ESG ESG Investment & Financial Integration 2

Question 1

What is 'stranded asset risk' in ESG investing?

Accepted Answer

Assets that may lose economic value due to ESG-related transitions such as carbon regulation

Answer

Stranded asset risk refers to assets—especially fossil fuel reserves—that may become economically unviable before the end of their useful life due to climate policy, technology shifts, or changing demand.

Question 2

Which framework specifically guides investors in aligning portfolios with the Paris Agreement temperature goals?

Accepted Answer

Paris Aligned Investment Initiative (PAII)

Answer

The Paris Aligned Investment Initiative provides investors with net-zero frameworks and benchmarks to align portfolios with limiting warming to 1.5°C.

Question 3

In sustainable finance, what does 'negative screening' mean?

Accepted Answer

Excluding companies or sectors that fail to meet minimum ESG standards from a portfolio

Answer

Negative screening (exclusionary screening) removes companies involved in activities deemed harmful—such as tobacco, weapons, or coal—from investment consideration.

Question 4

What is shareholder engagement in the ESG context?

Accepted Answer

Investors using their ownership position to influence corporate ESG behavior through dialogue and voting

Answer

Shareholder engagement means active investors use proxy voting, direct dialogue, and resolutions to push companies toward improved ESG practices.

Question 5

What does the UN Principles for Responsible Investment (PRI) require of its signatories?

Accepted Answer

Committing to incorporate ESG issues into investment analysis, ownership policies, and reporting

Answer

PRI signatories commit to six principles covering ESG incorporation, active ownership, disclosure, and collaboration—without prescribing specific investment decisions.

(ESG) Certified Environmental, Social, and Governance Consultant Practice Test

(ESG) Certified Environmental, Social, and Governance Consultant Practice Test

ESG ESG Investment & Financial Integration 2