ESG-Investing Exam Dumps : Certificate in ESG Investing

When evaluating an asset manager against an ESG investment mandate, several factors can cause concern. According to the Brunel Asset Management Accord, the following points are evaluated for adherence to ESG principles:

Change in investment style (A): A change in investment style can significantly alter the risk and return profile of the portfolio and potentially misalign it with the ESG mandate initially set by the client. This is a critical factor as consistency in investment style ensures that the ESG objectives are continuously met.

Loss of key personnel in the organization (B): Key personnel often drive the ESG integration within investment processes. Their departure could disrupt the consistency and quality of ESG analysis and integration, which is crucial for maintaining the standards of the ESG mandate.

Short term underperformance compared to benchmark (C): Short-term underperformance is not typically a major concern when evaluating an asset manager against an ESG mandate. ESG investing often focuses on long-term outcomes and sustainability. The performance of ESG strategies may fluctuate in the short term due to various factors, including market conditions and the inherent characteristics of ESG investments, which might not always align with short-term market movements. The emphasis is usually placed on long-term performance and the consistency of ESG integration rather than short-term results.

In the context of the Brunel Asset Management Accord and CFA ESG Investing principles, maintaining a long-term perspective and adhering to the agreed-upon ESG criteria are paramount. The primary focus is on the systematic and ongoing application of ESG principles rather than short-term performance metrics.

References:

Brunel Asset Management Accord

CFA ESG Investing Principles

MSCI ESG Ratings Methodology (June 2022)​​.

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Creating ESG scorecards for private companies presents unique challenges compared to public companies:

Less information is available in the public domain (A): Private companies are not required to disclose as much information as public companies, which are subject to regulatory requirements for transparency and reporting. This lack of publicly available data makes it more difficult to assess and create comprehensive ESG scorecards for private companies.

Rating agencies are more critical of private companies (B): While rating agencies might have stringent criteria, the primary challenge is the availability of data rather than the critical nature of the rating agencies.

Management is more unwilling to disclose commercially sensitive information (C): While management's unwillingness to disclose information can be a factor, the fundamental issue is the overall lower level of mandatory disclosure for private companies. Public companies have established reporting standards and are legally obligated to provide certain information, making the data more readily accessible.

Therefore, the main reason why creating private company scorecards is challenging is due to the limited availability of information in the public domain, making it difficult to gather comprehensive ESG data.

References:

CFA ESG Investing Principles

MSCI ESG Ratings Methodology (June 2022)​​.

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The UK Stewardship Code and the European Fund and Asset Management Association (EFAMA) Code both aim to enhance the quality of stewardship and engagement by institutional investors. However, there are some differences in the principles they address.

1. UK Stewardship Code Principles: The UK Stewardship Code outlines several principles for institutional investors, including monitoring investee companies, managing conflicts of interest, and reporting on stewardship and voting activities.

2. EFAMA Code Principles: The EFAMA Code, while similar in many respects, does not explicitly address all the principles covered by the UK Stewardship Code. One of the key differences is the requirement for institutional investors to report periodically on their stewardship and voting activities.

3. Reporting on Stewardship and Voting Activities: The UK Stewardship Code emphasizes the importance of transparency and accountability by requiring institutional investors to report periodically on their stewardship and voting activities. This principle is not explicitly addressed in the EFAMA Code, making it a notable difference between the two frameworks.

References from CFA ESG Investing:

Stewardship Codes: The CFA Institute highlights the importance of stewardship codes in promoting responsible investment practices. While both the UK Stewardship Code and the EFAMA Code encourage active engagement and monitoring of investee companies, the UK code places a stronger emphasis on reporting and transparency in stewardship activities.

Transparency in Stewardship: Reporting on stewardship and voting activities is crucial for ensuring that institutional investors are accountable to their beneficiaries and stakeholders. The UK Stewardship Code's focus on this principle underscores its commitment to enhancing the quality and transparency of stewardship practices.

In conclusion, the principle that institutional investors should report periodically on their stewardship and voting activities is not addressed in the EFAMA Code, making option B the verified answer.

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