CFA Institute ESG-Investing Questions Answers

Sustainability-linked bonds (SLBs) provide financing to issuers who commit to specific improvements in sustainability outcomes. Unlike green or sustainability bonds that fund specific projects, SLBs are tied to the issuer's overall sustainability performance and commitments to achieving predefined sustainability targets. These bonds incentivize issuers to enhance their ESG performance across various aspects, making them a flexible tool for promoting broader sustainability goals​​​​.

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Globalization has contributed to a reduction in social structural inequality. By integrating economies and increasing access to global markets, globalization has created opportunities for economic growth and development in many regions, helping to reduce poverty and inequality.

Reduction in social structural inequality (C): Globalization has enabled the transfer of technology, capital, and skills across borders, leading to job creation and economic development in less developed regions. This has helped to reduce structural inequalities by providing more equal opportunities for people in different parts of the world.

Regulation (A): Globalization has often led to an increase in regulation, particularly in areas such as trade, finance, and environmental standards, as countries cooperate to manage global issues.

Market efficiency (B): Globalization typically enhances market efficiency by increasing competition, improving resource allocation, and fostering innovation.

References:

CFA ESG Investing Principles

Economic studies on the impacts of globalization

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In Sweden, the nominations committee is drawn from shareholders rather than being a committee of the board.

Sweden (B): In Sweden, the nominations committee is typically composed of representatives of the largest shareholders and is responsible for proposing board members. This approach ensures that shareholder interests are directly reflected in the selection of board candidates.

Italy (A): In Italy, the nominations committee is generally a committee of the board rather than being drawn from shareholders.

The Netherlands (C): In the Netherlands, the nominations committee is also generally a committee of the board.

References:

CFA ESG Investing Principles

Corporate governance practices in various countries

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With reference to data security and customer privacy issues, a technology company in the research and development stage with no commercially marketed products is most likely to have low risk exposure to this factor in the short run.

Limited Customer Data: Since the company is still in the R&D stage and has no commercially marketed products, it is less likely to handle significant amounts of customer data, reducing the immediate risk of data security and privacy issues.

Focus on Development: The primary focus during the R&D stage is on product development and innovation rather than on managing and protecting customer data. This stage involves less exposure to operational risks associated with data breaches or privacy violations.

Short-term Horizon: In the short run, the company’s activities are centered on creating and testing new technologies. While data security and privacy will become critical as the company moves towards commercialization, the immediate risk exposure is relatively low.

References:

MSCI ESG Ratings Methodology (2022) - Discusses the varying risk exposures to data security and privacy issues based on a company's stage of development​​.

ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the lower risk exposure of companies in early development stages regarding customer data security and privacy​​