists
►Internal ESG research
► External ESG research
► ESG agenda items at investment committee- or chief information officer- level
meetings -
elements of ESG INTEGRATION - ANSWERS► adjusting forecast financials (e.g.,
revenue, operating cost, asset book value, capital expenditure)
► managing risk, including exposure limits, scenario analysis, and value-at-risk models
► ESG factor tilts
► ESG momentum tilts
► strategic asset allocation, including thematic and ESG objective tilts
► tactical asset allocation
► ESG controversies and positive ESG events
Research Stage - ANSWERS1. The research stage typically includes a materiality
assessment to identify the ESG issues that are likely to have an impact on the
company's financial performance. Materiality is typically measured in terms of both the
likelihood and magnitude of impact.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller papersmaster01. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.99. You're not tied to anything after your purchase.
