SUSTAINABLE FINANCE EXAM
QUESTIONS AND ANSWERS
What were the major recommendations from the Cadbury report? - Correct Answers -
(1) Chairman separate from CEO
(2) At least 3 non-executive directors on board
(3) An audit comittee of non-executive directors
What is Friedman's Theory about the responsibility of a business? - Correct Answers -
Only responsibility is to increase profits without deception or fraud
What are the three documents that point to the shift from Friedman's Theory to more of
a Stakeholder Theory approach? - Correct Answers -Cadbury Report, UN Principles of
Responsible Investing, and Swensen Letter on Climate Change
What corporate governance failures led to SOX - Correct Answers -Enron, WorldCom,
Lehman
ESG is not about philanthropy but... - Correct Answers -Risk management
Attention bias - Correct Answers -The tendency of our perception to be affected by our
recurring thoughts; our memories influence the perception of probabilites (9/11 and
plane travel)
Emotion bias - Correct Answers -Confusing emotions with risk management
Obedience to authority - Correct Answers -a tendency to comply with instructions from
an authority - "just following orders"
Conformity bias - Correct Answers -Conform judgements to agree with the crowd
Incrementation - Correct Answers -Much unethical behavior stems from people
unconsciously lowering the bar over time through small changes. "slippery slope" -
slowly justifying bad behavior
Does ESG investing pose a conflict with fiduciary duty? - Correct Answers -No, as long
as returns are equal to or in excess of what they would have been without ESG
QUESTIONS AND ANSWERS
What were the major recommendations from the Cadbury report? - Correct Answers -
(1) Chairman separate from CEO
(2) At least 3 non-executive directors on board
(3) An audit comittee of non-executive directors
What is Friedman's Theory about the responsibility of a business? - Correct Answers -
Only responsibility is to increase profits without deception or fraud
What are the three documents that point to the shift from Friedman's Theory to more of
a Stakeholder Theory approach? - Correct Answers -Cadbury Report, UN Principles of
Responsible Investing, and Swensen Letter on Climate Change
What corporate governance failures led to SOX - Correct Answers -Enron, WorldCom,
Lehman
ESG is not about philanthropy but... - Correct Answers -Risk management
Attention bias - Correct Answers -The tendency of our perception to be affected by our
recurring thoughts; our memories influence the perception of probabilites (9/11 and
plane travel)
Emotion bias - Correct Answers -Confusing emotions with risk management
Obedience to authority - Correct Answers -a tendency to comply with instructions from
an authority - "just following orders"
Conformity bias - Correct Answers -Conform judgements to agree with the crowd
Incrementation - Correct Answers -Much unethical behavior stems from people
unconsciously lowering the bar over time through small changes. "slippery slope" -
slowly justifying bad behavior
Does ESG investing pose a conflict with fiduciary duty? - Correct Answers -No, as long
as returns are equal to or in excess of what they would have been without ESG
