Sustainable-Investing Exam Dumps : Sustainable Investing Certificate(CFA-SIC) Exam

The utilities sector is likely to experience the highest share price increase through reduced carbon emissions.

Utilities (A): Utilities, particularly those involved in energy generation, are significant emitters of carbon. Therefore, reducing carbon emissions in this sector can lead to substantial cost savings, improved regulatory compliance, and enhanced reputation. These factors can positively impact share prices as investors increasingly value companies with lower carbon footprints.

Industrials (B): While industrials can benefit from reduced emissions, the impact on share price is generally less pronounced compared to utilities due to the broader range of factors influencing industrial sector performance.

Real estate (C): The real estate sector also benefits from reduced emissions through energy efficiency and sustainability initiatives, but the direct impact on share prices tends to be less immediate compared to the utilities sector.

ESG factors can create new sub-asset classes(e.g.,green bonds, impact investing funds) that affectrisk-return trade-offs in mean-variance optimization (MVO) models.

MVO assumes that ESG factors can impact risk-adjusted returns, meaning ESG data can influenceasset weightings and expected volatility.

Regional asset mixes (B) are still relevant for ESG investing, and ESG factorsdo impact expected returns and volatility (C).

ESG factors can impact credit risk at both issuer and industry levels by influencing financial stability, regulatory compliance, and reputational risks.

Issuer level: A company's ESG risk exposure (e.g., environmental violations, governance scandals) can lead to downgrades or higher borrowing costs.

Industry level: Sectors like coal mining, oil & gas, and tobacco face systemic ESG risks (e.g., climate regulations, social opposition).

Credit rating agencies (e.g., Moody’s, S&P, Fitch) integrate ESG risks into credit assessments.