Sustainable-Investing Exam Dumps - Sustainable Investing Certificate (CFA-SIC) Exam

Many Japanese companies use a statutory auditor system (Option B) instead of board committees for oversight. In this approach:

A statutory board of auditors (kansayaku) monitors management rather than a traditional audit or governance committee.

This structure is legally permitted in Japan and is different from Western corporate governance models that require independent board committees.

Option A (cross-shareholding practice) refers to companies holding each other’s shares to maintain business stability but does not directly explain the lack of board committees.

Option C is incorrect because Japan’s Corporate Governance Code allows the statutory auditor model.

A fund that excludes the worst ESG performers relative to their peers is using both negative and norms-based screening.

Why C (both negative and norms-based) is correct:

Negative screening removes poor ESG performers outright.

Norms-based screening excludes companies that violate international ESG standards (e.g., UN Global Compact).

Why not A or B?

A (Negative screening only) is incomplete—norms-based screening also plays a role.

B (Norms-based only) is incorrect—some exclusions go beyond norms (e.g., fossil fuel bans).

A minimum requirement for PRI membership is the establishment of accountability mechanisms to ensure that responsible investment policies are effectively implemented within the organization. (ESGTextBook[PallasCatFin], Chapter 9, Page 509)

ESG factors can impact credit risk at both issuer and industry levels by influencing financial stability, regulatory compliance, and reputational risks.

Issuer level: A company's ESG risk exposure (e.g., environmental violations, governance scandals) can lead to downgrades or higher borrowing costs.

Industry level: Sectors like coal mining, oil & gas, and tobacco face systemic ESG risks (e.g., climate regulations, social opposition).

Credit rating agencies (e.g., Moody’s, S&P, Fitch) integrate ESG risks into credit assessments.

Greenhushing occurs when a company is reluctant to publicly share its sustainability achievements or goals due to fears of backlash or misunderstanding from stakeholders. (ESGTextBook[PallasCatFin], Chapter 7, Page 364)

Investment managers in passive/index tracking strategies (Option C) frequently use proxy voting as a primary tool to influence companies because:

They cannot sell underperforming ESG stocks easily (since they track an index), so they engage through voting and shareholder resolutions.

Major passive fund managers like BlackRock, Vanguard, and State Street use voting to drive ESG changes.

Option A (Real estate) lacks public voting mechanisms—investors engage via direct ownership.

Option B (Private debt) involves debt covenants, not voting rights.

Stewardship codes share similar principles across different regions, emphasizing long-term value creation, accountability, and the active role of shareholders in corporate governance. (ESGTextBook[PallasCatFin], Chapter 6, Page 276)

A healthcare company’s ESG-contingent asset (Option C) arises when its data analytics division enables cost-effective healthcare solutions for governments, leading to:

Long-term value creation through cost savings.

A competitive ESG advantage due to social impact.

Option A (Custodian of medical details) is an ESG responsibility but not a contingent asset.

Option B (Lagging recruitment strategies) is an ESG weakness, not an asset.