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A small company based in Sweden operates in an industry that has good sustainability ratings. The company has a low ESG rating that an analyst believes to be biased. The bias would most likely result from the company's:
Smaller companies often receive lower ESG ratings due to their limited resources for ESG reporting and engagement, even if their actual practices are sustainable. (ESGTextBook[PallasCatFin], Chapter 7, Page 364)
When searching for an asset manager with an ESG approach, in the request for proposal (RFP) an institutional asset owner would most appropriately ask:
When searching for an asset manager with an ESG approach, it is essential for an institutional asset owner to understand whether the asset manager's strategy aligns with their sustainability objectives. The most appropriate question to ask in the RFP is whether the asset manager aims for positive, measurable ESG outcomes beyond financial returns. This question assesses the commitment to achieving concrete ESG results, which is a critical factor in evaluating the manager's integration of ESG factors into their investment process. Detailed questions about portfolio holdings or which broad market index the manager tracks are less relevant to assessing the ESG integration.
In a request for proposal from managers, for which of the following asset classes are voting policies least likely to be considered?
Voting policies are typically less relevant in passive/index tracking asset classes, as these managers have less influence over the selection of securities and engagement with company management compared to active strategies. (ESGTextBook[PallasCatFin], Chapter 6, Page 302)
Which of the following initiatives is most closely associated with the increased prevalence of antimicrobial resistance?
* Understanding Antimicrobial Resistance (AMR):
AMR occurs when bacteria, viruses, and some parasites become resistant to treatments such as antibiotics, antivirals, and antimalarials.
This resistance makes standard treatments ineffective, leading to persistent infections, increased mortality, and easier spread of diseases.
* FAIRR Initiative:
The Farm Animal Investment Risk and Return (FAIRR) initiative focuses on the risks and opportunities related to intensive livestock production.
FAIRR particularly addresses the increased prevalence of antimicrobial resistance due to poor antibiotic stewardship in intensive farming practices.
* Role of FAIRR:
FAIRR engages with companies to improve their antibiotic usage practices, aiming to reduce the spread of AMR.
This initiative emphasizes the ethical implications of animal welfare and the significant health risks posed to humans by AMR.
* Comparison with Other Initiatives:
The Bangladesh Accord focuses on improving safety standards in the Bangladeshi garment industry.
The Access to Medicine Index assesses how pharmaceutical companies are making medicine more accessible in low- and middle-income countries.
Only FAIRR is directly associated with addressing antimicrobial resistance through better management of antibiotic use in farming.
* Reference:
FAIRR's focus on AMR is detailed in the 2021 final book on ESG and sustainable investing.
An analyst reads the following statements about wastewater treatment plants:
Statement I: Wastewater treatment plants are capital intensive.
Statement II: Wastewater treatment plants are difficult to maintain.
Which of the following is correct?
* Statement I - Capital Intensive:
Wastewater treatment plants require significant upfront investment for construction and infrastructure.
This makes them highly capital intensive projects.
* Statement II - Difficult to Maintain:
The operation and maintenance of wastewater treatment plants involve complex processes and specialized skills.
This adds to the difficulty and cost of maintaining these facilities.
* Verification:
Both statements are correct as they describe the significant financial and operational challenges associated with wastewater treatment plants.
* CFA ESG Investing Reference:
