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

The CFA Institute’s Sustainable Investing materials explain thatgrowing income inequality typically erodes social mobility, as economic gaps widen between wealthy and low-income populations. This inequality limits access toeducation, health care, and financial opportunities, reinforcing socioeconomic divides and making it more difficult for individuals in lower-income brackets to improve their living standards. In contrast, it doesnotcreate more educational opportunities (option B) or boost the middle class’s purchasing power (option C)—both of which tend to bereducedas inequality worsens.

CFA materials highlight thatpension fundsdominate the landscape of the largest asset owners globally. They managetrillions of dollarsof assets—often dwarfing insurance company general accounts or sovereign wealth funds in sheer asset base and influence on capital markets. Pension funds’ size and long-term focus are central to their prominent role in sustainable investing and stewardship.

CFA ESG integration guidance notes that ESG rating agencies’ outputs can berelatively noisydue to:

Data inconsistenciesin reporting by companies

Subjective weightingdifferences across providers

Limited standardized definitions of ESG metricsThisdata noise(option A) is a known challenge in ESG investing, making it important for investors totriangulate multiple sourcesand not rely on a single rating alone.

Active ownershipinvolves using tools likeproxy votinganddirect engagementto influence companies’ ESG practices. CFA materials note that aclear agenda—focused on specific, measurable objectives—guides these proxy voting strategies, ensuring alignment with long-term sustainability outcomes. Active ownership is not primarily about disinvestment (B) or exclusionary screening (A), which are separate ESG strategies.