Bloomberg ESG Certification - Introduction to ESG and Sustainable Finance

Why do traditional valuation models, like discounted cash flow, fail at capturing the full range of risks companies face today? Choose one.

A. They do not consider compliance risk.

B. They offer limited, deterministic and potentially misleading insights.

C. They are outdated.

D. They do not consider reputational risk.

B. They offer limited, deterministic and potentially misleading insights.

Explanation : Traditional valuation models. like discounted

cash flow, do not take into account environmental

social and governance factors and therefore offer

limited, deterministic and potentially misleading

insights.

This is because companies with poor ESG metric

scores will likely have a higher risk profile on

average

Due to this, when using discounted cash flow

analysis one could argue for using a higher

discount rate (resulting in a lower valuation) in

the discounted cash flow.

A term closely related to sustainability reporting

that refers to the measuring of environmental

and social performance along with economic

performance. This is broken down into what is

called the "3 Ps": Profit, People and the Planet.

A. Sustainability Reporting

B. Corporate Social Responsibility

C. Sustainability Externality

D. Triple Bottom Line

D. Triple Bottom Line

Explanation : Triple Bottom Line is a term closely related to sustainability reporting that refers to the measuring of environmental and social performance along with economic performance. This is broken down into what is called the "3 Ps": Profit, People and the Planet.

A management concept whereby companies

integrate environmental and social concerns

into their business. Companies aim to contribute

to the well-being of the communities they affect

and on which they depend.

A. Sustainability Reporting

B. Corporate Social Responsibility

C. Sustainability

D. Triple Bottom Line

E. Externality

B. Corporate Social Responsibility

Explanation : Corporate Social Responsibility is a management concept whereby companies integrate environmental and social concerns into their business.

Refers to the positive or negative effects on

third parties arising from manufacturing and

consuming goods and services. Ideally, the

negative effects of economic transitions on

third parties should be reduced.

A. Sustainability Reporting

B. Corporate Social Responsibility

C. Sustainability

D. Externality

E. Triple Bottom Line

D. Externality

Explanation : Externality refers to the positive or negative effects on third parties arising from manufacturing and consuming goods and services. Ideally, the negative effects of economic transitions on third parties should be reduced.

Refers to companies' public disclosure of

non-financial performance to communicate

their impact, both positive and negative, on the

environment and people.

A. Sustainability Reporting

B. Corporate Social Responsibility

C. Sustainability

D. Triple Bottom Line

E. Externality

A. Sustainability Reporting

Explanation : Sustainability Reporting refers to companies' public disclosure of non-financial performance to communicate their impact, both positive and negative, on the environment and people.

Refers to investment decisions that take into account the environmental, social, and governance (ESG) factors of an economic activity or project. It is the intersection between the economy, social realities, and environmental health.

A. Sustainability Reporting

B. Corporate Social Responsibility

C. Sustainability

D. Triple Bottom Line

E. Externality

C. Sustainability

Explanation : Sustainability refers to investment decisions that take into

account the environmental, social, and governance (ESG)

factors of an economic activity or project. It is the intersection

between the economy, social realities, and

environmental health

Which company has had the greatest increase in ESG

data disclosure?

Answers:

A. Microsoft

B. Amazon

C. Meta

D. Apple

B. Amazon

Although Microsoft had the highest disclosure

score in 2020. Amazon has had the greatest

increase in ESG data disclosure. Since 2012

their data disclosure has increased by 80%.

Based on the underlying input data for the environmental and social pillars, what can you infer about materiality for the packaged food industry?

A. Energy, sustainable packaging, and customer welfare are most material for this industry

B. Energy, occupational health & safety, and marketing and labeling are most material for this industry

C. Supply chain management and customer welfare are most material for this industry

D. Energy, sustainable packing, and water management are most material for this industry

A. Energy, sustainable packaging, and customer welfare are most material for this industry

Explanation : Energy, packaging, and customer welfare drive

ESG scores for packaged food companies. In

the ESG materiality framework document, these

issues have 1 under the column labeled 'Bl

Issue Prioritv'. This indicates these issues are

most material for the packaged food industry.

Take a look at a snippet from the ES Scores Methodology

Industry Guide that you saw on the previous page. What

is the highest priority social issue for Agriculture

Industries?

A. Climate Exposure

B. Sustainable Product

C. Ecological Impact

D. Product Quality Management

D. Product Quality Management

Explanation : While all of the answer choices are high priority

issues for agriculture, the heat map for social

issues shows dark green and the number one

next to Product Quality Management. This

indicates Product Quality Management is a

higher priority for 'social' issues

How does the Volkswagen scandal highlight the need for integrating ESG factors into an investor's decision-making?

A. Volkswagen's actions led to a 37% drop in share price and billions of dollars in penalties.

B. Volkswagen's actions destroyed the environment by using cars that were designed to be environmentally- friendlv.

C. Owners of Volkswagen vehicles were unable to sell

D. Environmentally-conscious consumers lost faith in the Volkswagen brand and took their business elsewhere.

A. Volkswagen's actions led to a 37% drop in share price and billions of dollars in penalties.

Explanation : While all of these choices are true statements,

the financial hit that Volkwagen and its investors

took most highlight the need for using ESG

factors when making investment decisions.

Open and review Bloomberg's FA ESG screen for ICICI Bank. What can we learn from the bank's ESG disclosures?

A. ICICI Bank does not consistently disclose data on

energy consumption.

B. The average age of ICICI Bank's Board of Directors is

decreasing.

C. ICICI Bank discloses more Environmental data points

than Governance data points.

D. ICIC Bank does not have manv policies in place to

protect its emplovees.

A. ICICI Bank does not consistently disclose data on

energy consumption.

Explanation : In the Environmental tab of the FAESG

screen, we can see that ICICI Bank released

Energy data sporadically between 2016 and

2021. The bank has more Governance data

points than Environmental, which makes

sense for a financial institution. It has many

policies in place for their emplovees. And the

average age of its board is increasing.

Review the ESG Materiality Frameworks for food retailer Tesco and aircraft producer Boeing. Which of the following statements is true?

A. Boeing consumed more total energy than Tesco in 2020.

B. The Framework considers a greater number of Social factors to be relevant to the Retail & Wholesale industry compared to the Aerospace & Defense industry.

C. In 2020, Boeing had a greater percentage of board members that are women than Tesco.

D. For the Aerospace & Defense industry, the Environmental section of the Framework focuses more on sustainably-sourced products; for the Retail & Wholesale industry, it focuses more on waste and emissions.

B. The Framework considers a greater number of Social factors to be relevant to the Retail & Wholesale industry compared to the Aerospace & Defense industry.

Explanation : Tesco, in the Retail & Wholesale industry, has

64 Social factors that are rated as material.

Boeing, in the Aerospace & Defense industry,

has 27. Tesco had 30% board members that

are women, while Boeing had 25%. Tesco's

Total Energy Consumption was 6839.91

thousand megawatt hours, whereas Boeing's

was 4499.00. The Aerospace & Defense

industry's Environmental framework features

more line items for waste and emissions. The

Retail & Wholesale industry's Environmental

framework focuses more on sustainably-

sourced products like eggs and meat.

Examine the excerpt from Bloomberg's Environmental

and Social Scores Methodology Industry Guide - Oil

& Gas

Which issue would be considered the highest priority?

A. The ecological impact of the exploration of new

resources

B. The fatalitv rates of employees

C. The amount of sulfur dioxide released into the

atmosphere, reducing air qualitv

D. A delayed pipeline due to conflicts around community

relations

B. The fatalitv rates of employees

Explanation : The fatality rates of workers falls into the

Occupational Health & Safety Management

category of the Social Issues & Priorities

section. The graphic shows that this area is

of the highest concern as Oil & Gas is an

industrv that can expose its emplovees to

significant safety risks.

Which of the following is an example of socially

responsible investing?

A. An American company, in support of its employees protesting apartheid, divesting from companies doing business in South Africa

B. A university, in support of its students protesting war, investing in a military defense company rather than an agriculture company

C. A Japanese company, championing its top export cars, divesting from investments in foreign vehicle brands to invest in Japanese cars

D. An Islamic company, following the tenets of Sharia law, investing in a vodka company

A. An American company, in support of its employees protesting apartheid, divesting from companies doing business in South Africa

Explanation : Social responsible investing, or SRI, excludes

investments in firms that conflict with social.

moral, personal, or ethical values. A company

that invests in the moral direction of its

employees, like one divesting from investments

linked to South Africa, is a prime example. A

company following Islamic Finance principles

would not invest in alcohol. A university would

not invest in a military defense company to

support students protesting war.

Jason works on the ESG Investment Team at Worthing

Capital Management. He is responsible for research

and generating ideas in accordance with portfolio ESG

mandates. Jason is

A. a Portfolio Manager.

B. a Market Data/IT Representative.

C. an ESG Analyst.

D. a Risk Officer.

C. an ESG Analyst

Explanation : Jason is an ESG Analyst. ESG Analysts are

responsible for research and generatina ideas

in accordance with portfolio ESG mandates.

Andrew also works on the ESG Investment Team at Worthing Capital Management. He is responsible for managing portfolios in accordance with sustainable policies. Andrew is

A. a Portfolio Manager.

B. a Market Data/IT Representative.

C. an ESG Analyst.

D. a Risk Officer.

A. a Portfolio Manager.

Explanation : Andrew is a portfolio manager. ESG portfolio managers or asset managers are responsible for managing portfolios in

accordance with sustainable policies.

Why is Bloomberg's GHG Estimate model intensity on the high side for companies like Cronos?

A. Partly due to stil-low sales and having fewer growing facilities

B. Partly due to still-high sales and having fewer growing facilities

C. Partlv due to still-low sales and having more growing facilities

D. Partly due to still-high sales and having more growing facilities

A. Partly due to stil-low sales and having fewer growing facilities Explanation : Bloomberg's GHG Estimate model intensity is on

the high side for companies like Cronos partly due to still-low sales and having fewer growing facilities.

In which year did disclosure reporting regulations

begin to shift from majority voluntary to majority

mandatory?

2017

2019

2018

2020

In 2019. There were 27 mandatory regulations compared with 17 voluntary.

What makes it challenging to compare AUM from

different countries?

A. Differences in currency denominations

B. Different investing laws

C. Different ideas about how to compare AUM

D. Different rules defining sustainable funds across regions

D. Different rules defining sustainable funds across regions

Explanation : Different rules defining sustainable funds across

regions have made it difficult to compare AUM.

Why would an investor remove their capital from

some or all activities related to coal, oil and gas?

A. To reduce financed emissions

B. To bankrupt fossil fuel companies

C. To change behavior of fossil fuel companies

D. To cut oil and gas share prices

A. To reduce financed emissions

Explanation : Investors that remove their capital from some or all activities related to coal, oil and gas want to reduce financed emissions.

Take a moment to read some of the research and news articles that Akshay has been reading. What might he infer about ESG investing?

A. ESG investment strategies eliminate entire sectors B. ESG is value-increasing

C. The ESG movement in capital markets is showing no signs of slowing down

D. ESG is well integrated into mainstream investment management

C. The ESG movement in capital markets is showing no signs of slowing down

Explanation : It is most likely that Akshay would think the ESG movement in capital markets is showing no signs of slowing down.

This does not mean, however, that ESG is well integrated into mainstream investment management.

According to the Global Sustainable

Investment Alliance, the global sustainability market represented around $35.3 trillion at the start of 2020, roughly 35% of the global

$103.1 trillion managed by UNPRI signatories.

European companies are scoring best, on average,

in sustainability-data reporting and ranking. Based

solely on the data shown, which continent is

performing the worst?

A. South America

B. Asia

C. North America

D. Africa

B. Asia

Based solelv on the data in the chart. Asia is performing worst on average in sustainability- data reporting and ranking.

Review Form 8-K for FedEx. How many proposals

were approved?

All Proposals

3 Proposals

2 Proposals

4 Proposals

2 Proposals

Of the following options, which is the most likely reason that U.S. ESG funds do well when the market is doing pporly?

A. Large U.S. ESG funds tend to have more high-volatility stocks that are highly profitable and have a lot of debt.

B. Large U.S. ESG funds are overweight in Utilities and Energy, which are the most successful during a downtum.

C. Large U.S. ESG funds tend to have more low-volatility stocks that are highly profitable and do not have a lot of debt.

D. Large U.S. ESG funds are underweight in Utilities and Energy, which struggle the most during a downturn.

C. Large U.S. ESG funds tend to have more low-volatility stocks that are highly profitable and do not have a lot of debt.

What is one reason that the number of sustainable

finance regulations have increased so much since the

early 2000s?

A. People from all demographics want their investments to align with their values, and regulations have increased to support these investors.

B. Over recent ears, companies have been voluntarily

reporting on ESG metrics and that has increased the

necessity for requlations.

C. Companies, more than shareholders, have pushed to

increase regulations as their goal is to positively impact

the planet.

D. Pension funds and millennial investors are less

interested in sustainable investing than other aroups.

but their investments require greater requlation.

A. People from all demographics want their investments to align with their values, and regulations have increased to support these investors.

Why are the investment choices of pension funds so

pivotal to the spread of sustainable finance?

A. Pension funds invest more monev less frequently than other investors and are more able to adjust their

investments quickly.

B. Pension funds pursue sustainable finance advocacy

efforts and conduct research on increasing reliance on fossil fuels.

C. Pension funds hold a vast amount of assets and their investments have long-term horizons.

D. Pension funds invest for their own benefit and are thus the sole investment decision makers

C. Pension funds hold a vast amount of assets and their investments have long-term horizons.

Explanation : Pension funds hold tens of trillions of dollars in assets globally, which gives them a lot of power. Additionally, their clients are future

retirees, investing for the long-term, often for decades. With power, money, and a clientele interested in sustainable investing, pension funds can push for companies to become more sustainable and for regulations to be

enacted. In order to further represent their clients' wishes, pension funds often advocate for and do research on sustainable investment initiatives.

Click on and read the Bloomberg Intelligence

Restaurant Primer. Which statement is best

supported by the Primer?

A. Restaurants globally are all transforming their current business models to better manage their use of resources and better control their waste within the next 5 to 10 vears.

B. A challenge of comparing restaurants' environmental impact is that restaurants are employing different strategies from each other to minimize resource intensitv.

C. If restaurants wait to take action until environmental

requlations are imposed, the will have higher profits

as they won't be spending resources to modify their

offerinas.

D. Government regulations are the sole reason restaurants are working to reduce food waste, recycle cooking oil, and improve takeout packaging

B. A challenge of comparing restaurants' environmental impact is that restaurants are employing different strategies from each other to minimize resource intensitv.

Explanation : In each of the sections of the Primer, we can see that different restaurant chains have prioritized different environmental strategies.

Some are prioritizing renewable energy while others are focusing on reducing emissions. A contributing factor to a restaurant's focus is

likelv related to the kind of restaurant it is. For example. McDonalds creates more greenhouse-gas emissions than Norway because it serves beef (which releases a lot of methane). so GHG emissions will be hard for the fast-food chain to reduce. Cheesecake Factory uses a lot more energy and water

than Starbucks. but Starbucks coffee shops are smaller and they cook less food.

Government regulations are helpful to

pushing restaurants towards change, but they are not the sole reason. If a restaurant waits to make ESG changes until a regulation is passed, they may find themselves scrambling to meet the law. Additionally, they may also face pressure from consumers who may

choose not to invest in or dine at their

establishments. Although many restaurants are transforming their businesses, not all are; and those that are changing their models may not be targeting a transformation by the early

2030s.

Which of the following are the two most popular

forms of ESG investing, in terms of assets allocated,

in 2018 and 2020?

A. Negative/exclusionary screening and sustainability.

themed investing

B. Norms-based screening and corporate engagement and shareholder action

C. Negative/exclusionarv screenina and ESG integration

D. Sustainability-themed investing and ESG integration

C. Negative/exclusionarv screenina and ESG integration

Explanation : As the top two strategy trends, negative exclusionary screening and ESG integration combined have nearlv 78 billion USD in assets in 2018 and 2022.

A company in which of the following industries would

be most likely to pass the screening process for a

fund prioritizing ESG?

A. Weapons defense

B. Tobacco

C. Technology

D/ Fossil fuel

C. Technology

Explanation : When asset managers survey their clients on their investment preferences, they are learning that clients increasingly do not want their money supporting tobacco, weapons defense, or fossil fuels. Of the four choices provided, a technology

company is the one most likely to remain in a fund that is ESG-oriented.

Click on the Bloomberg screen to look at the ESG

profile for entertainment and media company Disney.

As of the date this screen was captured, which of the

following statements is true?

A. Disney is leading peers on environmental issues based on Bloomberg scores, however there seems to be much room for improvement

B. Disney is leading peers on social issues based on

Bloomberg scores, however there seems to be much

room for improvement

C. Disney is leading peers on governance issues based on Bloomberg scores, however there seems to be much room for improvement

D. Disney is leading peers on environmental and

governance issues based on Bloomberg scores,

however there seems to be much room for improvement

Bloomberg ESG Scores range from 0 to 10 where 10 is better.

At the time of the screen capture, although Disney is leading peers on social issues, their Bloomberg

score is closer to 0 (S = 1.71). This indicates there is room for improvement on social issues compared to governance issues where the company is also leading

Worthing Capital wants to invest in British companies

with the best ESG scores. Based on the results of this

EQS screening done on 24 July 2022, which two

companies initially seem to be the most promising

investment candidates, worthy of deeper exploration?

A. Reckitt Benckiser and Diageo PLC because a high

ESG disclosure score is better

B. Amor and Llovds Banking because thev have the

lowest price

C. HSBC and Prudential because the have among the

lowest greenhouse-gas intensity per sales

D. HSBC and Astrazeneca because thev have the highest market cap

A. Reckitt Benckiser and Diageo PLC because a high ESG disclosure score is better

Explanation : Worthing Capital is looking for investments that have the main criteria of high ESG scores. ESG Disclosure Scores on the Terminal are on a scale of 0-100, with higher being better. Reckitt Benckiser and Diageo

PLC are the British companies with the highest ESG Disclosure Scores on this list.

Examine the ESG analysis from Bloomberg for

Reliance Industries, an Indian company that

manufactures petrochemicals, synthetic fibers, and

textiles. Based on the provided information, which of

the following is true about Reliance?

A. Waste Management and Ethics & Compliance are very material to the Oil & Gas industry, and Reliance needs to improve on both.

B. Reliance lags on safety issues and has less board

diversity than its peers.

C. Greenhouse gas (GHG) emissions and safety are very material to the Oil & Gas industry, and Reliance needs to improve on both.

D. Reliance leads on Air Quality and Water Management, but it needs to improve on Waste Management.

C. Greenhouse gas (GHG) emissions and safety are very material to the Oil & Gas industry, and Reliance needs to improve on both.

Explanation : Since Reliance is the Oil & Gas industry, emissions and safety are very material and the hardest to accomplish. In the Weight column, we can see just how important they are: GHG Emissions Management has the highest weight in the Environmental category and Occupational Health & Safety Management has the highest weight in the Social category. Reliance is ranked below the median on emissions and lagging on safety. They need to improve their performance on both to outrank their peers.

An analyst created the provided image on SRCH, Bloomberg's fixed income search function. What can be deduced from the analyst's search?

A. The analyst is searching for bonds in the Energy industry from companies in Africa that mature in less than 5 years.

B. The analyst is searching for bonds in the Health Care sector from Western Europe that are not investment grade.

C. There are so few results because not many investment grade Utilities bonds mature in 5 or more years.

D. The net proceeds of the single bond in the result will be applied towards an environmental sustainabilitv purpose.

In this search, the analyst is looking for active bonds in the Health Care sector that have a Green Instrument indicator.

which means that the net proceeds will be applied towards green projects or purposes. Additionally, the analyst searches for bonds that have Western Europe as the region of risk, that are investment grade, and that mature 5 or more vears from the given date

A credit analyst has been tasked with adding more green bonds to his firm's portfolio

without sacrificing yield, or spread value. He created this Fixed Income Worksheet on

the Terminal function FIW that shows U.S. Electric bonds with a BBB+ to BBB- rating

Then he used the Group By field to sort the data into green bonds (the green bubbles)

and non-green bonds (blue bubbles). He also added a regression curve for the

displayed bonds: the ones above the curve have a higher yield and the ones below it

have a lower yield. In which pink lettered section is the analyst most likely to start his

deeper credit research?

A. Choice A. because CMS 4.75 is a green bond with the highest spread above the

regression curve

B. Choice C. because WEC 2.2 is a green bond with a spread below the regression curve

C. Choice B, because AES 1.375 is a green bond with a spread above the regression curve

D. Choice D, because these bonds have a l

C. Choice B, because AES 1.375 is a green bond with a spread above the regression curve

Explanation : On this screen, analysts typically focus on bonds that are in the top left as a starting point. Higher bubbles with a greater spread and a shorter maturity translate as more money faster. Choice A would be worthy of further investigation if it were a green bond, which the analyst has been tasked with finding. However, the key tells us it is not. Choice B is a green bond and, of the provided choices, it has a higher yield than many of the non-green bonds - it is certainly above the regression curve Choice C features green bonds as well; however, these are below the regression curve, which means they are not performing as well. Choice D shows bonds that are not performing as well and also have a longer duration. Choice B is the best

choice for more research because it is a green bond that is performing better than most of the other non-green bonds.