Sustainable Investing Online Practice Questions

Explanation:
Technological innovation, especially concerning big social media companies, has sparked debates around human rights, such as free speech, privacy, and censorship. These issues have created tensions between these companies and sovereign nations, suggesting shifts in societal power.ESG
Reference: Chapter 4, Page 192 - Social Factors in the ESG textbook.

Explanation:
TheEU’s taxonomy for sustainable activitiesis a prominent example of apublic policy framework―it sets criteria and definitions for sustainable economic activities, guiding investors, companies, and governments in aligning with climate and environmental objectives.
Option A is incorrect becauseboth asset owners and managerscan integrate ESG factors into strategic asset allocation.
Option C is incorrect becauseshareholder engagementextends far beyond the annual general meeting, encompassing ongoing dialogue and stewardship activities.

Explanation:
A major challenge in ESG integration iscultural resistance and biases within investment firms. Sometraditional investment managersview ESG as non-financialorirrelevant to performance, leading to resistance in fully embedding ESG into decision-making.
WhileESG reporting complexity (B)is a challenge, it does not outweigh the fundamentalorganizational and mindset barriersthat slow adoption. Standardized disclosures (C) actually help rather than hinder ESG integration.
References:
CFA Institute ESG Integration Framework
Principles for Responsible Investment (PRI) Survey on ESG Adoption Barriers
MSCI Research on ESG Culture in Investment Firms

Explanation:
The Green Claims Directive (GCD) aims to make green claims reliable, comparable, and verifiable across the world. This directive addresses the need for consistency and transparency in the way businesses communicate their environmental claims to consumers.
Reliability: The GCD ensures that green claims made by businesses are based on accurate and substantiated information, preventing misleading claims.
Comparability: By standardizing the criteria and methodologies for green claims, the GCD enables consumers to compare the environmental benefits of different products and services effectively.
Verifiability: The directive requires that green claims be verifiable, meaning that businesses must provide evidence and undergo scrutiny to support their claims, enhancing trust and accountability.
References:
MSCI ESG Ratings Methodology (2022) - Discusses the importance of reliability, comparability, and verifiability in ESG disclosures and claims.
ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the role of regulatory frameworks like the GCD in ensuring transparent and trustworthy green claims.

Explanation:
TheKyoto Protocol(adopted in 1997) was the firstinternational treatyto legallycommit industrialized nationstoreduce greenhouse gas emissions. It setbinding targetsfor developed countries but did not impose obligations on developing nations.
Options A and B are incorrect becauseKyoto focused on emission reductionsrather than corporate disclosures or private finance mobilization.
References:
United Nations Framework Convention on Climate Change (UNFCCC) Kyoto Protocol Overview
IPCC Reports on Kyoto and Climate Policy
OECD Climate Governance Analysis