CFA Level I · CFA Level I Exam · Basics of Portfolio Planning and Construction
An investor integrates ESG analysis by adjusting forecasts of a company's cash flows and risk to reflect material environmental, social and governance factors alongside traditional financial analysis. This approach is best described as:
This is ESG integration. The investor explicitly includes material environmental, social and governance factors in the analysis of cash flows and risk, together with traditional financial factors. Impact investing aims for measurable positive outcomes, while exclusionary screening simply removes certain issuers from consideration.
- AESG integrationCorrect
- Bimpact investing
- Cexclusionary screening
Explanation
ESG integration incorporates material ESG factors into the financial analysis and valuation process. Impact investing targets measurable social or environmental outcomes alongside returns, and exclusionary screening removes issuers from the universe.
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