When institutional asset owners are searching for an asset manager with an ESG approach, it is important to understand whether the manager aims for positive, measurable ESG outcomes beyond just financial returns.
This ensures that the asset manager is committed to integrating ESG considerations in a meaningful way, rather than merely tracking a broad market index or focusing solely on financial metrics. Detailed questions on specific portfolio holdings are less relevant at this stage compared to understanding the overall ESG commitment and strategy of the manager.

Determining the materiality of ESG issues involves judgment, as it depends on various factors, including the company's industry, business model, and operating environment. Material ESG factors are those that have the potential to significantly impact a company's long-term financial performance.ESG Reference: Chapter 7, Page 371 - ESG Analysis, Valuation & Integration in the ESG textbook.

Private equity investors who primarily view ESG integration as a way to attract clients are more susceptible to allegations of greenwashing. Greenwashing occurs when a company or investor overstates or falsely claims their commitment to sustainability, often for marketing purposes rather than genuine ESG improvements.ESG Reference: Chapter 7, Page 325 - ESG Analysis, Valuation & Integration in the ESG textbook.

Excluding certain companies based on ESG factors is consistent with an investment mandate focused on risk management. By excluding companies with poor ESG practices, investors can reduce their exposure to risks such as regulatory fines, reputational damage, and operational disruptions, all of which can negatively impact returns.ESG Reference: Chapter 9, Page 510 - Investment Mandates, Portfolio Analytics & Client Reporting in the ESG textbook.

Statement 1 is incorrectbecause investor engagementis typically focused on long-term value creation, not just short-term gains.
Statement 2 is correctbecause investor engagementcan involve lobbying efforts through industry groupsto promote ESG policies, regulatory changes, and corporate reforms.
References:
* Principles for Responsible Investment (PRI) Active Ownership Guide
* CFA Institute ESG Stewardship & Engagement Report
* UK Stewardship Code 2020 Best Practices
========