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

According to the Global Sustainable Investment Review 2022, impact investing represents the smallest share of sustainable investment assets.

Why A (Impact investing) is correct:

Impact investing is more niche and less common than ESG integration or screening strategies.

It focuses on generating measurable ESG impact alongside financial returns.

Why not B or C?

B (Best-in-class) and C (Norms-based screening) are more widely adopted strategies.

References:

Global Sustainable Investment Alliance (GSIA) 2022 Report

Active ownership refers to investors using their rights (voting, engagement, resolutions) to influence corporate behavior.

Why C (Proxy voting with an agenda) is correct:

Active owners use proxy voting to push ESG policies (e.g., climate risk disclosures, executive compensation reforms).

Example: BlackRock and Vanguard vote on shareholder resolutions to demand climate risk reporting.

Why not A or B?

A (Negative screening) is a passive strategy, not active ownership.

B (Disinvestment) is sometimes used but is not the main strategy of active ownership.

References:

PRI: Active Ownership 2.0 Framework (2023)

The UK Stewardship Code (2020) sets principles for asset owners, asset managers, and service providers (Option B) to enhance corporate governance and sustainable investing.

Signatories must demonstrate active ownership and engagement.

Reporting is annual, not quarterly (Option A is incorrect).

Signatories must show evidence of stewardship in practice, not just publish policies (Option C is incorrect).

References:

UK Financial Reporting Council (FRC) – Stewardship Code (2020)

PRI Active Ownership 2.0

OECD Guidelines on Corporate Governance

Greenhushing occurs when a company is reluctant to publicly share its sustainability achievements or goals due to fears of backlash or misunderstanding from stakeholders. (ESGTextBook[PallasCatFin], Chapter 7, Page 364)