CFA Institute Updated Sustainable-Investing Exam Questions and Answers by nuala

TheUnited Kingdomwas the first to introduce a formal corporate governance code, known as theCadbury Report (1992). This groundbreaking document established best practices for corporate governance, emphasizing theroles and responsibilities of boards, transparency, and accountability. It became the model for many global governance frameworks and was a direct response to financial scandals at the time.

Alinear economyfollows the “take–make–dispose” model: resources are extracted, manufactured into products, and ultimately discarded asnon-recyclable waste. In contrast, acircular economy(not described here) seeks to reuse, recycle, and recover materials. Only in a circular system (option A or C) are materials recycled or reused, whereas linear systems produce waste with minimal resource recapture.

Reshoringrefers to the process of moving production or sourcing back to a company’s home country or a country with higher labor costs, typically in response to geopolitical, supply chain, or ESG concerns. This is distinct fromoffshoring, which involves shifting production to low-cost regions, andjust transition, which relates to workforce and community adaptation in climate policy shifts.

The CFA Institute confirms thatESG indices have been developed for both equity and fixed income asset classes, providing investors with performance and risk data. While the specific criteria and weightings of these indices can vary widely (so option A is incorrect), and comprehensive back-testing across multiple cycles is often limited (option C is also not uniformly true), these indices do consistently extend acrossboth equities and bondsto enable portfolio-level ESG integration and benchmark comparisons.