Chapter 9: Investment Mandates, Portfolio Analytics, and Client Reporting

Question 1

An ESG policy of a fund management firm needs to address the manner in which the portfolio manager establishes…

Answer 1

…rationale and methodology for ESG portfolio-level assessment.

Question 2

An ESG policy needs to address the manner in which the portfolio manager

Answer 2

1) addresses ESG issues at portfolio reviews,
2) establishes the rationale and methodology for ESG portfolio-level assessment,
3) assesses exposure to ESG risk in the risk management function,
4) determines ESG impacts to the portfolio,
5) responds in the investment decision-making process to ESG implications, and
6) discloses ESG exposure to the fund’s investors.

Question 3

An ESG-related thematic focus aims to…

Answer 3

…invest in sectors, industries, or companies that are expected to benefit from the long-term macro or structural ESG-related trends.

Question 4

Which of the following is the most likely primary driver of ESG investment for a sovereign wealth fund?

Answer 4

In the case of a sovereign wealth fund, the primary driver for ESG investment is reputational risk.

Question 5

Which of the following describes the risk mindset of a general insurer?

Answer 5

Loss aversion. A defined pension scheme has higher risk tolerance, and a sovereign wealth fund has high tolerance for illiquidity.

Question 6

The implied favored ESG approach of a charitable foundation is…

Answer 6

…exclusions, to ensure investment is consistent with founding or charitable aims.

Question 7

The PLSA published a disclosure guide for public equities developed by a group of pension schemes, setting out some pared-down expectations for manager reporting on both ESG integration and stewardship activities. The disclosure on ESG integration asks for…

Answer 7

…separate disclosure on both identification of ESG risk and the management and monitoring of ESG risks and opportunities.

Question 8

The ICGN Model Mandate requests two areas of disclosure that are ESG specific:

Answer 8

stewardship engagement and voting activity.

Question 9

The Pensions and Lifetime Savings Association (PLSA) disclosure guide for public equities expects reporting on…

Answer 9

ESG integration and stewardship.

Question 10

A primary ESG driver for a European defined benefit pension scheme will be…

Answer 10

Fiduciary duty

Question 11

In the case of a sovereign wealth fund, the primary driver for ESG investment is…

Answer 11

reputational risk.