Excluding tobacco from the investment universe is an example of a conduct-related exclusion. This approach involves excluding industries or companies that are deemed to engage in unethical or harmful activities, such as tobacco production, based on their conduct or the nature of their business.
ESG Reference: Chapter 7, Page 325 - ESG Analysis, Valuation & Integration in the ESG textbook.

The concept of a 'just' transition refers to ensuring that the shift towards a sustainable and low-carbon economy is fair and inclusive, addressing the social and economic impacts on workers and communities.
* Just transition (C): Helping displaced miners transition to safe decommissioning of abandoned mines ensures that these workers are provided with new employment opportunities that utilize their skills, while also addressing environmental remediation. This approach highlights the social responsibility of managing the transition's impacts on workers and communities.
* Subsidizing businesses for solar arrays (A): While beneficial for promoting renewable energy, this does not directly address the social impacts on displaced workers.
* Funding outplacement programs for public sector workers (B): While important, this example does not specifically address the environmental aspects of a just transition, which encompasses both social and environmental justice.
References:
* CFA ESG Investing Principles
* Just Transition Centre and International Labour Organization (ILO) guidelines on just transition

The Green Claims Directive (GCD) aims to make green claims reliable, comparable, and verifiable across the world. This directive addresses the need for consistency and transparency in the way businesses communicate their environmental claims to consumers.
* Reliability: The GCD ensures that green claims made by businesses are based on accurate and substantiated information, preventing misleading claims.
* Comparability: By standardizing the criteria and methodologies for green claims, the GCD enables consumers to compare the environmental benefits of different products and services effectively.
* Verifiability: The directive requires that green claims be verifiable, meaning that businesses must provide evidence and undergo scrutiny to support their claims, enhancing trust and accountability.
References:
* MSCI ESG Ratings Methodology (2022) - Discusses the importance of reliability, comparability, and verifiability in ESG disclosures and claims.
* ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the role of regulatory frameworks like the GCD in ensuring transparent and trustworthy green claims.

Screening on both a relative basis and an absolute basis is most likely to result in a well-diversified portfolio.
* Relative Screening: This involves comparing companies within the same industry or sector to identify the top or bottom performers based on ESG criteria. It ensures that the portfolio maintains exposure to various industries.
* Absolute Screening: This sets fixed thresholds for ESG criteria that companies must meet to be included in the portfolio, regardless of their industry. It ensures that the portfolio includes only companies that meet a certain standard of ESG performance.
* Diversification: Combining both methods allows for a broader and more balanced approach to ESG integration, ensuring that the portfolio is diversified across sectors while maintaining high ESG standards.
CFA ESG Investing References:
The CFA Institute's ESG Investing materials emphasize the benefits of using both relative and absolute screening to achieve a well-diversified portfolio that aligns with ESG objectives. This combined approach helps in capturing a wide range of high-performing ESG companies across different industries.

The use of renewable energy is an environmental factor in real estate. Integrating renewable energy sources in real estate developments helps reduce greenhouse gas emissions and alignswith sustainability goals, making it a key factor in ESG assessments of real estate portfolios.ESG Reference: Chapter 3, Page 153 - Environmental Factors in the ESG textbook.