CAIA - CIT 4 - Developing an Asset Owner Climate Change Strategy

Question 1

The ___ ___ is the estimated amount of carbon dioxide the world can emit while maintaining a reasonable chance of limiting increases in global temperature to ___ degrees C above pre-industrial levels. It is estimated to be ___ trillion tons of carbon.

Answer 1

The carbon budget is the estimated amount of carbon dioxide the world can emit while maintaining a reasonable chance of limiting increases in global temperature to 2 degrees C above pre-industrial levels. It is estimated to be 1 trillion tons of carbon.

Question 2

The principles of responsible investment (PRI) are:

1. Incorporate ESG into ___ ___and ___-___
2. Be ___ ___
3. ___ ___on ESG from investments
4. ___ the principles
5. ___ the principles
6. ___ ___ the principles

Answer 2

The principles of responsible investment (PRI) are:

1. Incorporate ESG into investment analysis and decision-making
2. Be active owners
3. Seek disclosures on ESG from investments
4. Promote the principles
5. Implement the principles
6. Report on the principles

Question 3

There are 3 steps to developing a climate change strategy: ___, ___, ___.

Answer 3

There are 3 steps to developing a climate change strategy: measure, act, review.

Question 4

Approaches for assessing exposure to climate change risk and opportunity include:

1. S
2. S
3. E
4. L

Answer 4

Approaches for assessing exposure to climate change risk and opportunity include:

1. Sector
2. Stranded assets
3. Emissions and carbon footprint
4. Low-carbon exposure

Question 5

___ ___are fossil fuel energy assets that, before the end of their economic lives, stop generating an economic return due to market and regulatory changes associated with transition to low-carbon economy.

Answer 5

Stranded assets are fossil fuel energy assets that, before the end of their economic lives, stop generating an economic return due to market and regulatory changes associated with transition to low-carbon economy.

Question 6

The UK Environment Agency Pension Fund’s 2015 Policy to Address the Impacts of Climate Change includes a target of ___% of the fund invested in low carbon/energy efficient opportunities; and includes a decarbonization target for its equity portfolio by reducing future emissions by ___% for coal and ___% for oil/gas by ___)

Answer 6

The UK Environment Agency Pension Fund’s 2015 Policy to Address the Impacts of Climate Change includes a target of 15% of the fund invested in low carbon/energy efficient opportunities; and includes a decarbonization target for its equity portfolio by reducing future emissions by 90% for coal and 50% for oil/gas by 2020)

Question 7

In addition to exclusionary strategies, passive managers can also implement ___ strategies.

Answer 7

In addition to exclusionary strategies, passive managers can also implement engagement strategies.

Question 8

Broad tools for monitoring and reporting on climate change risks include:

1. P
2. A
3. B
4. I

Answer 8

Broad tools for monitoring and reporting on climate change risks include:

1. PRI

2. Asset owner disclosure project

3. Balanced scorecards

4. Investor platform for climate action

Question 9

The investor platform for climate action identifies public records for climate change actions taken by the global investor community in 4 key areas:

1. M
2. E
3. R
4. R

Answer 9

The investor platform for climate action identifies public records for climate change actions taken by the global investor community in 4 key areas:

1. Measurement

2. Engagement

3. Reinforcement

4. Reallocation

Question 10

The second step associated with acting on climate change strategy involves selecting one of 3 main strategies and executing the strategy:

1. E
2. I
3. A

Answer 10

he second step associated with acting on climate change strategy involves selecting one of 3 main strategies and executing the strategy:

1. Engage

2. Invest

3. Avoid

Question 11

Investment opportunities exist across various asset classes and approaches:

1. L
2. T
3. C
4. G
5. R
6. P

Answer 11

Investment opportunities exist across various asset classes and approaches:

1. Low carbon indices

2. Thematic funds

3. Climate aligned bonds (green bonds)

4. Green infrastructure

5. Real Estate

6. Private market

Question 12

The catholic super is a case study in ___ ___ ___. In 2015 they performed a ___ ___ and then ___with managers.

Answer 12

The catholic super is a case study in monitoring external managers. In 2015 they performed a carbon footprint and then engaged with managers.

Question 13

In the catholic super case study, Australian managers fared (better/worse) than international managers.

Answer 13

In the catholic super case study, Australian managers fared worse than international managers.

Question 14

CalPERS is a case study in ___ with ___.

Answer 14

CalPERS is a case study in engaging with companies.

Question 15

CalPERS believes that companies should report on 3 forms of capital:

1. F
2. H
3. P

Answer 15

CalPERS believes that companies should report on 3 forms of capital:

1. Financial

2. Human

3. Physical

Question 16

Allianz is a case study in ___ ___ ___.

Answer 16

Allianz is a case study in assessing carbon risks.

Question 17

Wespath Investment Management is a case study in managing ___ ___ ___.

Answer 17

Wespath Investment Management is a case study in managing excessive sustainability risk.

Question 18

Wespath has 5 sustainable investment strategies integrating ESG factors into its investment process:

1. E
2. A
3. P
4. E
5. S

Answer 18

Wespath has 5 sustainable investment strategies integrating ESG factors into its investment process:

1. Ethical exclusions

2. Active ownership

3. Positive Impact Investment

4. External Manager ESG Integration

5. Strategic Partnerships

Question 19

In 2014 Wespath enhanced its active ownership strategy to focus on ___ ___.

Answer 19

In 2014 Wespath enhanced its active ownership strategy to focus on thermal coal.

Question 20

___ ___is the most carbon-intensive fossil fuel.

Answer 20

Thermal coal is the most carbon-intensive fossil fuel.

Question 21

The following companies are excluded from investment from Wespath:

1. Developed country companies with ___% or more revenues from ___ ___
2. Developing country companies with ___% or more revenues from ___ ___ and in bottom ___% of peergroup.

Answer 21

The following companies are excluded from investment from Wespath:

1. Developed country companies with 50% or more revenues from thermal coal
2. Developing country companies with 50% or more revenues from thermal coal and in bottom 50% of peergroup.

Question 22

AP7 is a case study in ___-___ ___

Answer 22

AP7 is a case study in low-carbon solutions

Question 23

___ is the Swedish government pension fund.

Answer 23

AP7 is the Swedish government pension fund.

Question 24

A number of factors are important to the success of clean tech investing:

1. L
2. R
3. D
4. S

Answer 24

A number of factors are important to the success of clean tech investing:

1. Long timeframe

2. Realistic returns

3. Diversification

4. Specialist knowledge

Question 25

AP7 believes the following are needed to scale up clean tech: 1. C 2. N 3. C

Answer 25

AP7 believes the following are needed to scale up clean tech: **1. Close funding gap** **2. New technologies** **3. Carbon price**

Question 26

Aegon NV is a case study in ___ \_\_\_.

Answer 26

Aegon NV is a case study in **internal engagement.**

Question 27

\_\_\_ ___ is an international provider of life insurance, pensions, and asset management thta operates in over 25 countries.

Answer 27

**Aegon NV** is an international provider of life insurance, pensions, and asset management that operates in over 25 countries.

Question 28

The AXA Group is a case study in ___ from \_\_\_.

Answer 28

The AXA Group is a case study in **divesting** from **coal**.

Question 29

AXA has stopped investing in: 1. Mining companies with more than \_\_\_% turnover from ___ \_\_\_ 2. Electric utilities with more than \_\_\_% turnover from ___ \_\_\_ \_\_\_

Answer 29

AXA has stopped investing in: 1. Mining companies with more than **50**% turnover from **coal extraction** 2. Electric utilities with more than **50**% turnover from **coal power generation**

Question 30

The Local Government Super (LGS) is a case study in multiple long-term strategies to ___ \_\_\_ ___ and \_\_\_

Answer 30

The Local Government Super (LGS) is a case study in multiple long-term strategies to **reduce carbon footprinting** and **intensity**

Question 31

Local government super (LGS) implemented the following strategies: 1. M 2. E 3. E 4. L 5. D 6. I

Answer 31

Local government super (LGS) implemented the following strategies: ## Footnote **1. Measure** **2. Engage with companies** **3. Engage with policy makers** **4. Low-carbon investment** **5. Divestment and exclusions** **6. Independent evaluation**

Question 32

Every ___ months, LGS reviews ___ \_\_\_ ___ and compares \_\_\_to a \_\_\_.

Answer 32

Every **6** months, LGS reviews **carbon risk audits** and compares **performance** to a **benchmark**.

Question 33

LGS engages with policy makers and regulators through the ___ \_\_\_on ___ \_\_\_

Answer 33

LGS engages with policy makers and regulators through the **investor group** on **climate change** (IGCC)

Question 34

LGS does not invest in companies that generate more than \_\_\_% of their revenue from carbon-sensitive industries.

Answer 34

LGS does not invest in companies that generate more than **33%** of their revenue from carbon-sensitive industries.

Question 35

The Dutch healthcare pension fund ___ has committed to increasing sustainable investments to \_\_\_% of assets and reducing carbon footprint by \_\_\_% by 2020.

Answer 35

The Dutch healthcare pension fund **PFZW** has committed to increasing sustainable investments to **12%** of assets and reducing carbon footprint by **50%** by **2020**.

Question 36

The Dutch civil servants pension fund ___ has committed reducing greenhouse gas emissions by \_\_\_% and \_\_\_its investments in renewable energy and environmentally friendly technologies by \_\_\_.

Answer 36

The Dutch civil servants pension fund **ABP** has committed reducing greenhouse gas emissions by **25%** and **doubling** its investments in renewable energy and environmentally friendly technologies by **2020**.

Question 37

The UK's Environment Agency Pension Fund has reduced its carbon footprint by \_\_\_% on active equities and \_\_\_% on active bonds.

Answer 37

The UK's Environment Agency Pension Fund has reduced its carbon footprint by **44**% on active equities and **42**% on active bonds.

Question 38

\_\_\_ asset classes can participate with the various ways to implement ESG programs. However, private equity, property and infrastructure investments may not be able to ___ \_\_\_-\_\_\_companies because of the \_\_\_nature of those companies.

Answer 38

**Most** asset classes can participate with the various ways to implement ESG programs. However, private equity, property and infrastructure investments may not be able to **avoid high**-**carbon** companies because of the **public** nature of those companies.