Ethical and Sustainable Investing: A Guide for Advanced Diploma in Business Students

Question 1

The United Nations Principles for Responsible Investment (UNPRI) advocate for which of the following?

Accepted Answer

Sustainable investment practices

Answer

Short-term profit maximization

Answer

Government intervention

Answer

Industry deregulation

Question 2

Which type of investment fund primarily invests in companies with strong environmental, social, and governance (ESG) performance?

Accepted Answer

Ethical fund

Answer

Growth fund

Answer

Money market fund

Answer

Index fund

Question 3

What is the primary objective of impact investing?

Accepted Answer

Generating positive social and environmental outcomes

Answer

Maximizing financial profit

Answer

Complying with regulatory requirements

Answer

Reducing investment risk

Question 4

Responsible investing considers environmental, social, and governance (ESG) factors in investment decisions. What is a primary challenge for investors who follow responsible investing principles?

Accepted Answer

Insufficient reliable and consistent ESG data

Answer

Limited investment choices that align with ethical values

Answer

Low investor interest in ethical investments

Answer

Strict regulations that limit ethical investing practices

Question 5

Which of the following is NOT a pillar of ESG investing?

Accepted Answer

Profitability

Answer

Environmental

Answer

Social

Answer

Governance

Question 6

Which of the following is NOT a method investors can use to encourage corporations to adopt more ethical and sustainable practices?

Accepted Answer

Litigation

Answer

Shareholder resolutions

Answer

Divestment

Answer

Proxy voting

Question 7

How does socially responsible investing (SRI) stand apart from conventional investment strategies?

Accepted Answer

SRI prioritizes social and environmental factors alongside financial returns in investment decisions.

Answer

SRI excludes ESG factors, while traditional investing emphasizes them.

Answer

SRI investments are limited to specific funds, unlike traditional investments.

Question 8

Identify the challenges in evaluating a company's ESG performance. Discuss the shortcomings of current metrics and explore new approaches that aim to address these limitations.

Accepted Answer

Measuring ESG performance is subjective and difficult to quantify.

Answer

Current metrics offer a complete assessment of all ESG aspects.

Answer

Emerging technologies like AI can fully resolve ESG measurement challenges.

Answer

ESG performance is not a reliable indicator of a company's long-term financial health.

Question 9

Which of the following is NOT a core pillar of ESG (Environmental, Social, and Governance) investing?

Accepted Answer

Financial performance

Answer

Climate change mitigation

Answer

Labor relations and human rights

Answer

Board diversity and accountability

Question 10

What is the primary motivation behind the growing popularity of ethical and sustainable investing?

Accepted Answer

Investor demand for socially responsible investments

Answer

Government regulations

Answer

Technological advancements

Answer

Economic recession

Question 11

What is the role of socially responsible investment (SRI) funds in ethical investing?

Accepted Answer

They provide investors with access to a diversified portfolio of ethical investments.

Answer

They ensure that all investments are perfectly aligned with the investor's personal values.

Answer

They guarantee positive financial returns.

Answer

They are not subject to market fluctuations.

Question 12

What is the difference between exclusionary and inclusionary screening in ethical investing?

Accepted Answer

Exclusionary screening eliminates companies with certain negative practices, while inclusionary screening focuses on companies with positive ESG performance.

Answer

Exclusionary screening focuses on companies with positive ESG performance, while inclusionary screening eliminates companies with certain negative practices.

Answer

Both methods involve investing in companies with strong ESG performance.

Answer

Neither method involves screening companies based on ESG factors.

Question 13

How can the United Nations Sustainable Development Goals (SDGs) be used in ethical and sustainable investing?

Accepted Answer

They provide a framework for investors to align their investments with global sustainability priorities.

Answer

They are mandatory requirements for all companies seeking ethical investment.

Answer

They have no relevance to ethical and sustainable investing.

Answer

They only apply to developing countries.

Question 14

Which of the following is a distinctive feature of a "green" bond?

Accepted Answer

The proceeds are exclusively used to fund environmentally friendly projects.

Answer

It carries a higher interest rate than conventional bonds.

Answer

It is only available to institutional investors.

Answer

It has no maturity date.

Question 15

How does corporate governance contribute to ethical and sustainable practices, leading to long-term value creation?

Accepted Answer

Enhances transparency, accountability, and risk management.

Answer

Maximizes immediate shareholder returns.

Answer

Eliminates ethical challenges within organizations.

Answer

Minimizes operational expenses.

Question 16

What is the primary goal of ethical investing?

Accepted Answer

To align investments with personal values

Answer

To generate short-term profits

Answer

To reduce risk and volatility

Answer

To comply with regulatory requirements

Question 17

What is the main challenge of impact investing?

Accepted Answer

Measuring and tracking the social and environmental impact of investments

Answer

Identifying profitable investment opportunities

Answer

Attracting investors with high-risk tolerance

Question 18

Which sector is most likely to be excluded from a socially responsible investment portfolio?

Accepted Answer

Tobacco

Answer

Technology

Answer

Education

Answer

Healthcare

Question 19

What is the main purpose of a green bond?

Accepted Answer

To finance projects that have a positive environmental impact

Answer

To promote corporate sustainability initiatives

Answer

To raise capital for traditional infrastructure projects

Question 20

What is the role of a sustainability consultant in ethical and sustainable investing?

Accepted Answer

To advise investors on the ESG implications of investment decisions

Answer

To manage investment portfolios

Answer

To audit companies' ESG performance

Question 21

Which of the following is a key factor considered in ethical and sustainable investing?

Accepted Answer

Environmental, Social, and Governance (ESG) factors

Answer

Short-term profit maximization

Answer

Market sentiment

Question 22

What is a potential benefit of investing in ethical and sustainable funds?

Accepted Answer

Alignment with personal values

Answer

Guaranteed high returns

Answer

Lower risk

Answer

Tax advantages

Question 23

Which type of investment considers the social impact of a company, such as its labor practices and community involvement?

Accepted Answer

Social impact investment

Answer

Green bonds

Answer

Carbon credits

Question 24

What is a potential challenge of ethical and sustainable investing?

Accepted Answer

Measurement and data availability

Answer

High upfront costs

Answer

Strict regulatory requirements

Answer

Lack of investor interest

Question 25

Which of the following is a key performance indicator (KPI) used to measure the sustainability of an investment portfolio?

Accepted Answer

Carbon footprint

Answer

Sales growth

Answer

Market share

Answer

Employee turnover rate

Question 26

What is the role of regulation in ethical and sustainable investing?

Accepted Answer

Setting standards, ensuring transparency, and protecting investors

Answer

Providing tax breaks

Answer

Mandating ethical investments

Answer

Promoting investor education

Question 27

Which of the following is a benefit of integrating ESG factors into investment analysis?

Accepted Answer

Improved risk management

Answer

Higher dividend yield

Answer

Reduced transaction costs

Answer

Guaranteed capital appreciation

Question 28

What is the purpose of a shareholder engagement strategy in ethical and sustainable investing?

Accepted Answer

To influence company behavior through active dialogue and voting

Answer

To donate dividends to social causes

Answer

To divest from companies that do not meet ethical standards

Question 29

What is the ultimate goal of ethical and sustainable investing?

Accepted Answer

To create both financial return and positive social and environmental impact

Answer

To invest only in companies with perfect ESG scores

Answer

To divest from all fossil fuel companies