Screening on a relative basis would most appropriately be used to construct a balanced and diversified portfolio. This approach involves comparing companies within the same industry or sector and selecting those that perform better on ESG criteria relative to their peers.
* Relative Comparison: Screening on a relative basis allows investors to identify the best-performing companies within each sector or industry, ensuring a balanced approach across different segments of the market.
* Diversification: By selecting top ESG performers from various industries, investors can maintain a diversified portfolio while still adhering to ESG principles. This helps in spreading risk across different sectors.
* Sector-Neutral: This approach ensures that the portfolio is not overly concentrated in specific sectors, which can happen with thematic investing or absolute screening. It allows for sector-neutrality, maintaining exposure to a broad range of industries.
References:
* MSCI ESG Ratings Methodology (2022) - Discusses the benefits of relative ESG screening for constructing diversified portfolios.
* ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the importance of maintaining diversification while applying ESG criteria in portfolio construction.

TheInternational Labour Organization (ILO)identifiesforced laboras aviolation of fundamental labor rights.
Companies mustnot support or engage in forced laboras per theILO's core labor standards.
* Freedom of association (C)is aprotected labor rightunder ILO conventions.
* Minimum age (B)is covered underILO child labor laws, setting a minimum legal working age.
References:
* ILO Core Conventions on Labor Rights
* United Nations Guiding Principles on Business & Human Rights
* OECD Responsible Business Conduct Guidelines
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ESG Index-Based Strategies:
ESG index-based strategies offer various advantages, including lower costs compared to discretionary, actively managed ESG strategies.
1. Lower Costs: Index-based strategies typically have lower management fees compared to actively managed strategies. This is because index funds aim to replicate the performance of a specific ESG index, requiring less research and management effort than actively selecting and managing individual securities based on ESG criteria. This cost efficiency is a significant advantage for investors seeking exposure to ESG factors without incurring high fees.
2. Fee Structures and Stewardship Activities:
* Fee Structures: While ESG index-based strategies may not necessarily have slightly lower fee structures compared to other index-based strategies (option A), they do offer cost advantages over actively managed ESG strategies.
* Stewardship Activities: Although stewardship activities are important, ESG index-based strategies may not offer more focused stewardship activities compared to actively managed strategies (option C), as active managers often engage more directly with companies on ESG issues.
References from CFA ESG Investing:
* Cost Efficiency: The CFA Institute explains that index-based strategies, including ESG-focused ones, generally incur lower costs than actively managed strategies due to their passive management approach.
* Index-Based ESG Strategies: These strategies provide a cost-effective way to incorporate ESG considerations into a portfolio, making them attractive to investors who prioritize cost efficiency.
In conclusion, an advantage of using ESG index-based strategies is their lower costs compared to discretionary, actively managed ESG strategies, making option B the verified answer.

CICERO's "Shades of Green" methodology classifies bonds based on their environmental impact. A bond that supports transition activities which do not lock in emissions, but contribute to a gradual transition to low- carbon operations, is considered "Light Green." This designation indicates that while the activities are beneficial, they may not yet be fully aligned with a low-carbon future.ESG Reference: Chapter 7, Page 123 - ESG Analysis, Valuation & Integration in the ESG textbook.

The 2020 version of the UK Stewardship Code emphasizes reporting on the outcomes from ESG activity, highlighting the practical impact of stewardship efforts rather than just focusing on policies or intentions.
(ESGTextBook[PallasCatFin], Chapter 6, Page 276)