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

A minimum requirement for PRI membership is the establishment of accountability mechanisms to ensure that responsible investment policies are effectively implemented within the organization. (ESGTextBook[PallasCatFin], Chapter 9, Page 509)

Assessing the alignment of local labor laws with International Labour Organization (ILO) principles is an example of social analysis at the country level. This type of analysis involves evaluating the legal and regulatory frameworks of a specific country to determine how well they adhere to international labor standards.

National Legislation: Social analysis at the country level examines the extent to which a country's labor laws comply with ILO principles, such as freedom of association, the right to collective bargaining, and the elimination of forced labor, child labor, and discrimination in employment.

Regulatory Environment: Understanding the alignment of local labor laws with ILO standards helps assess the regulatory environment's effectiveness in protecting workers' rights and promoting fair labor practices.

Implications for Investment: For investors, this analysis provides insights into the social risks and opportunities associated with operating in or investing in a particular country. It helps identify potential compliance issues and social impacts that could affect investment decisions.

References:

MSCI ESG Ratings Methodology (2022) - Discusses the importance of evaluating labor laws at the country level to understand social risks and regulatory compliance​​.

ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the role of country-level social analysis in assessing adherence to international labor standards and its impact on investment strategies​​.

Policy engagement refers to efforts by investors to influence regulatory frameworks. An example of this would be responding to a regulator's public consultation on ESG issues, thereby contributing to the development of ESG policies that can drive broader change across markets and industries.ESG Reference: Chapter 6, Page 280 - Engagement and Stewardship in the ESG textbook.

Over the past several years, the proportion of sustainable investing relative to total managed assets has fallen in the United States.

1. Sustainable Investing Trends: While sustainable investing has generally been growing globally, there have been regional variations in its adoption and growth rates. In the United States, there has been a noted decline in the proportion of assets managed under sustainable investing criteria relative to total managed assets.

2. Factors Contributing to the Decline: The decline in the US can be attributed to several factors, including regulatory uncertainties, shifts in investor preferences, and varying definitions and standards for sustainable investments.

3. Comparative Trends in Europe and Canada:

Europe (Option A): Europe has seen continued growth in sustainable investing, driven by strong regulatory support and investor demand for ESG-aligned investments.

Canada (Option B): Canada has also experienced growth in sustainable investing, although at a different pace compared to Europe.

References from CFA ESG Investing:

Regional Trends: The CFA Institute provides insights into the regional differences in sustainable investing trends, highlighting the decline in the proportion of sustainable investing in the United States relative to total managed assets.

Market Dynamics: Understanding the market dynamics and regulatory environment is crucial for interpreting the trends in sustainable investing across different regions.

In conclusion, over the past several years, the proportion of sustainable investing relative to total managed assets has fallen in the United States, making option C the verified answer.

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