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

Gender diversity on a company’s board is often seen as an indicator of strong corporate governance, as it promotes diverse perspectives and better decision-making. (ESGTextBook[PallasCatFin], Chapter 5, Page 236)

Bonds are typically considered inferior in the capital structure compared to equities, meaning bondholders are paid after senior debt but before equity holders in the event of a liquidation. (ESGTextBook[PallasCatFin], Chapter 8, Page 451)

While race and gender diversity are critical components of a well-functioning board, diversity of thought is the most important in ensuring effective decision-making, reducing groupthink, and improving governance.

Diversity of thought arises from board members with different backgrounds, professional experiences, and viewpoints, leading to better risk management and innovation.

Research (e.g., McKinsey's "Diversity Wins" 2020 report) indicates that companies with diverse perspectives outperform their peers financially and strategically.

Regulatory bodies and institutional investors (such as MSCI and ISS) increasingly assess cognitive and experiential diversity rather than just demographic diversity.

Tobacco companies are commonly excluded from portfolios using universal exclusion criteria, which apply broadly to all companies involved in certain controversial industries. (ESGTextBook[PallasCatFin], Chapter 1, Page 6)