Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test

Which SRI strategy had the highest amount of AUM in Europe from 2016 to 2020?

1. Engagement/voting

2. Best-in-class

3. Sustainability themed

4. Negative/exclusionary screening

The correct answer is: Negative/exclusionary screening

The strategy that had the highest amount of Assets Under Management (AUM) in Europe from 2016 to 2020 is the negative/exclusionary screening approach. This strategy involves systematically excluding certain sectors, companies, or practices from investment portfolios based on specific criteria, such as environmental impact, social issues, or governance concerns. This approach has been widely adopted by institutional investors and funds that aim to align their investment practices with ethical considerations and values. It is particularly attractive to investors who want to steer clear of industries associated with significant risks or negative externalities, such as fossil fuels, tobacco, and firearms. The popularity of this strategy during the stated period can be attributed to a growing awareness of sustainability and responsible investing among investors, leading to increased demand for funds employing these exclusionary practices. Many asset managers focused on negative screening as a primary tool to demonstrate their commitment to Environmental, Social, and Governance (ESG) principles, thus attracting a significant amount of AUM. In contrast, other strategies such as engagement/voting, best-in-class, and sustainability themed may not have garnered the same level of AUM during this timeframe. Engagement focuses on influencing corporate behavior through dialogue rather than exclusion, best-in-class selects leading companies within various