CFA Institute Sustainable-Investing Question Answer
The term 'management gap' most likely refers to:
The lack of diversity among senior leaders in a firm.
Risks that cannot be addressed through company initiatives.
Risks that a company could manage but is not yet managing.
A management gap occurs when a company has the ability to manage ESG risks but has not yet implemented the necessary policies or controls.
Why C (Manageable but unaddressed risks) is correct:
Example: A company exposed to water scarcity risk but failing to implement water efficiency measures.
Why not A or B?
A (Diversity gap) is a related but different concept.
B (Unmanageable risks) refers to systemic risks that companies cannot directly control.
TESTED 25 Feb 2026
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