CFA Institute Sustainable-Investing Question Answer
ESG portfolio optimization most likely:
A.
Applies a fixed decision to specific securities.
B.
Accepts lower active risk when optimizing for multiple factors.
C.
Requires defining an upper and lower bound for a given variable.
The Answer Is:
C
This question includes an explanation.
Explanation:
ESG portfolio optimization involves setting upper and lower bounds for ESG-related variables (Option C) to balance financial performance with ESG impact. For example:
Carbon footprint constraints: Ensuring portfolio emissions stay within a target range.
Sector exposure limits: Avoiding excessive concentration in high-emission industries.
Option A is incorrect because optimization is dynamic and does not apply rigid decisions.
Option B is incorrect because ESG optimization does not necessarily accept lower active riskāit depends on investor preferences.
[References:, MSCI ESG Portfolio Construction Framework, BlackRock ESG Optimization Research, PRI Guide to ESG Integration in Portfolio Management, , , , , ]
Sustainable-Investing PDF/Engine
Printable Format
Value of Money
100% Pass Assurance
Verified Answers
Researched by Industry Experts
Based on Real Exams Scenarios
100% Real Questions
Get 75% Discount on All Products,
Use Coupon: "ac75sure"