Both Enron and WeWork faced governance failures due to excessive control and influence by their CEOs (Jeffrey Skilling for Enron, Adam Neumann for WeWork).
Why C (CEO dominance) is correct:
Enron's CEO misled investors through fraudulent accounting practices.
WeWork's CEO (Adam Neumann) had unchecked authority, leading to unethical corporate decisions that ultimately resulted in a failed IPO.
Why not A or B?
A (Auditor lapses) is relevant for Enron (Arthur Andersen scandal) but not a key factor in WeWork's collapse.
B (Related-party deals) occurred at WeWork (e.g., CEO leasing buildings to his own company) but was not a central issue in Enron's collapse.
References:
Harvard Business Review: "The Leadership Failures of WeWork and Enron"
SEC Case Studies on Corporate Governance Failures

The underlying principle of the corporate governance code in most markets is "comply or explain." This principle mandates that companies either comply with the established governance guidelines or explain why they have not done so. This approach allows for flexibility while encouraging transparency and accountability in corporate governance.
Flexibility and Adaptability: The "comply or explain" approach provides companies with the flexibility to adapt the guidelines to their specific circumstances. If a company believes that a certain recommendation is not suitable for its situation, it can choose not to comply, provided it explains the reasons for this decision.
Transparency: By requiring companies to explain their non-compliance, this approach promotes transparency.
Stakeholders, including investors, can assess the company's governance practices and make informed decisions based on the explanations provided.
Encouragement of Best Practices: This principle encourages companies to strive towards best practices in governance, while allowing for deviations when justified. It balances the need for high standards with the recognition that one size does not fit all.
References:
MSCI ESG Ratings Methodology (2022) - Discusses the principles of corporate governance codes and highlights the "comply or explain" approach as a common standard in various markets.
ESG-Ratings-Methodology-Exec-Summary (2022) - Provides insights into how corporate governance codes are designed to promote transparency and accountability through the "comply or explain" principle.

The first step in the effective design of an investment mandate is determining the client's ESG investment beliefs.
* Client's ESG investment beliefs (A): Understanding the client's values, preferences, and beliefs regarding ESG factors is essential for creating an investment mandate that aligns with their objectives.
This step ensures that the investment strategy and mandate are tailored to the specific ESG priorities of the client.
* Impact of ESG factors on risk and return characteristics (B): This step is important for analyzing how ESG factors influence financial performance but comes after understanding the client's ESG beliefs.
* Fund manager's investment approach to reflect ESG issues (C): The investment approach should reflect ESG issues identified in alignment with the client's beliefs and priorities, making this a subsequent step in the mandate design process.
References:
* CFA ESG Investing Principles
* Best practices for creating investment mandates

In fixed income investing, both corporate and government bonds can be impacted by environmental factors at a country level. For corporate bonds, companies operating within a country are affected by its environmental regulations, policies, and natural resource management. Government bonds, directly tied to a country's economic and environmental conditions, are also influenced by such factors.ESG Reference: Chapter 7, Page
318 - ESG Analysis, Valuation & Integration in the ESG textbook.

A significant hurdle to adopting ESG investing is the lack of suitable benchmarks. Investors often need benchmarks to measure performance relative to specific goals or standards. The development of appropriate benchmarks for ESG investing is challenging due to the diverse and evolving nature of ESG factors. According to the MSCI ESG Ratings Methodology, integrating ESG factors into investment processes requires robust benchmarks that accurately reflect ESG risks and opportunities. Without these benchmarks, it is difficult for asset managers to gauge performance and make informed investment decisions.