Free Access CFA Institute ESG-Investing New Release

A coal power plant forced to close due to carbon regulationsis astranded asset, as it loses economic value due toregulatory, environmental, or market changes.

A tech company losing market share (B) is a business risk, not asset stranding.

Short-term stock price declines (C) are normal market fluctuations.

References:

Carbon Tracker Initiative Stranded Assets Report

CFA Institute ESG Climate Risk Framework

World Bank Energy Transition & Asset Risk Guide

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The management teamis responsible fordeveloping ESG reports, financial disclosures, and corporate transparency efforts.

The audit committee (B) reviews and ensures compliance with reporting standards.

The board (A) provides oversight but does not directly lead reporting.

References:

CFA Institute Corporate Governance Handbook

Global Reporting Initiative (GRI) ESG Disclosure Guidelines

OECD Transparency & Corporate Reporting Principles

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Achange in investment style (A) is least concerningif the manager remainsaligned with the long-term ESG mandate. In contrast:

Underperformance (B)raises questions aboutwhether ESG integration is effective.

Portfolio turnover (C) outside the expected rangecould indicatea misalignment with ESG strategy.

References:

Brunel Pension Partnership ESG Investment Guidelines

CFA Institute ESG Manager Selection Framework

Principles for Responsible Investment (PRI) Asset Manager Accountability Report

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Quantitative ESG analysis involves numerical, measurable data that can be compared across companies and time periods.

Why A (Issuer-reported carbon emissions) is correct:

Carbon emissions data (Scope 1, 2, and 3) is measurable and numeric, often reported in metric tons of CO₂ equivalent (MTCO₂e).

This data can be used in financial models to assess climate risk.

Why not B or C?

B (Executive compensation policies) are qualitative, as linking pay to ESG goals involves policy assessments rather than hard data.

C (Investments and policies credibility) involves subjective judgment rather than numerical data.

References:

CDP Climate Disclosure Framework

SASB Standards for Carbon Emissions Measurement