Sustainable Investing Certificate Sustainable-Investing Exam Questions and Answers PDF

One of the main challenges incollective engagementis ensuring compliance with legal and regulatory boundaries, particularly rules around"acting in concert"ormarket abuse regulations. Investors working together risk being seen as trying to influence control over a company, which can triggerregulatory scrutinyor require disclosures.

“Many investors see such market abuse rules as limiting their ability to carry out collective engagement effectively.”

Organizations like theInvestor Forumin the UK have created frameworks to facilitate engagement without breaching these regulations, underscoring the seriousness of this issue.

The Official Training Manual summarises the Dimson, Karakaş & Li (2015) “Active ownership” study and states unambiguously: “The core finding of this study was clear: that successful engagement activity was followed by positive abnormal financial returns.”

This directly supports option C and provides no evidence for A or B in the study extract cited.

Pension fund members—the actual beneficiaries—are often surveyed or consulted to understandethical preferences, which then informinvestment mandates. Trustees act on their behalf, and managers implement decisions.

“Asset owners, such as pension funds, are increasingly required to reflect the ethical or normative preferences of their members in ESG investment decisions.”

Thus, members are the key source of influence for setting exclusion policies or ESG priorities.

Inissue-based engagement, investors addressspecific ESG issuesthat affect multiple companies or sectors. These engagements are often supported byexamples of best practice, which may emerge through prior engagements or research.

“Issue-based approaches to engagement are often accompanied by examples of what best practice in a particular area looks like... By expecting all companies in a given sector to adopt these best practices, investors may over time move sector or industry practice forward overall.”

While active investors may prefer company-specific engagements,issue-based engagementsare more commonly used bypassive or diversified investors.