CFA Institute Updated ESG-Investing Exam Questions and Answers by callan

Asset owners must integrateESG factors into both strategic (long-term) and tactical (short-term) asset allocationsto ensuresustainability objectives are met.

References:

CFA Institute ESG Investment Policy Guide

Principles for Responsible Investment (PRI) ESG Asset Allocation Report

MSCI ESG Strategic & Tactical Allocation Study

Asset managers actively engage with investee companiestoimprove ESG performance through stewardship, proxy voting, and direct engagement.

Fund labellers (A) certify funds but do not engage.

Investment platforms (C) provide access but do not influence corporate ESG strategy.

References:

Principles for Responsible Investment (PRI) Stewardship Best Practices

CFA Institute Active Ownership & ESG Integration Report

MSCI ESG Engagement Framework

ESG rating providerstypically uselonger time horizonsthan credit rating agencies because ESG factors (e.g., climate change, governance risks)unfold over extended periods.

Credit rating agencies focus onshort-term default risk, whereas ESG ratings assesslong-term sustainability risksthat may impactvaluation and performance over decades.

References:

MSCI & Sustainalytics ESG Ratings Methodology

CFA Institute ESG Risk Time Horizons Report

Principles for Responsible Investment (PRI) Guide to ESG Credit Risk

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TheKigali Amendment to the Montreal Protocol(adopted in 2016) is alegally binding international agreementthat aims to phase down the production and consumption ofhydrofluorocarbons (HFCs)—potent greenhouse gases used in refrigeration and air conditioning. Unlike theMontreal Protocol, which focused on ozone-depleting substances, the Kigali Amendment directly addresses climate change by reducing HFC emissions.

The Nagoya Protocol (A) deals with biodiversity and genetic resources, while the Basel Convention (B) regulates hazardous waste.

References:

UNEP (United Nations Environment Programme) Kigali Amendment Overview

Montreal Protocol Official Documents

UNFCCC Reports on HFC Phase-Out

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