Investing in a Sustainable Future 2018

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What is the one requirement for a startup to be in the pre-seed stage? A) Management Team B) Business plan C) Pilot Project D) Proof of concept

According to our lecture, the only real requirement for a pre-seed stage startup is a proof-of-concept

What is the difference between an output and an outcome, with respect to Impact Value Chains (and SROI)? A) An outcome is quantifiable, while an output is typically not. B) An outcome is a result of a company activity that can be measured, while and output refers to the resulting changes in a social system. C) An output is a result of a company activity that can be measured, while and outcome refers to the resulting changes in a social system. D) The two terms are interchangeable.

C - See Legrand Slides, slide 3 - Impact Value Chain

As regulators how did taxes affect outcomes of pricing and supply and demand? A) They directly affected outcomes B) They indirectly affected outcomes C) The did not affect outcomes

One of the challneges for regulators is that they have to guess and estimate how players will react to their policy measures. So they have an indirect effect on outcomes

What is the most appropriate first step for identifying financial proxies for impact outcomes? A) Begin with government resources B) Use anything related to your subject that has a pricetag C) Choose proxies that vary widely from indicators D) Ask your stakeholders what they value

Your stakeholders will be a good starting point for finding your proxies because only they know what it is they value and so know best how this might be captured.

Will is an investment banker and is trying to see if he should invest in Company X. The hurdle rate he will use is 10% and the future cash flows of the firm are the following: 2019: $350 2020: $380 2021: $488 2022 (terminal year): $5000 Additionally, assume that the non-operating assets of the firm is $50, the debt of the firm is $300, and the number of outstanding shares is 300. If the market value of a share of stock in Company X is $15, what is the implied price per share and should Will recommend that his firm buys shares of Company X? A $14.35, No B $14.87, No C $15.23, Yes D $15.55, Yes

$4,712.40 PV of Cash Flows + 50.00 Non-Operating Assets = 4,762.40 Value of the Firm - 300.00 Debt of Firm = 4,462.40 Equity of Firm / 300.00 Shares of Stock Outstanding = 14.87 Price per Share Because the intrinsic value of the stock is less than the market price, Will should not invest in Company X.

If the human population as a whole collectively uses .5% of the productivity the earth produces in a year every day, on what day will we hit the overshoot day? Day 150 Day 200 Day 365 Based on the above daily consumption, there will be no overshoot day this year.

100% / .5% daily consumption = 200 days until the overshoot day

A company called YogaTech chooses to buy a new machine for extruding sustainable yoga mats worth $10,000. They anticipate a cash flow of $2,000 for years 1-3, but an increase of cash flow to $5,000 for years 4 and 5. Assuming a hurdle rate of 12%, calculate the internal rate of return. A) 12% B) 13.3% C) 8.1% D) 14.7% E) 9%

14.7%

Judy wants to calculate the SROI her volunteer organization makes. In 2017, her organization made an impact of $85 per person and she served 500 people. If she did not make this organization, 15% of the people would have been helped anyways. Additionally, 10% of the change she made was attributed to other organizations. Her impact drops by 15% every year. If it costs her $35 per person to help, what is her SROI for 2018? 157.91% 185.79% 191.75% 242.86%

2018 Impact: $85 * 500 people * 15% deadweight * 10% attribution * 15% drop off = $27,635.63 2018 Cost: $35 * 500 people = $17,500 SROI = Impact / Cost = 27,635.63 / 17,500 = 157.91%

Elaine is trying to see what the impact of her volunteering with the underprivileged children. The average benefit she provides for her work is $10 per child and she helps 400 children every year. She plans on helping the children for 5 years. If the deadweight percentage is 10%, the attribution percentage is 15%, and the drop off percentage is 40%, what is the value of the impact made in year 2? $1,836 $2,160 $3,060 $4,000

400 x $10 = $4,000 $4,000 x (1-10%) x (1-15%) = $3,060 year 1 impact $3,060 x (1-40%) = $1,836 year 2 impact

Carbon offsets represent investments in third-party projects that reduced greenhouse-gas emissions (UBS & Climate Change case), and come in three types - Certified emission reduction units (CERs), Emission reduction units (ERUs), and Verified Emission reductions (VERs). Which of the following is FALSE about these types of carbon offsets? CERs and ERUs differ in where the represented carbon-reducing projects are located - CERs represent projects in developed countries that have signed the Kyoto Protocol, while ERUs represent projects in developing countries. VERs represent projects that have not yet qualified as CERs or ERUs. VERs are traded in over-the-counter markets. VERs are traded at a discounted price. VERs are verified by independent consultants.

A A is FALSE. Rather, CERs represent projects in developing countries, while ERUs represent projects in developed countries (UBS & Climate Change case). The three statements on VERs are true - they are traded in over-the-counter markets and carry a discounted price because they have yet to be qualified as CERs or ERUs (although they have been verified by independent consultants).

Which of the following is INCORRECT about SRI (sustainable, socially responsible, impact) investing? SRI results in higher returns, over the long run. SRI investments are consistent with fiduciary responsibility. SRI investing considers public equity, as well as other investments. SRI investments show higher volatility in the short run. Both A & D

A A: SRI shows SIMILAR returns in the long run. B: This is true (see DOL statements, 2008 vs. 2015) C: SRI is mostly public equity, but can consider other investments as well. D: SRI shows higher volatility in the short run. Only A is incorrect.

In class, we discussed three different ways to evaluate an investment, one of which is the payback period. Which of the following is TRUE about the payback period? It tells you the length of time required to recover your initial investment. It's used by the financially sophisticated. It considers all future cash flows from an investment. It considers the time value of money.

A B) Payback period is not used by the financially sophisticated. C) Payback period only calculates breakeven period; it does not consider any cash flows after that. D) Payback period does not consider the TVM - https://www.investopedia.com/terms/p/paybackperiod.asp A is correct. - https://www.investopedia.com/terms/p/paybackperiod.asp

Facebook decides to build a massive solar field so it can bolster its image as a sustainable company and attract more millennial programmers. Although a civic-minded decision, the company also receives financial benefits in the form of an Investment Tax Credit (ITC). Facebook currently has EBT of $21B and will pay $5B in taxes this coming year. If the Solar Array costs $1B, and Facebook receives a 30% ITC on the project, what will the company's new Net Income be? $15.3B $15.7B $16.3B $17.5B

A ITC Credit = ($1B Project) * (30% ITC) = $300M Tax Credit $5B Old Taxes - $300M = $4.7B New Tax Bill EBT of $21B - $1B Solar project = $20B new EBT Minus $4.7B new Tax Bill = $15.3B NI

It's 2020, and Bugs Bunny has rapidly ascended the political ladder to become President of the USA. An avid duck hunter, one of the first acts he wants to pass through a congress dominated by Looney characters is to directly compensate landowners to maintain and create duck ponds on their property. If Bugs decides to give tax breaks to owners with large duck ponds, what type of Payment for Ecosystem Services would this be classified as? Public Payment Scheme Self Organized Deal Open Trading Scheme

A Public Trading Scheme: Government compensates owners directly to incentivize behavior Self Organized Deal: Voluntary arrangements set up between private parties Open Trading Schemes: Market trading of credits

Oliver Queen is a risk-seeking investor who has invested $40 million in Even-Better Ventures (EBV), a small venture capital firm that invests in early-seed stage companies. He is one of the biggest investors in EBV, and holds a lot of influence over how EBV's three managers allocate their funds. Of the options below, what would Mr. Queen more likely recommend to the managers of EBV, given his risk attitude? Identify up to 9 firms (3 firms per manager), and invest most of EBV's funds and significant amounts of the manager's time in guiding these firms to exit or IPO, throughout the next 5-10 years. Use negative screening on a large list of candidates, narrowing down that list to about 30 firms. Invest smaller amounts in each of these qualified firms, hoping for one or two "unicorn" firms to generate extraordinarily high returns.

A Each investment in an early-stage firm carries high risk. Thus, "spray and pray" (option B) is viewed as the safer option because it spreads the risk across multiple investments. Most traditional VC's take this approach. However, Mr. Queen is a risk-seeking investor, and would most likely prefer option A.

A new project undertaken by Nelson Power Co. will reduce the toxic emissions the company releases into the Rivanna River, Charlottesville's source of drinking water, by 50%. This project will drastically increase the river's water quality, benefitting members of the community greatly. What type of impact is best described in this example? External Impact Implied Impact Optimized Impact None of the Above

A External Impact is the health, economic, and/or environmental effect that an investment has on parties outside a company, such as customers and communities.

Inspired by his 2006 hit film Blood Diamond that, of course, failed to win him an Oscar, Leonardo DiCaprio decided to divest all mining stocks that did not meet U.N. compliance for ethical labor standards. Which category of SRI would this decision most specifically fall under? Norms-Based Screening Positive Screening Impact/Community Investment Corporate & Shareholder Actions Sustainability Themed Investing

A Norms-based screening is a type of negative screening that ensures all investments meet a minimum standard of business practices based on international norms. While DiCaprio's decision may touch on other factors, the fact that he was basing his decision on U.N. standards signals he is employing norms-based screening

Which of the following is NOT true about sustainable, responsible and impact investing (SRI)? Only does negative screening SRI can result in higher returns SRI can take private equity investments SRI is consistent with fiduciary responsibilities

A SRI does not ONLY do negative screening as we saw in lecture

In calculating an organization's carbon footprint, the decision between using the equity share approach or the control approach relates to which scope of emissions? Scope 1 Scope 2 Scope 3 The decision relates to all three scopes

A Scope 1 includes direct emissions "from those sources that are owned or controlled by the reporting entity" Scopes 2 & 3 relate to indirect emissions from activities that are "owned or controlled by another entity"

David is preparing a pitch deck to secure funding from two prominent Venture Capitalists, Alex & Judy, to build a brand-new theme park called David's Dinos. If these two VC's give David $300,000, he says he will be able to create a live Velociraptor through a mixture of fossilized DNA and genetic cross-breeding. He also plans to recruit recent MBA grad John Hammond to round out his management team and produce a business plan. What stage of FC financing would Alex & Judy's investment be classified as? Seed Stage Financing Early Stage Financing Expansion Stage Financing Later Stage Financing

A Seed Stage: "relatively small amount of capital to prove a concept. Involves product development & market research, as well s building a management team and developing a business plan" Early stage: "complete development where products are mostly in testing or pilot, product may just have been made commercially avialable" Expansion stage: "initial expansion of a company that is producing and shipping products/service" Later Stage: "fairly stable growth rate"

Ted is considering a project and hoping to calculate the impact (i.e. prior to calculating SROI). Using a financial proxy of $10.50 with a quantity 25 outcomes, Ted arrives at the initial total value of $262.50. If deadweight is 15% and attribution was 35%, what is the impact of the project? $145.03 $150.00 $25.67 $167.09 None of the above.

A The first step is to subtract out the deadweight from the initial value. This entails taking 85% of $262.50 (i.e. subtracting out 15% deadweight) which brings you to $223.125. You then take out the attribution of 35% to arrive at $145.03.

At orientation John tells his new friend, Jane, that he is planning on buying one cup of coffee from Greenberry's for $2.00 every day of school for all four years (assume 250 days per year). Jane suggests that John be more environmentally conscious and purchase a reusable container, so John buys a $20.00 coffee thermos. On John's first day of class he visits Greenberry's and is pleased to learn that the coffee only costs him $1.90 because he brought his own container. Over the course of John's four years at UVA, what is the NPV of his investment in the reusable thermos? Assume a 10% discount rate. $59.25 $65.25 $70.91 74.77 80.00

A This NPV question relies not on future sources of revenue, but on future savings. To answer this question, we must figure out how much money John saves on each cup of coffee, and from there how much he saves each year. Ordinarily coffee costs $2.00, but with a reusable container it costs $1.90, so John saves $0.10 per cup of coffee. He buys one cup of coffee for 250 days each year, so he saves $25.00 each year thanks to his reusable thermos. We learn that John will be at UVA for four years. From there this problem is simple to solve in Excel with the following outflow and savings data. Year 0: (20.00) Year 1: 25.00 Year 2: 25.00 Year 3: 25.00 Year 4: 25.00 NPV = NPV(0.10,Year 1:Year 4)+Year 0

You invested and purchased three small houses near the Corner for $50,000 each 30 years ago. If all three houses appreciated at 6% a year, what is the total value of your investment today? (Rounded to the nearest whole number.) $861,524 $950,078 $600,323 $1,002,099 None of the above.

A This question is baed on time value of money. Since all three houses have the same initial value and appreciate at the same rate, we can first multiply $50,000 by 3 to come to a total value of our initial investment of $150,000. Then, we account for the appreciate of the houses for the past 30 years by multiple $150,000 by (1 + growth rate)^n years. The equation is thus: $150,000 times (1 + 0.06)^30, which gives option A.

David is thinking of investing in a new cryptocurrency called ElonMuskCoin. Given Elon's economic wizardry, David is positive this too will be a success. If David invests his life savings of $15,000, he believes he will receive a return of $5,500 annually for 4 years. David has also heard his rare collection of tulip bulbs will appreciate at a rate of 20% annually on the market, so any investment he makes must surpass this. What is the NPV on David's crypto-investment? $ (761.96) $ (634.97) $ 7,000 $ 1,400

A Using a Discount Rate of 20%, use the formula: Sum of: - (Initial Outlay) + (Cash Period 1)/((1 + Discount Rate)^(time period)) Year 0: Outlay of ($15,000) Year 1: Discounted payment of $4,583.33 Year 2: Discounted payment of $3,819.44 Year 3: Discounted payment of $3,182.87 Year 4: Discounted payment of $2,652.39 For a sum total of $ (761.96)

Fulcrum capital is a VC firm that just started a $500 million venture fund that take 2% per annum in management fees and 20% carried interest. If the fund is worth $800 million at closing in 10 years, excluding management fees, how much money will the firm make at the closing of the fund? $60 million $16 million $160 million $40 million $10 million

A VC firms typically make money from management fees and carried interest or a percentage of profits after returning the value of the fund. In this case, management fees are excluded so the only other money paid to the VC is carried interest. $800 million value at closing means that the firm made $300 million over the life of the fund. 20% profit on $300 million is $60 million.

Why are industry leaders supportive of ESG related regulation and standardization? It creates certainty over uncertainty and they are overburdened by surveys They believe it can add value by pushing market competitors to better communicate investment goals ESG regulation by an agency such as the SEC could lead to government marketplaces for impact/sustainable investments

A Why are industry leaders asking for regulation? Creates certainty over uncertainty Overburdened by statements/questionnaires

Lightsaber is a startup that hopes to be a leader in the sustainable electricity industry. While the product is using solar technology to power lightbulbs, in reality any removal of GHG emissions will not occur until the technology is viable enough, which will take at least two more years. What type of offset quality does this violate? conditionality additionality no leakage permanence

A conditionality: payments are conditional on the actual removal of GHG from the atmosphere

Mr. Green bought a new sewing machine for his tailor shop for $20,000. Assume that he runs his business under the same accounting principles as any large firm except with a small business tax rate of 20%. This will allow him to fix 350 more garments a year, each earning him a margin of $10. Assuming the sewing machine will last him 10 years with no salvage value and undergoes straight line depreciation, was this a good project to take if he requires a return of 10% on all investments? What is the NPV? A) No, the NPV is $(337.39) B) No, the NPV is $(2,795.21) C) Yes, the NPV is $1,505.98 D) Yes, the NPV is $2,795.21 E Not enough information was given to answer this question.

A msg brandon for foto. but take into account depreciation for cash flows

Bayside Engineering, Inc.--an engineering firm focused on projects ranging from traffic flow to architectural building--plans to be carbon neutral by 2030. The PR team is concerned about common criticisms of offsets, and hopes to find projects that they can conceptually relate to their emissions. They found that wetland restoration projects in Australia had been highlighted in the media and well received by the public. The team thought the restoration of natural areas could be conceptually linked as a sensical way to 'offset' the corporation's intense development of previously undisturbed land for projects. There were ample funds for purchasing offsets, so they eliminated the option of investing in projects that had not undergone all certification and verification procedures. What type of offset will their strategy involve?

A - It specifies Australia--CERs are solely for projects in developing countries. B - ERUs are issued for projects in any country that had signed the Kyoto Protocol (ie. Australia), and are certified. C - It specifies they want to buy offsets based on certified projects. VERs are exchanged at discounted rates because the projects are not verified/certified. D - They are purchasing offsets-- not an internal reduction.

Why do Pennsylvania farmers have a disproportionate impact on the Chesapeake Bay's Health? A) Because they are higher up in the watershed, so there is more time for nutrient runoff to accumulate. B) Because they have large numbers of dairy cattle, which cause more nutrient runoff than beef cattle. C) Because they have large numbers of beef cattle, which cause more nutrient runoff than dairy cattle. D) Because they are not directly connected to the Bay, so the nutrient runoff into the watershed is more concentrated. E) They do not have a disproportionate impact on Bay Health.

A doesn't make any sense, environmentally. B is correct C is the inverse of B (dairy cattle cause less runoff because they are alive longer than beef cattle) D also doesn't make any sense, environmentally. E this is false

A is FALSE. Rather, CERs represent projects in developing countries, while ERUs represent projects in developed countries (UBS & Climate Change case). The three statements on VERs are true - they are traded in over-the-counter markets and carry a discounted price because they have yet to be qualified as CERs or ERUs (although they have been verified by independent consultants).

Which of the following companies would Better Ventures be most likely to invest in, based on their Investment and Impact Theses? A) A Bay Area-based start up with market research, but no set business plan or management team. B) A small company in West Virginia that focuses on clean energy production, and also has a stable management team and a business plan. C) A small San Francisco-based company aimed at improving the health of children in low income families that has done some initial testing, but doesn't have a clear way to measure their impact due to variable factors influencing improved health. D) A small tech company with a firm business plan, focused on improving post-care patient-doctor communications in SF hospitals, that has shown positive results in its first two years of operation.

A is unlikely due to the very early stage of start up. With no clear business plan in place, it may be unwise to invest B would fit the bill, were it closer to the Bay Area C violates the impact thesis that BV has: they need measurable results for impact D would meet all requirements set by BV

Larry Fink, the CEO of BlackRock, recently wrote a letter to CEOs whose firms are partially owned by BlackRock. In the letter Fink urged these CEOs to move their firms towards more sustainable practices. What gives Fink the clout to urge firms to make these changes? A) Fink can have BlackRock divest from corporations that do not act accordingly to his letter without any repercussions B) Fink owns large portions of many companies and can use that power to vote against the firms' management if it acts in opposition to his letter C) Fink has ties with the SEC and can use them to crack down on firms that continue to act in opposition to his letter D) Fink's letter will encourage people who own Blackrock funds to use their ownership to vote for what Fink wants

A is wrong because if Blackrock divests from these firms, many people will likely sell their Blackrock funds. Additionally, these firms are not doing anything wrong per se, they simply have room to improve. B is correct C is wrong because this would be illegal D is wrong because as discussed in class, owning shares of an index/mutual fund does not give the owner voting rights for the firm.

Hooville's virtuous bureaucrat Bennett Tony decided to do something about the emissions that came out the chocolate factory. He wasn't sure which would be better - forcing all the chocolatiers to install a filter on their factories or capping the emissions to a certain amount and creating allowances for each factory. Bennett knew the chocolate lobby would be furious with a strict and expensive requirement, but could be open to something more flexible. He also wanted a solution that was most cost effective. What would you recommend? A)Make the factories pay the affected parties a fixed rate B) Only make the highest emitters install the filters C) Make all factories install the same filter D) set a cap ABOVE the optimal amount of emissions and distribute allowances E) set a cap at the optimal amount of emissions and distribute allowance

A technology like a filter would be a command and control instrument. It would be easy to administer but creates limited flexibility and incentive to innovate for the factories. A Cap&trade program with allowances above the optimal quantity would cause the price to be too low and factories would emit past the point at which marginal abate costs equal the marginal benefits from abatement.

During our Bay Game simulation, there was a major restoration in the crab population in the bay. Which of the following best explains the reason for the rise in crabs? A) Stakeholders from different states coordinated with one another to impose restrictions on the crab catching season and yield of watermen. B) Regulators independently decided on their crab restrictions -- some imposed harsh limits while others were extremely lax C) Regulators provided lucrative incentives to watermen to influence the amount of crab caught and sold D) Environmental restoration efforts started by local governments attracted more crabs to the area

A) Stakeholders from different states coordinated with one another to impose restrictions on the crab catching season and yield of watermen.

What characteristic do both taxation and market-based instruments share as tools for mitigating externalities? A) Both are price instruments, meaning they set a price standard that caps emissions. B) Both lead to economic inefficiency, and thus do not achieve the greatest improvement at the lowest possible cost. C) Both are subject to the political process, meaning they must pass through legislation. D) All of the Above E) None of the Above

A: Cannot be correct because market-based instruments (i.e. certified emissions reductions and cap-and-trade permits) are considered quantity instruments, fixing the amount of allowable harm to a specific standard. B: Is also incorrect, as market-based instruments achieve economic efficiency, resulting in the greatest improvement at the lowest cost. C: Is correct, since both market-based instruments and taxes must be voted on by the government before they are enacted, thus subjecting both tools to legislation and the political process. D: Since both A and B are incorrect, this is not a viable answer. E: Since C is correct, this is also not a viable answer.

Which of the following is classified correctly according to the carbon footprint methodology? (Format: type of emission - scope, classification) Mobile combustion (from factory trucks, planes and construction vehicles) - Scope 1, direct emission Purchased electricity for the factory - Scope 2, direct emission Unintentional leaks and spills at a factory - Scope 3, indirect emission Mobile combustion (from factory trucks, planes and construction vehicles) - Scope 2, indirect emission Unintentional leaks and spills at a factory - Scope 1, indirect emission

A: Correct B: Scope 2 is indirect emissions C: This is a scope 1 emission D: This is a scope 1 emission E: Scope 1 is direct emissions

A farm is calculating their cumulative organizational carbon footprint since they founded their farm in 1998 (20 years ago). Methane release from cow manure is a significant factor in their emissions calculations. They have 14 cows, and each produces a whopping 90 lbs of manure per day. Each pound of manure is associated with the release of 6 liters of methane. The 20 year GWP (global warming potential) of methane is 72. How many units of carbon dioxide equivalent (CO2Eq) are attributed to cow manure's methane release since the farm opened? (Assume these are exceptionally healthy cows that have all been at the farm since its opening 20 years ago. )

A: you are correct; = 14 cows x 90 lbs x 6L/lb x 365 days x 20 years x 72 (GWP) B: you got this answer if you forgot to multiply by 14 for the number of cows C: you got this answer if you forgot to multiply by 20 for the number of years D: you got this answer if you forgot to multiply by 72 for the GWP E: you got this answer if you forgot to multiply by 365 for the days/year

Farmer Joe has a 200 forest on his property. He has no current plans to develop the land, but wants to make an extra buck from its presence. He argues that the local aluminum smelting plant should be able to pay him to offset their omissions with the emissions reduction capacity of the forest. Which principle of Payments for Ecosystem Services does Farmer Joe's argument violate? Conditionality Additionality No Leakage Permanence

Additionality: Farmer Joe is not planning on doing anything with the offsets that would improve the environment relative to its baseline. Because he is not doing anything additional, his forest violates the principle of additionality

Brandon runs a very popular history book manufacturing company. Historically, his company has emitted a lot of carbon in the air and did not do much for the community it was located in. However, this year, he actively had his company invest in lower emitting carbon technology and donated money for social programs in the community. Which of the following is not a reason he should inform stakeholders of his company's new actions? A Public Relations: Informing the public of the good his company is starting to do will improve the public relations of the firm and may increase business as well B Public Good/Externality: because air is a public good, it could be argued that society has a right to know what his company is doing to try to reduce its carbon footprint. C Self-Regulation: it allows his company to cover itself in the face of any potential backlash if stakeholders claim that the firm does not care about the environment or society. D Both B and C are correct answers E All of the above are correct answers

All of the above are valid reasons for reporting ESG metrics as seen in the Generation Investment Management case.

From the Generation 180 campaign, a brighter outlook on our energy future was provided. Which of the follow were of the main points in support of this thesis? A) Popular Support B) Favorable Trends in the Power Industry C) Business Buying Clean Energy D) B and C E) All of the Above

All of the above were given as reason in support of a brighter energy future. The public is noticing, new renewable energy sources are growing, and companies are looking to improve their CSR.

Oil producing companies were worried about Yasuní-ITT because.. A) They thought the oil was going to run out and needed the ITT block reserve. B) They did not want to look like "the bad guys" in the media. C) They did not want to have stranded assets on their balance sheets due to a decrease in oil production.

Although point B might have some truth to it, the ITT result would not have a large influence on this perception. Point C however is directly related to the oil infrastructure, such as pipes, drills, and other equipment, that oil companies had already deployed in and around Ecuador.

Which of the following was the main externality that farmers contributed to impacting the health of their communities in the Bay Game? A) Nutrient runoff, which puts toxic chemicals in the Chesapeake Bay's water system. B) Bad meat, which harms those that consume it. C) Air pollution, which contributed to an increased presence of acid rain in heavily effected regions. D) All of the above were explicitly stated pollutants in the Bay Game.

Although these are all examples of negative externalities, only A was explicitly mentioned as a pollutant in the Bay Game.

Within the Bay Game, we noticed a large drop-off in fish populations due to overfishing by collective farmers resulting in negative externalities. This systems thinking archetype mentioned in class that often causes unrestrained pollution and deterioration of our habitats is known as: A) Tragedy of the commons B) Success to the successful C) Growth and underinvestment D) Poor planning

Although we only mentioned it a few times briefly in class, tragedy of the commons is where share resources are misused and over used due to unnoticed consequences over the short term to specific individuals.

Brandon owns a wonderful 10 acre piece of land he calls "Brandon's Sanctuary" that has many different features to it. Which of the following correctly matches the category of ecosystem services with the service his land provides? A Cultural Services: his land has many mountains in which people can hike on B Regulating Services: There are many berries in the land that are quite tasty and people can eat them C Provisioning Services: the bees love his land. It helps to pollinate all of the crops D Supporting Services: there are so many trees that it helps make the air cleaner and removes carbon in the atmosphere.

Answer A correctly matchers the ecosystem services category with the correct benefit. Answer B is a provisioning service. Answer C is a supporting service. Answer D is a regulating service.

Brandon is a risk-adverse investor. Brandon typically invests in government treasury bonds and municipal bonds as these two entities rarely default on their debts. Cameron is a less risk-adverse investor. Cameron typically invests in start-ups which may go bankrupt. Which of the following is true? A When both Brandon and Cameron get a return on their investment, Brandon's rate of return will often be less than Cameron's. B When both Brandon and Cameron get a return on their investment, Brandon's rate of return will often be greater than Cameron's. C When both Brandon and Cameron get a return on their investment, their rate of return will often be the same. D Brandon is risk-adverse so although he is investing in government and municipal bonds, he probably still thinks the costs of this investment far exceeds the potential benefits.

Answer A is correct. One of the principles of investing is that greater risk leads to greater rewards. Because Brandon's investments have a very slim chance of defaulting while Cameron's investments have a high risk, Brandon should expect a lower return than Cameron when they get them.

The EBITDA of Company X is $300,000. Its annual depreciation expense is $100,000. Given a tax rate of 35%, what is Company X's operating cash flow? $130,000 $195,000 $230,000 $250,000

Answer C is correct. 300,000 EBITDA - 100,000 Depreciation 200,000 EBIT - 70,000 Taxes (200000*.35) 130,000 EBT +100,000 Depreciation 230,000 Operating Cash Flow

Mark has recently started an early stage venture capital fund. Which company is he most likely to invest in? A) Meetup, a new online dating app with significant traction looking to scale. B) Lemon Drinks, a healthy nutrition company with proof of concept, a management team in place, and a developed business model. C) Hello, a new social media startup with proof of concept, a solid management team, a business model and some pilot projects. D) Germs Away, a bacteria-fighting startup with proof of concept but little to no traction.

As an early stage investor, Mark would invest in Hello (option C). The company has all attributes of an early stage investments, particularly with the use of pilot projects. Option A would be an expansion investment, option B would be a seed investment, and option D would be a pre-seed investment.

Which of the following explains the benefit of an allowance versus an offset, as discussed over the Yasuni case? A) Offsets are for good publicity; allowances are to meet regulatory requirements B) Offsets are for meeting regulatory requirements; allowances are for good publicity C) Offsets and allowances are synonymous; offset is a term used in North America whereas allowance is the term in Europe D) Offsets are specifically referring to carbon markets whereas allowances can refer to markets for other environmental securities

As discussed in class, offsets are simply for good publicity. Offsets enable actors to "cheat" by paying to offset their own emissions, such as Coldplay planting trees. Allowances are devised to push actors to fit into regulatory requirements via open market securities.

What is an impact firm's best advantage with regards to recruiting? A) Impact firms are becoming prestigious assets to have on a resume B) Large labor pool eager to work in an impact business C) Mission-driven employees will accept below their market value in salary if they believe in the business/purpose D) Less stigma of harsh workplaces or tough hours

As discussed in lecture, many impact firms can retain employees who care about the cause for relatively cheap salaries

Which ecosystem service is best known for supporting a market and incentivizing behavior? A) Provisioning Services B) Regulating Services C) Cultural Services D) Supporting Services

As discussed in lecture, provisioning services are most easily quantified and traded

Bruce Wayne starts a venture capital branch of Wayne Enterprises with hopes of investing in firms that will provide new technology to help him keep Gotham safe. Bruce finds himself extremely busy balancing his vigilante duties with those of running a VC operation, so he decides to expand his operation by bringing on Alfred the Butler and Dick Grayson. Bruce offers them salaries below the market wage expecting them to negotiate up, but to his surprise, they accept! Based on what we discussed in class about impact focused VC firms, why did Alfred and Dick accept a lower wage to work at Bruce's VC firm? Hint if you're not in the loop, Bruce is Batman, Alfred is his Butler, and Dick is his sidekick (Robin). A) Alfred and Dick are friends with Bruce so they don't mind being paid less B) Alfred and Dick don't know their worth on the market C) Alfred and Dick are aligned with Bruce's crime fighting mission and they believe this VC firm will make Bruce more effective at doing so

As discussed with Better Ventures, employees that agree with the firm's mission are often willing to work for less money. Alfred and Dick who work closely with Bruce (Batman) will benefit from having Batman be better able to fight crimes, so they work for a low wage in hopes that their VC firm's investments produce better crime-fighting technology.

In the Bay Game, what was the overarching strategy to understand the system as a whole? A) Focusing on individual success B) Communication with other roles in your own state C) Communication with other roles outside of your own state D) Both B & C E) Both A & B

As taught in class, communication with other roles inside and outside of your own state was crucial for the bay to succeed as a whole

B Additionality: Farmer Joe is not planning on doing anything with the offsets that would improve the environment relative to its baseline. Because he is not doing anything additional, his forest violates the principle of additionality

Murray Energy has discovered a wetland on its property! Rather than draining it and mining for sub-bituminous coal, they realize the land could be more profitably exploited through Wetland Mitigation Banking. At a development cost of $500,000, they believe they could produce 20 total wetland credits to be sold evenly over a period of 5 years. The market price for similar credits at the moment is $90,000/credit and projected to remain stable over the sale period. Murray must also pay an upfront fee to the developers of $300,000 to go through with the project. If the discount rate of Murray Energy is 15%, what is the NPV of the investment? Assume no tax implications because the IRS and the DOE have determined it is in the public's interest that Murray Energy should not pay taxes. $ 505,647 $ 571,560 $ 614,367 $ 479,416

B Annual Net Income: Credits: $90,000 * (20 credits / 5 years) = $360,000/year Development Cost: $500,000 / 5 years = $100,000/year Upfront Fee: $300,000 NPV: Sum of: $260,000/(1+15%)^year Minus $300,000 upfront fee = $571,560

Why do the managers of a firm often get their way when voting on an issue? The board can use an executive order to override the owner's decision When owners are unable to participate in the vote, their proxy vote by default goes to the the board The board always make the right decisions, so owners tend to vote in agreement with the the board All of the above are correct None of the above are correct

B One of the difficulties of being the owner of a company, as in owning stock, is that it is difficult to organize other owners to vote in one's favor due to the sheer abundance of voters. It is so complicated for a group of owners to push their agenda, that usually the board's choice ends up winning the vote.

Which of the following would be considered a Scope 3, indirect emission, for a company? Factory leak of 3000 m3 of methane Emissions due to consumer disposal of 1 years worth of products Stationary combustion from powering a 5 story plant 20,000 hrs of mobile combustion from company trucks

B Option B is an indirect emission because the emissions from the disposal of the product are not necessarily directly related to the companies actions or activities.

Which of the below is NOT a 'pro' of carbon offsets? Assists in meeting climate commitments (comparative advantage) Gives companies access to consistent quality investments with similar verification procedures Incentivizes high-return internal reduction projects (price on carbon emissions) Funds greenhouse gas removal projects

B PROS of Carbon Offsets • Assists in meeting climate commitments (comparative advantage) • Incentivizes high-return internal reduction projects (price on carbon emissions) • Funds greenhouse gas removal projects CONS of Carbon Offsets • Organizations "buy their way out of" reducing emissions ... shirking of moral duty • Offsets are of uneven quality; multiple standards and verification procedures

Wetlands provide a critical role in the environment by mitigating flood damage and improving water quality. What category of Ecosystem Service does this function fall into? Provisioning Service Regulating Service Cultural Service Support Service

B Provisioning Services: scarce and have markets to efficiently allocate resources Regulating Services: prevent soil erosion, maintain air quality; do not generally have markets Cultural Services: recreational and spiritual use Supporting Services: nutrient cycling, soil formation, etc.

The Governance & Accountability Institute recently found that 85% of S&P 500 companies now issue corporate reports on sustainability annually. One major regulatory reason for this trend is that companies seek to: Proactively confront potential lawsuits Self-regulate and avoid more government regulation Avoid being fined by the government for nondisclosure All of the above

B Reporting on Sustainability is not required, so companies cannot be sued for their reports unless they are deliberately untruthful or they are reporting illegal activities. The main regulatory reason companies self-report is to show the government they are taking a stand early, and there is no need for extra regulation in the space. Another potential argument could be made for getting ahead of predicted regulation, but this was not an answer choice.

Husk Power systems is a social enterprise that is trying to solve the problem of widespread lack of access to power in rural India. They discovered that there is a way to generate power from husks, a resource traditionally thrown away. Husk is looking for potential impact investors. When preparing their slide deck what would be the best potential "addressable impact" of their venture to present to the investors? Number of husks that would be wasted Number of homes without power in rural India Number of people in the world without power Number of electrical wires used

B The addressable impact is how Husk would quantify the size of the problem. While the total market may be all people without power, the market their solution addresses is the number of homes without power in rural India (B)

David's Dog Toys & Judy's Jammies are two companies in a local carbon market that, under new regulation, will need to reduce their emissions. Each company currently produces 1,000 tons of CO2, but crushing new regulations require the total carbon emitted by the two companies to be reduced from 2,000 to 1,000 tons. The new marketable permits system sets the trading price of carbon permits at $1,250 per ton. If it costs David's Dog Toys $1,000 to reduce each ton of CO2 and Judy's Jammies $1,500 to reduce each ton of CO2, what is the total cost of each company to reduce to market levels? $ 625,000 $ 1,000,00 $1,250,000 $1,125,000

B Under a system of marketable permits, David's Dog Toys will choose to reduce his CO2 by 1,000 pounds, and sell 500 permits to Judy's Jammies. Cost of CO2 reduction: $1,000/ton * 1,000 tons of CO2 = $1,000,000 Revenue from sale of permits = $1,250/permit * 500 permits = $625,000 Total Cost to David's Dog Toys = $375,000 Judy's Jammies will choose to purchase permits from David's Dog Toys rather than reduce CO2 herself. Cost of permit purchase = $625,000 Total Cost to the System Judy's Permit Purchase = $625,000 David's Net Cost = $375,000 Total cost = $1,000,000

The Nature Conservancy is dedicated to protecting Earth's natural resources and beauty. It owns 2000 acres of wetlands in Virginia, and is willing to keep its wetlands at a price of $100,000 per credit. This price could change at any time, due to changing regulations. If no other wetland credits are available in the market, then developers wishing to build on top of wetlands would have to purchase credits from the Nature Conservancy. In this context, this is known as a(n) Credit sales price In-lieu fee Conversion fee Regulatory fee

B "The in-lieu fee allows a developer to pay a fixed fee to the relevant agency (in this case, the Nature Conservancy) instead of purchasing credits to offset a proposed wetland loss, and set an effective maximum cap on the trading price of credits within a region," from the Wetlands Banking case.

How are the processes of valuing an asset and capital budgeting similar? Both asset valuation and capital budgeting involve estimating value creation based on the IRR implied by a project or asset. Both asset valuation and capital budgeting involve computing the present value of an assets cash flows to figure out whether the benefits/value created exceed the cost of buying that asset. Both asset valuation and capital budgeting involve using historical prices and cash flows to estimate the future value and net positive effects of purchasing an asset. These two share no similarities.

B "To make a capital budgeting decision, we need to compare the cost of the project to the value the project will provide the firm. To determine the value of an asset, we need to compute the present value of the cash flows the assets is expected to generate over its life. This computation of value is the same as was discussed in the section about valuation of financial assets—that is, bonds and stocks. Once the value of the asset is determined, the firm can determine whether to invest in the asset by comparing its computed value to how much the asset costs to purchase."

A large chemical firm is cleaning a nitrogen polluted river used by farmers for many miles downstream for a one-time outlay of $50,000. The net benefit of cleaning for each farmer is $3,500. If dead-weight cost is 15%, and drop-off and attribution costs are both 10%, what is the minimum number of farmers for this project to help that would render a breakeven SROI of 0%? (Round up to next largest whole number) 17 22 27 28 50

B $3,500 * 65% = $2,275 $50,000/$2,275 = 21.9, which rounds to 22

It's 1908, and the U.S. government just ruled that Andrew Carnegie's U.S. Steel must reduce its carbon emissions. What type of credits could Carnegie choose to purchase on the open market, instead of reducing emissions internally? Voluntary Emissions Reductions Participate in the Steel Mill Cap & Trade Market Certified Emissions Reductions

B A & C are both offsets, while B is an allowance. Companies use allowances when they are mandated by an authority to reduce emissions.

What is the first step in calculating an organization's carbon footprint? Identify stakeholders of the report Define the scope of the analysis Use an online calculator for estimations Create a flow diagram for life-cycle analysis

B According to GHG protocol, the first step in calculating an organization's carbon footprint is to define the organizational and operational scopes of the analysis.

The NBA is attempting to measure the SROI from donating the rubber of its game-used basketballs to build tracks in underprivileged communities. They wish to first measure the SROI of the projects it has already undertaken. What type of SROI best fits this goal? Descriptive Evaluative Forecasting Predictive

B Attempting to measure past results of SROI is Evaluative SROI. Predicting future results of SROI is forecasting. Predictive and Descriptive SROI do not exist.

The Easter Bunny would like to invest in ComputerCo. ComputerCo is a large computer manufacturing company that provides high-quality, high-performance computers. Historically, ComputerCo's computers have been very energy-intensive, and the company would like to improve the computers' energy efficiency due to rising shareholder concerns about the company's impact on the environment. The Easter Bunny is willing to invest in the company on the condition that ComputerCo quantifies and reports its year-over-year improvements in energy efficiency. Given only the information above and nothing else, this type of investment qualifies as Impact investing ESG investing Venture Philanthropy Responsible Investing Traditional Investing

B ESG investing puts quantifiable metrics to environmental, social, and governance factors. This is correct. Impact investing takes investing a step further, and is done with the intent to create a measurable impact and financial return.

If a startup company has a feasible business proposal, a management team, and a relatively comprehensive business plan, but has not had any tested products yet, which one of the following stages of financing is the MOST appropriate one for the owners of the startup company to apply for? A) Pre-seeds B) Seed Stage C) Early Stage Financing D) Expansion Stage Financing E) None of the above

B Financing process of Start-up: Pre-seed: Only has the proof of concept Seed Stage: Has the proof of concept, management team, and business plans Early Stage Financing: Testing products and pilot projects Expansion Stage Financing: Growing account receivables and inventories, and VC evolves from supportive role to a more strategic role

What is the correct formula for how to calculate free cash flows? EBIT(tax rate) + (depreciation - amortization) - (change in net working capital) - (capital expenditure) EBIT(1- tax rate) + (depreciation + amortization) - (change in net working capital) - (capital expenditure) EBIT(1-tax rate) + (depreciation + amortization) + (change in net working capital) - (capital expenditure) EBIT(tax rate) + (depreciation - amortization) - (change in net working capital) + (capital expenditure) EBIT(1-tax rate) + (depreciation + amortization) + (change in net working capital) - (capital expenditure)

B Free cashflows are calculated by first getting the EBIT multiplied by one minus the tax rate. Depreciation and amortization are then added to this value and the change in NWC and capital expenditures are then deducted. The final value is the free cash flows of a company.

Social Return on Investment is a framework based on generally accepted accounting principles used to help manage and understand an organization's social, economic, and environmental outcomes. Which of the following is the third (of five) steps in this framework? Establishing the Impact - having collected evidence on outcomes and monetized them, those aspects of change that would have hapened anyway or are a result of other factors are eliminated from consideration (deadweight loss, etc.) Evidencing Outcomes and Giving Them a Value - This stage involves finding data to show whether outcomes have happened and then valuing them. Mapping Stakeholders - it is important to have clear boundaries about what the SROI will cover, who will be involved in the process, and how they will be involved. Calculating Return - This step involves sharing findings with stakeholders and responding to them, embedding good outcomes and processes, and verifying the report. Mapping outcome - by engaging stakeholders, you will develop an impact map or theory of change that shows the relationship between inputs, outputs, and outcomes.

B Mapping stakeholders > Mapping outcomes > Evidencing outcomes and giving them a value > Establishing the impact > Calculating return (see Dalmia Bharat case, exhibit 4).

Mike regularly visits his local gym, Buff Bodies, but is reconsidering his membership now that Buff Bodies is increasing their membership fees from $40 to $45 dollars per month. While searching for alternative options, Mike saw a set of fitness equipment on sale at his local athletics store for $2,000. The equipment is used, and Mike estimates that it will last another 6 years. What is the NPV of purchasing the used fitness equipment? Assume a 10% discount rate. $91 $352 ($1,804) $422 ($1,826)

B NPV: -Future Cash Flows= $540/year for 6 years ($45/month x 12) -PV of Future Cash Flows=$540/(1+0.1)^1+...$540/(1+0.1)^2+... -Initial Outlay=$2,000 -Sum of PVs of Future Cash Flows - Initial Outlay=$352

Norms-based Screening is a type of Ethical-Negative Screening True False

B Norms-based screening is a type of Environmental/Social Negative Screening

McIntire Ventures is a new fund hoping to incorporate some type of socially responsible considerations into their fund strategy. The fund has decided that their goal is to align with international norms and minimum standards on ESG metrics (but the primary goal is to seek high returns). What type of SRI strategy is McIntire Ventures likely to adopt? Sustainability-themed investing Norms-based screening Best-in-class screening Impact investing

B Norms-based screening is the screening of investments against minimum standards and business norms.

Which one of the followings is a common misperception of socially responsible investing (SRI)? SRI does not always result in a lower return SRI investing includes only negative screening SRI investing is consistent with fiduciary responsibility SRI involves both public and private equity investments

B SRI: Common Misperceptions: - Sustainable, responsible, and impact investing (SRI) results in lower returns - SRI investing includes only negative screening - SRI involves only public equity investments - SRI is not consistent with fiduciary responsibility

Suppose you are working for a successful firm with a specialty in environmental development. You, as facilities management, have decided to adopt some of the same technologies you invest in, particularly new solar panels, and a smart A/C system. The solar panels will cost your firm $200,000 while the smart A/C system will cost you $50,000. Your boss wants to know if he can claim any tax credits for these purchases and you find there there is a 25% ITC on the solar panels and 5% ITC on the A/C. Assuming a tax rate of 30%, how much money should your boss claim in tax credit for these purchases? $28,423 $52,500 $17,625 $32,250 $18,750

B Tax Credits for the Solar Panels will be 200,000 * 25% which is $50,000. The ITC (5%) for the $50,000 A/C unit will be $2,500. Thus, the total tax credit shall be 52,500.

Which of the following is not a major disadvantage of command and control methods of mitigation? Subject to the political process Legal uncertainty No incentive to go beyond compliance Limited flexibility None of the above.

B The main advantage of command and control is its legal certainty-- it sets an exact legal allowance for carbon emissions.

BluthCorp is a real estate development firm focusing on commercial developments. CEO George Bluth loves money and is willing to invest in anything and everything that will generate high positive returns, including stocks in tobacco, alcohol, and crude oil companies. George's son, Michael Bluth owns BluthCorp stocks and is troubled by these investments. At shareholder meetings, he votes for divestment in sin stocks. His actions can be categorized as - Constructive Engagement Active Corporate Governance Shareholder Advocacy

B • Active corporate governance - voting your shares • Constructive engagement - voting + talking to the company. ○ "I think you could do more about..." • Shareholder advocacy - "nuns with a mission" ○ Confrontational - bringing up topics they want to see change in ○ Less about the returns; more about changing the way the company acts

Citibank is looking to invest in Tricia's Tree Town. This start-up company seeks to reduce carbon levels in cities by creating more green spaces by planting trees on City Sidewalks and growing moss on the walls of skyscrapers. If Citibank measures the social impact of carbon reduction alongside the financial returns it will receive from the investment, what type of investment would this be classified as? ESG Investment Impact Investment Sustainable Investing Venture Philanthorpy Responsible Investing

B ESG Investment puts a financial value on different factors Impact investing measures the social impact of investments alongside financial returns Sustainable Investing focuses on ESG leaders and in sustainable sectors (similar to ESG) Responsible investing: screening out investment types

Which ESG Screening Strategy is described below? "In our portfolio, we exclude firms or sectors falling short of our absolute environmental, social or economic standards--no exceptions. All of these standards meet or exceed the expectations of internationally accepted standards." Ethical Negative Screening Environmental/Social Negative Screening Norms Based Screening B and C All of the above

B & C

Lisa's social enterprise is focused on providing skills to booster employability for homeless and veterans in the city of Chicago. When reporting impact, she lists that over the past year, there has been a 10% increase of homeless and veteran individuals that have obtained jobs in Chicago. What is wrong with this measure of impact? A) Lisa did not ask what outcomes her intended audience desires. B) This could involve deadweight- outcomes that would have happened even if Lisa's enterprise hadn't intervened. C) There is a lack of stakeholder mapping, D) None of the above

B Lisa should include the number of homeless and veterans that obtained jobs because of her program, not in the entirety of Chicago.

Which of the following is not a principle of investing? Greater rewards require greater risks. The payback period of a safe investment must be shorter than 18 months. Money today is worth more than money tomorrow. The gains from the investment outweigh the pains.

B is correct - see slide 5, week 2

Why can't the CEO of BlackRock choose to divest the company's holdings from investments in "sin stock" companies, like weapons manufacturers and tobacco producers? BlackRock does not want to lose the dividends it receives from these profitable companies. Most of Blackstone's holdings are from its index fund products, which are simply tracking companies that lead by criteria such as market capitalization. Divestment is too difficult for a company with such high levels of investment in these companies. Lobbyists make it difficult for BlackRock's CEO to proceed with divestment.

B is the correct answer from our class discussion. The BlackRock CEO can't arbitrarily eliminate companies from an ETF that tracks an index like the S&P 500 or Dow Jones Industrial Average.

Larry Fink's annual letter to CEOs rippled throughout the financial community and called for a new model for corporate governance. Which of the following best describes the transition that Fink is advocating for? Voluntary ESG Reporting -> Mandatory, Standardized ESG Reporting Shareholder Capitalism -> Stakeholder Capitalism Finance-First Investments -> Impact-First Investments Executive Efficiency -> Executive Diversity

B is the correct answer. In his annual letter to CEOs, Larry Fink is calling for a newer model of corporate governance that emphasizes management & consideration of all stakeholders (communities, the environment, etc.) as opposed to shareholders only. Fink advocates for more diverse boards, but this is only only piece of his ideal model of "stakeholder capitalism."

Why are many wetlands banks owned by counties? Counties can afford to make these investments by raising the tax rate Some counties already own natural wetlands so they stand to make guaranteed returns by using the land as mitigation banks Wetlands status must be approved by the Army Corps of Engineers, so as public entities counties have an advantage when requesting the approval of Wetlands Status More and more Americans are growing concerned with climate change and are pressuring their elected officials into making environmentally friendly decisions

B is the correct answer. As we discussed in class, natural wetlands require very little investment to be converted into mitigation banks, therefore counties that own natural wetlands need only get approval of the Wetlands Status before the profits starts rolling in.

Kyle Guy Manufacturing (KGM) is a rubber exporter in the Charlottesville area. For their operations, which of the following would be considered Scope Two GHG Emission? KGM's emissions from a company-owned smokestack Emissions related to their power purchased from Dominion Emissions generated from commercial planes taken during KGM's yearly company outing to Bennettville

B is the correct answer. Scope 2 emissions are defined as: "GHG emissions from the generation of purchased electricity consumed by the company" Answer A describes Scope 1 emissions, and Answer C describes Scope 3 emissions

What is the purpose of drop off when conducting an SROI analysis? A) The drop off helps calculate the difference in impact that is lost each year when performing an evaluative SROI analysis B) The drop off helps calculate the difference in impact that is lost each year when performing a forecasting SROI analysis C) The drop off accounts for the fact that some of the impact would have happened anyway D) The drop off accounts for how much impact was caused by other firms and initiatives

B is the right answer because drop off helps predict how much benefit will be accrued in the future. Evaluative SROI's typically don't need drop-off because the data for each year is already available. Choices C and D refer to dead-weight and attribution respectively.

Vietnam Finance specifically targets workers making between 150-400 USD from large factories (more than 1,000 employees) across southeast Asia, with a primary focus in Vietnam. This would best fall under which category of the business model canvas? A) Key resources B) Customer Segments C) Value Propositions D) Cost Structure E) None of the Above

B) Customer Segments

The increase in supply of sustainable land in the Bay Game simulation caused a decrease in price for sustainable beef and dairy. Which of the following is a parallel scenario in the case of carbon as discussed in relation to the Yasuni case? A) Potential for oil prices to be higher than carbon B) Potential for overcrowding of carbon market C) Potential for lack of communication among countries D) Potential for increased demand for carbon E) None of the above

B) Potential for overcrowding of carbon market In relation to the Yasuni Case we discussed that the price for carbon could drop if the Yasuni credits were to flood the market. This is a similar challenge to what we experienced in the Bay Game when too much sustainable beef/dairy production was released into the market and prices dropped.

What is an advantage of having fewer but more concentrated investments in pre-seed companies as compared with more, smaller investments in more developed companies? A) It is less risky B) You will receive a larger ownership stake and have more control to change and direct the company C) Less investments takes less time D) None of the above

B) You will receive a larger ownership stake and have more control to change and direct the company

What is not a reason that most companies choose to take part in ESG reporting? They would rather auto-regulate themselves than have a government agency come in and impose strict regulations on them Tax saving purposes Good PR Hiding any negative things they are doing with lots of positive ESG reporting as a distraction All of the above are reasons companies engage in ESG reporting

B. Companies don't receive financial benefits from ESG reporting as it is neither required nor financial information. Any tax credits would be included on the traditional financial statements.

What is a difference between The Clean Development Mechanism (CDM) and the Joint Implementation (JI) offset programs within the Kyoto Protocol? A) The JI program requires you to trade ERUs and CERs together while the CDM program allows only ERU trade B) In the JI program, the host country is not a developing nation unlike the CDM program C) The CDM program requires Annex countries to develop sustainable mechanical instruments for developing nations D) There is not a difference between The Clean Development Mechanism and Joint Implementation program

B. Joint Implementation works similarly to CDM, with the exception that the host country is not a developing nation but another Annex I country

Bill's Bombastic Burgers (BBB) is a multinational fast-food chain that aims to surpass its peers in regards to ESG factors. BBB recognizes that its food is unhealthy and that raising cattle is not the best thing for the environment, but it hopes that by being as sustainable as possible it can attract a user base that wants to enjoy a good burger without feeling guilty about buying into a shady corporation that cuts corners. Which of the following investment methods would most likely include BBB in its portfolio? Impact Investing Negative Screening Best in Class Sustainability Themed Investing

BBB wants to surpass its peers and be as best as it possibly can despite that their product comes with the inherent downside of being unhealthy and bad for the environment. These are elements of a Best in Class investing methodology. Impact investors wouldn't buy BBB because the firm is not tied to making an impact beyond making the process of selling burgers as harmless as possible. Negative screening investors wouldn't buy BBB because the firm is bad for the environment and unhealthy. Sustainability themed investors wouldn't buy BBB because the cattle industry is not very sustainable. However this could change if BBB used artificial meat

Mike wants to build a new factory. However, this new factor is expected to emit a lot of carbon dioxide in the atmosphere. To combat this, he decides to invest in a carbon reducing project elsewhere in the world. If Mike only gets the credit if the project he invests in improves the environment over a baseline, how is his offset being evaluated? Conditionality Additionality No Leakage Permanence

Because Mike is being evaluated over the increase in benefit that the project does, the answer is additionally.

Back in 2016, Mary started a reforestation program in Ecuador called Plantemos. Initially the forest had 100,000 trees Furthermore, thanks to forest protection laws, the forest was projected to grow by 15% at the end of 2018. By January 1st 2019 the forest had grown 30%. In her website, Mary claims that the Plantemos project was responsible for all the forest growth. Her friend Pedro points out that she didn't include deadweight loss in her calculations. What was the true yearly average contribution - in number of trees- made by the Plantemos initiative? A 30,000 trees B 5,000 trees C 15,000 trees D 20,000 E 25,000

Because of protection policies the forest was already going to grow by 15% (15,000 trees) at the end of 2018. Therefore Mary's initiative only added 15,000 trees over a 3-year period. This means that on average the Plantemos initiative added 5,000 trees per year.

Steven is a fisher that wants to increase his wellbeing by decreasing the importance of economic well-being, and increasing environmental and social well-being, which action would he take? A) Slow down his fishing efforts so he can let the fish population grow B) Donate whatever fish he does not sell to the local shelter so they can eat it C) Hire more fishermen to work with him, so as to increase fishing efficiency and profits. D) None of the above E) Both A and B

Both A and B sacrifice profits to increase environmental and social well-being

Which of the following is FALSE about the similarities and differences between traditional NPV analysis and SROI analysis? a) The discount rate for traditional NPV analysis is the cost of capital for a firm, while the discount rate while SROI usually uses an estimated discount rate, which is typically recommended to be around 3.5%. B) NPV analysis uses currency as its unit for analysis, while SROI analysis can use any type of unit, as long as it is consistent throughout the analysis. C) Both traditional NPV analysis and SROI analysis use sensitivity analysis to determine how differences in inputs, assumptions, and other factors impact the final results of the analysis. D) Traditional NPV analysis has the final calculation of the Net Present Value of the project. SROI analysis uses an initial SROI ratio of (Present value/value of inputs) or the net SROI ratio of (NPV/value of inputs).

Both traditional NPV analysis and SROI analysis use currency as its unit for analysis. SROI will quantify non-financial factors in order to maintain the consistent and easily understood unit of currency.

Brandon is a multimillionaire because he is CEO of a manufacturing firm. In regards to his mix of overall well-being, it is heavily focused on his economic well-being. His environmental and social well-being plays a very small part in this mix. Currently, he believes that his economic position could be better than it currently is and that his social well-being and environmental-wellbeing are too high. Which of the following is an action he would take to perfectly align his well-being? A Sell his products to low-income families at discounted prices to increase sales for the company. B Create more eco-friendly packaging for his product as he believes that this will increase sales for his company. C Fund the cleaning of a river because it would be good public relations for the company and increase sales. D All of the above are actions Brandon would take E None of the above are actions Brandon should take

Brandon should take none of the actions above if he believes his well-being goals are not aligned. He would only want to take actions that would improve his economic well-being or decrease both his social well-being and environmental well-being. Choice A would be helping both economic well-being and social-well being. Choice B would be helping both economic well-being and environmental well-being. Choice C would be helping both economic well-being and environmental well-being.

What is the single most important factor needed to save the bay in the Bay Game? A)Communication within and between regions B)Reducing nutrient runoff by as much as possible C) Developing the least amount of land possible D) Opting for the most sustainable measures for all roles E) Maximizing economic well-being

By communicating between roles and regions, players can set policy that will benefit all stakeholders while still improving bay health. Nutrient runoff, while it is the leading cause of declining bay health, does not need to be completely eliminated. Similarly, sustainability measures and limiting development help improve bay health, but without coordination players will play to maximize their own well-being, and not necessarily make the sacrifices necessary to save the bay.

Which of the following best describes offset additionality? Whether or not repeated payments are needed for the offset to be effective How the offset increases momentum for additional climate progress Actions improving what would have occurred were the activity not to take place The ease with which offsets can be bundled and evaluated

Which of these is the correct order of the stages of impact investment? Proven Impact, Implied Impact, Optimized Impact Implied Impact, Optimized Impact, Proven Impact Implied Impact, Proven Impact, Optimized Impact Optimized Impact, Proven Impact, Implied Impact

A group of Rick and Morty fans decided that McDonalds was failing to maximize shareholder value by not including Szechuan Sauce as a standard menu item at locations across the US. If these fans decided to hold a rally at the annual shareholder meeting and motivate shareholders to support 'Szechuan Suffrage' by voting the sauce's inclusion on the annual ballot, what type of Corporate Engagement would these confrontational actions qualify as? Active Corporate Governance Constructive Engagement Shareholder Advocacy

C Active Corporate Governance: vote your shares Constructive engagement: vote + feedback Shareholder advocacy: more confrontational, pressuring management actively for specific areas

Professor White is interested in buying a vacation home on the beach, but is worried that climate change will potentially threaten this expensive investment. One home he is interested in is built on stilts to avoid flooding. The owner of this house also claims that the home will automatically deploy a thick, inflatable rubber lining to turn the house into a house-boat if the stilts happen to break away. The stilts and 'house boat' represent what type of strategy to combat climate change? Prevention Mitgation Adaptation

C Adaptation means adapting to the changing environment based on new climate conditions. The home-owner realizes that climate change increases flood risk, and has adapted his house with stilts and rubber lining to protect his investment.

Green Fund is an impact investor based in Charlottesville. The company is evaluating 4 different potential investments suggested by the firm's founder's cousin, who is an esteemed analyst at 0.1% Bank in NYC. If Green Fund is a finance-first impact investor, which of the 4 options are they most likely to invest in? Nebulous Vape Shop, evaluated at 20% returns annually for 5 years. Solar for All, which offers low-interest financing plans for solar panels, evaluated at 5% returns annually for 5 years Carbon Captive, which sells innovative carbon capture devices, evaluated at 15% returns annually for 5 years

C Carbon Captive sells a service that will both positively impact the environment, while still providing high returns among the options listed

Somewhat surprisingly, major oil companies such as Exxon and BP publicly support carbon pricing. What might be a financial reason behind this political support? Carbon pricing allows market-based solutions to preventing climate change, instead of perceived burdensome regulation Carbon pricing allows companies to more accurately price risk in a transitioning energy economy Both A & B It's surprising because it isn't true! There's no way oil companies would support carbon pricing!

C Carbon pricing gives certainty to financial markets in how fossil fuel companies will have to deal with climate change. This allows the companies to price risk more easily and they avoid more government regulation as well.

Credit Suisse's RIIF differs from Al Gore's Generation Investment Management in that: Credit Suisse uses negative screening on companies that won't be part of the sustainable future, while Generation Investment Management uses negative screening on companies that don't have a social or environmental bottom line. Credit Suisse is an impact investor, focusing on companies that create a measurable impact and financial return, while Generation Investment Management is primarily concerned with companies who use ESG metrics. All of the above There are no differences in investing strategies; both will invest in any company that preserves the environment in some way.

C Screening • Credit Suisse ○ Negative screening on companies that won't be part of the sustainable future • Generation Negative screening on companies that don't have a social or environmental bottom line CS is an impact investor, while Generation is an ESG investor.

Carbon dioxide is responsible for the failure of oyster farming operations due to ocean acidification making it difficult for oysters to survive. Researchers are investigating a technique to reduce the amount of CO2 in the atmosphere by using waste tailings, the left over rocks from a mining operation, to capture carbon dioxide from the air and store it as harmless solid carbonate. Assume the research is successful. If mining companies pay for this CO2 capture technique, it would be an example of a _____. If oyster farmers pay for the technique it would be an example of a ______. beneficiary pays model; beneficiary pays model beneficiary pays model; carbon offset carbon offset; beneficiary pays model carbon offset; carbon offset

C The mining companies are paying to offset the CO2 generated by their operations, whereas the oyster farmers are paying to maintain the provisioning service provided by their oysters.

The City of Charlottesville is considering a partnership with TJHousing, in which buildings located south of Belmont would be converted into 30 affordable housing units. The initial outlay on part of the City of Charlottesville is $250,000, and the housing units are forecasted to last 50 years. The objective of this investment is to move lower-income families of 3-5 off the streets, hopefully helping these residents eventually break out of their poverty cycles. In using Social Return of Investment to capture the value of this investment, which of the following would be the most suitable metric according to this objective? Household income of renters. Monthly rent (or another metric for affordability). Number of low-income Charlottesville residents moved into these housing units after 2 years. Breakeven time in months, for the initial outlay of $250,000. Improvement in health metrics, such as BMI, stress level, and heart rate during time of renting.

C The prompt states explicitly that the objective is to move lower-income Charlottesville residents into housing. While the other answers may be closely related to economic improvement and wellbeing, only C is explicitly stated.

What percentage of Earth's water is (1) fresh and (2) readily potable? 10% fresh, 5% potable 33% fresh, 5% potable 3% fresh, 1% potable 5% fresh, 2% potable

C According to Lloyd's Global Water Scarcity pdf, roughly 3% of Earth's water is fresh. Of that 3%, only 1% of the fresh water is readily usable. In the footnotes, Lloyd clarifies that the rise of artificial desalination has introduce a greater supply of available freshwater but at a capacity too low to significantly affect global freshwater availability.

Which of the following is NOT an advantage of Environmental Markets? Economic efficiency because they achieve the greatest improvement at lowest cost Quantity instrument because they fix the amount of allowable harm Allows all investors to offset their pollution and emissions which leads to net zero environmental damage Promotes innovation because manufacturers are incentivized to reduce pollution in unique, efficient ways

C Advantages of Environmental Markets Quantity instrument • Fixes the amount of allowable harm Promotes innovation • Manufacturers are incentived to reduce pollution Economic efficiency • Achieves greatest improvement

Mitigation banking refers to: Financial services firms seeking to mitigate increase in their carbon footprint Developing nations seeking to invest in overseas offset markets Activity regarding aquatic resource areas that have been established for the purpose of providing compensation for impacts to aquatic resources Investment institutions which raise funds to mitigate the environmental impact of the institution's other investments

C C is the correct definition of mitigation banking, based on our wetlands mitigation banking case.

Why do small VC funds like Better Ventures struggle to raise capital? A) They are required by law to raise money from at least 50 different investors B) High net worth individuals are not interested in venture capitalism due to the long term nature of the payout C) Large pension funds need to invest at least $50 million while not owning more than 10% of a fund D) Small venture funds do not have the depth of talent that the large funds have therefore they struggle to win capital

C Large pension funds need to invest at least $50 million while not owning more than 10% of a fund preventing them from investing in these small funds. This is because it is not worth the time and effort for these companies to invest time in the small funds that will barely be a drop in the bucket

McIntire is developing a new app to help connect students with employers on grounds. They have set aside $8,000 in funds to develop this app, which will notify students before class when an employer in their desired field will be visiting so that they can prepare before heading to class. The hope is that using this app will lead to more internships and jobs offered to McIntire students at these visiting companies. What are the leading indicators of this project? What is the impact? A The leading indicators are the $8,000 put into app development and the number of students who download the app. The impact is the number of offers accepted by McIntire students who used the app and attended these company visits, minus the historical average of offers accepted by students who attend these company visits. B The leading indicators are the number of students who download the app and the number of students who attend the company visits. The impact is the number of offers given to McIntire students who used the app and attended these company visits. C The leading indicators are the app's notifications to the students and the number of job/internship offers given to McIntire students from the visiting companies. The impact is the number of offers given to McIntire students who attended these company visits, minus the historical average of offers received by students who attend these company visits.

C Leading indicators are the venture's primary activities (i.e. the app's notifications to students) and the outputs or measurable results of the venture (i.e. the number of offers extended to students). The impact of a venture is what changes in the social system (i.e. the number of offers extended to students who made an impression at these company visits) minus what would have happened anyway (i.e. historical average of offers extended to students who attend company visits).

Holy Shirts and Pants is a social impact clothing business with a 14x multiple on earnings of $20 million dollars. In five years, they will maintain their P/E multiple with earnings of $50 million. Assuming an 8% hurdle rate, what is the real value of a $10 million investment five years from today? $10 million $13 million $17 million $50 million $140 million

C Lightsaber is a startup that hopes to be a leader in the sustainable electricity industry. While the product uses solar technology to power lightbulbs, the entire process creates more packaging and processing waste than normal lightbulbs. What type of offset quality does this violate?

What is systems thinking and how did it relate to the Bay Game? A) Systems thinking is a philosophy in which decisions are made based on how things unfold over time and how different stakeholders are connected directly and indirectly. In the Bay Game, we looked at how decisions made by the farmers, watermen, developers, and regulators collectively affected the Bay health over time. We saw how the maximizing of ones economic, social, or environmental well-being affected that of another and the overall bay health. B) Systems thinking is a philosophy in which decisions are made based on weighing the costs versus the benefits and choosing the decision that maximizes short term benefits. In the Bay game, each role player decided to maximize current well being by either farming/producing/developing as much as possible. C) Systems thinking is a philosophy in which decisions are made by breaking things into component pieces, fixing symptoms of an issue, and belief that an organizations are organized and predicable. In the Bay Game, we looked at how decisions made by the farmers, watermen, developers, and regulators individually affected the Bay health over time. For example, farmers in PA had the largest nutrient run off and only they could affect Bay health. Other stakeholders could not do or say anything to change this.

C Link to defining systems thinking: https://thesystemsthinker.com/making-the-jump-to-systems-thinking/ and https://www.youtube.com/watch?v=V38HrPnYkHI. Inclass, we covered systems thinking and how the decision of one person connected with the overall bay health over time.

All of the following are disciplines in which we can attempt to mitigate environmental issues. Which of the categories does Costa Rica's Environmental Services Payment (PSA) fall under? Description of PSA: Financial compensation is paid to forest and forest plantation owners in exchange for mitigation of greenhouse gas emissions, protection of water supplies, biodiversity and beauty of natural landscape Cultural transformations Legal actions/restrictions Business and market-based strategies None of the above

C PSA was brought up in our discussion of ecosystem services, which involve placing an economic value on ecological functions, and engaging natural resources in various payment/trading schemes (public payments, self organized deals, or open trading). It is a business solution an environmental issues. (Discussed in Lecture 4/23)

What are some weaknesses of the using the payback period method to evaluate an investment decision It is hard to calculate It is hard to assess different options with this tool It does not take in account anything after the initial investment is paid back There are no weaknesses to this method

C The payback period can be a quick, easy tool to help evaluate a decision but ultimately is limited because it only takes into account how quickly the initial investment is paid back

Social Return on Investment is a framework based on generally accepted accounting principles used to help manage and understand an organization's social, economic, and environmental outcomes. The framework contains five steps including: (a) Establishing the Impact (b) Mapping outcome (c) Evidencing Outcomes and Giving Them a Value (d) Calculating Return (e) Mapping Stakeholders Which of the following has the correct order of the five-step framework? (a) - (b) - (c) - (d) - (e) (c) - (a) - (d) - (e) - (b) (e) - (b) - (c) - (a) - (d) (e) - (c) - (a) - (b) - (d)

C the correct order is (e) Mapping Stakeholders > (b) Mapping outcome > (c) Evidencing Outcomes and Giving Them a Value > (a) Establishing the Impact > (d) Calculating Return

Ned decided to invest in a hydroponics system for his backyard while he's in grad school for three years. He plans to sell what he grows to colleagues, as well as a couple smoothie businesses on the corner. It costs $1750 to purchase and install the materials and equipment. He expects $500 annual profit for the first year, and $900 annual profit for the two following years. After graduating, he expects to sell the materials for $300. What is the Internal Rate of Return?

C - 19% A - 500 annual profits for each year gives this IRR. B - This is the IRR calculated if you do not account for selling the materials for $300. D - 900 for each year gives this IRR.

Walter has 50 acres of land that he wants to use to sell offsets to carbon emissions. He has the land surveyed and verified as a suitable candidate to produce carbon offsets. In order to capture more greenhouse gases above his baseline carbon recapturing, he uses chemical fertilizers to help more plants grow on his land. However, this fertilizer seeps into a local river and proves harmful to the fish population there. All the fish die and another species goes extinct. Which aspect of offset quality has Walter failed? A) Conditionality B) Additionality C) No Leakage D) Permanence

C - Improving the amount of plantlife able to recapture carbon on Walter's land has caused damage in another region. Quality offsets cannot allow leakage in this way, and so the use of this dangerous fertilizer has compromised Walter's carbon offsets.

DirtyPaper is a small, regional, U.S.-based paper manufacturer based in California that has seen declining profits in recent years due to an increased use of laptops and tablets. DirtyPaper's main product is high-quality paper made from high-quality hardwood trees. Competitor GreenPaper wants its practices to align with its values, and has recently purchased carbon offsets in hopes of becoming carbon neutral. These carbon offsets pay DirtyPaper $500 for each acre of hardwoods it doesn't cut down. This amount actually turns out to be more than what DirtyPaper would profit by cutting down hardwoods and processing them into paper, so they agree. John, CEO of DirtyPaper has an idea to boost profitability even further, responding to shareholder pressures. It will agree to the terms of the carbon offsets, and in addition, will cut down hardwood trees in neighboring state Oregon. The issue in this case is - A) Additionality B) Permanence C) Leakage D) Compliance E) Allowance

C - Leakage • Additionality - improving over a baseline of what would've occurred anyways • Leakage - when an improvement in one region is offset by damage in another ○ e.g. cutting down trees on a neighbor's property • Permanence - existing in perpetuity* (VCS standard 30 years); implies need for continuous payments

One large part in the debrief in the Bay Game was discussing the system of supply and demand. Which of the following does not correctly apply this system? A If there is a sudden shift and people demand more water, the price of water purification will increase, assuming the same level of supply. B If there is a sudden shortage of crabs, the price of crabs will increase, assuming the same level of demand. C If there is a lot of land to be developed but people develop a sudden distaste for the area and do not want to move there, the equilibrium point price of the land will increase to compensate. D All of the above correctly applies the law of supply and demand.

C does not correctly apply the law of supply and demand. If there is a sudden decrease shift in people wanting to move to the area, this shifts the equilibrium point down the supply curve. In turn, The equilibrium price point of the land is less then where it was originally.

Which of the following best explains why most of Better Ventures' limited partners were individuals or family offices? A) Individuals & family offices are more likely to prefer impact over financial return B) Individuals & family offices can make investment decisions relatively unencumbered C) Institutional investors are unable to invest in smaller venture funds D) Institutional investors require disclosures on financial performance that aren't available in newer venture funds

C is the correct answer. While A, B, and D may be correct is some instances, this generally differs on a case by case basis. Option C is always true. According to the case, in 2015 the largest investors into U.S. VC funds based in North America were pension funds (25%), foundations (15%), and endowments (14%). Large pension funds (e.g., CalPERS) need to invest at least $50 million per fund, while at the same time, not own more than 10 percent of the fund. This stipulation disqualifies newer and smaller funds such as BV.

The tools used for mitigating negative externalities include negotiation, command-and-control legislation, taxes, and market-based instruments. Which of the following includes incorrect information for the following tools and their attributes? Negotiation: This tool works best with a limited number of people. The different parties will negotiate on how to deal with the negative externalities each party contributes. Command-and-control legislation: This tool uses legislation as a means to limit negative externalities. While easy to administer, it is subject to the political process and creates no incentive to go beyond compliance. Taxes: This type of tax is imposed on goods that are considered negative externalities. It is considered a quantity instrument because it sets a definite quantity of tax imposed on the good. Market-based instruments: Otherwise known as cap-and-trade. It was used as a way to reduce sulfur dioxide emissions in the US. It takes advantage of differing marginal abatement costs through the trading of allowances.

C is the correct answer. Taxes are considered a price instrument, not a quantity instrument, since the price of the tax (either too high, too low, or just right) determines its effectiveness in reducing negative externalities.

Goliath National Bank is a top-10 U.S. bank based in New York City. Recently, the bank has come under shareholder pressure, pushing the bank to decrease its large environmental footprint (specifically its CO2 emissions), mainly resulting from its energy-inefficient buildings built in the 1950s and extremely high levels of employee travel. The bank plans to begin by renovating its headquarters, aiming for LEED certification and reducing employee travel by allowing entry-level analysts to teleconference instead. However, these measures are not enough to appease shareholders, and management decides to purchase certificates, investing in sustainable projects elsewhere. Which type of carbon bonds would Goliath National Bank most likely purchase? A) Carbon Allowances B) Carbon Offsets

Carbon Allowances, such as cap & trade, aid a company in meeting regulatory requirements. Based on the prompt, GNB is responding to shareholder demands, not environmental regulations. Carbon Offsets, such as CERs and VERs give companies a "reputation benefit." These is more likely to be purchased by GNB than are allowances.

One of the advantages of carbon offsets is that they assist in meeting overall climate commitments. This is an example of which of the following? Absolute advantage Comparative advantage Total advantage Market advantage

Comparative advantage is the ability to carry out a particular economic activity more efficiently than another activity. Carbon offsets essentially allow for the greatest net carbon reduction through the creation of a market

Jason is thinking about having his company invest in more sustainable practices for his consumer goods business. Which of the following does not correctly identify the stakeholders and their interests in regards to this decision? A Customer: is concerned about the impact on the price of the goods following Jason's opinion B Shareholders: is concerned that the increase in the price of the goods will drive down sales and lower stock prices following Jason's decision. C Employees: are interested in working for a more sustainable company due to a sense of pride for who they work for. D Current Creditors/Lenders: are concerned if it will improve public perception of the firm and increase overall sales.

Current creditors and lenders are likely not concerned about if a change in business practices will increase sales or improve public perception. They are more concerned that they will get the money back that they lended to Jason's business. As long as the decision does not decrease sales and there are no collectibility issues arise from this decision, the creditor/lender likely does not have too much of a stake in this decision.

A mitigation bank is an aquatic resource area that has been preserved for the purpose of compensating for unavoidable damage to aquatic resources (often as a result of development). What are some of the benefits of mitigation banking compared to other forms of compensatory mitigation? They reduce uncertainty over whether the compensatory mitigation will be successful in offsetting; in other words, there's greater certainty it will work. The ability to assemble and apply comprehensive financial resources and scientific expertise that often aren't available in other compensatory mitigation proposals. Reduced permit processing times and overall a more cost-effective mitigation opportunity. All of the above.

D All of the above - these are all benefits of mitigation banking over other permittee-responsible compensatory mitigation programs.

Bill de Blasio and Andrew Cuomo are discussing how to best combat the effects of climate change so that Times Square does not become the architectural centerpiece of New Atlantis. If they decide to focus on improving the state's carbon sinks, which of the following strategies should they adopt? Shutting down New York's gas power plants Providing incentives to homeowners to build more rooftop-solar Launching millions of tons of glitter into the Earth's atmosphere to reflect more sunlight Building artificial trees on the corners of each street in Albany and New York City

D Answers A & B focus on how to address the sources of Carbon Answer C focuses on how to stop the greenhouse effect from occurring at all. The artificial trees in Answer D will absorb carbon emitted from cars and buildings, making it a 'carbon sink'

Under intense stakeholder pressure, ComputerCo needs to reduce the carbon footprint of one of its best selling laptops. Limiting its scope to include scopes 1 and 2, which of the following would be included? Emissions associated with extracting, producing, and transporting the raw materials used to manufacture the laptop. Electricity used by the average consumer to charge the laptop, over the average lifetime of the laptop Emissions associated with distributing the laptop across the continental United States Energy used in ComputerCo's plants - lighting, loss from poor insulation, methane leakge from pipelines,

D Scope 2: Purchased electricity, heat, and steam Scope 1: Things associated with the organization's operations It does not include things relating to raw materials used to produce the product, distribution of the product, consumption of the product, or disposal of the product (scope 3).

Fill in the blanks: The bees are dying at an alarming rate and Jeff is determined to save them. Bees pollinate plants, playing a key role in the fertilization of flowers and providing _________ to humans. Jeff's plan is to start a huge market for trading bee populations, making the bee population an example of ________. Cultural services; provisioning services. Provisioning services; regulating services. Supporting services; cultural services. Supporting services; provisioning services. None of the above.

D The correct answer is D. The pollination bees provide is an example of a supporting service, but setting up a market to promote efficiency and incentives would create a provisioning service.

Which of the following are elements of a company in the seed stage? Proof of Concept Business Plan Revenue A & B only All of the above

D A company does not have to have earned any revenue to be in the seed stage.

Niche market, mass market, inactive, diversified and multi-sided markets are all examples of which of the following part of the Business Model Canvas? Channels Key Resources Value Proposition Customer Segments

D All of the listed above are ways to define different types of customer segments.

Within evaluating social impact using measurement tools like ecological footprint, the trade-off is often between: A) accuracy and precision B) motivation and pursuit C) ambiguity and effectiveness D) accuracy and simplicity

D As spoken about during class, things such as ecological impact are often ambiguous at first glance. Professor white described the long excel sheet to evaluate an office building's ecological footprint and the much shorter and easier to follow tool to estimate the same. Thus, the trade-off is often between how complex our measurements are and the accuracy of our results. We want users to follow this data to quantify their efforts but don't want to hinder the adoption of measurement in general.

Which one of the following is not a benefit that Patagonia receives by being a mission-driven company? More customers make purchases due to the mission Equally talented employees will have higher productivity in mission-driven coporations More talented employees are willing to work for mission-driven corporations for less Tax benefits due to its status as a benefit corporation All of the above are benefits that Patagonia receives from being a mission-driven company

D B-Corporations are treated the same as S-Corps and C-Corps under US tax law. A, B, & C are the three main benefits we discussed in class.

Ugly produce is a company that seeks to decrease food waste by selling produce that would have otherwise been deemed "ugly" and not sold in supermarkets. The company wants to determine its impact using the impact value chain. If their output metric is pounds of produce saved and then sold in supermarkets what would be considered the "deadweight loss" in this scenario? The pounds of ugly produce saved from becoming food waste The price of the ugly produce sold in supermarkets The size of the ugly produce sold in supermarkets The amount of food otherwise wasted in supermarkets

D Deadweight loss in an impact assessment is what would have happened had the company not existed. In this scenario it would be how much produce would be wasted if Ugly Produce did not exist (D). uhmmm I think that this is a bad question bc deadweight loss refers to what would have happened in terms of positive impact if it had not existed???

Which of the following is the correct order of the steps in computing SROI? Mapping Stakeholders, Establishing impact, Mapping Outcomes, Calculating Returns, Evidencing Outcomes and Giving Them a Value Mapping Outcomes, Mapping Stakeholders, Evidencing Outcomes and Giving Them a Value, Calculating Returns, Establishing Impact Establishing Impact, Mapping Stakeholders, Mapping Outcomes, Evidencing Outcomes and Giving Them a Value, Calculating Returns Mapping Stakeholders, Mapping Outcomes, Evidencing Outcomes and Giving Them a Value, Establishing the Impact, Calculating Return Establishing impact, Mapping Outcomes, Evidencing Outcomes and Giving Them a Value, Calculating Returns, Mapping Stakeholders

D EXHIBIT 4: STEPS IN COMPUTING SROI (Dalmia Bharat Case) Mapping Stakeholders • It is important to have clear boundaries about what the SROI analysis will cover, who will be involved in the process, and how they will be involved. Mapping Outcome • By engaging with stakeholders, you will develop an impact map or theory of change that shows the relationship between inputs, outputs, and outcomes. Evidencing Outcomes and Giving Them a Value • This stage involves finding data to show whether outcomes have happened and then valuing them. Establishing the Impact • Having collected evidence on outcomes and monetized them, those aspects of change that would have happened anyway or are a result of other factors are eliminated from consideration. Calculating Return • This step involves sharing findings with stakeholders and responding to them, embedding good outcomes and processes, and verifying the report.

Matin's Melons is a brand-new farm in Charlottesville that has figured out how to sell watermelons, cantaloupes, and honeydew in any season and in any climate. Soon, Martin's Melons becomes a popular destination for townies to enjoy the sun and snack on a fresh melon. Which two categories of ecosystem services does this new company best fit? Cultural and Supporting Regulating and Supporting Regulating and Provisioning Cultural and Provisioning

D Martin's melons primarily provides food, a provisioning service, and a place to hang out in nature, a recreation service.

As an alternative to paying Buff Bodies' new $45/month membership fee, Mike has decided to purchase the set of used exercise equipment for $2,000. Although he initially didn't think he would be able to, Mike determined after some browsing on Craigslist that he'll be able to resell the equipment for $500 at the end of 6 years. What is the NPV of the exercise equipment? Assume a 10% discount rate and a 30% tax rate. $352 $462 $72 $255

D NPV: Revenues - $0/year for 6 years (Operating Costs) - $540/year in savings for 6 years --- EBITDA - $540/year for 6 years (Depreciation) - $250/year for 6 years --- EBIT - $290/year for 6 years (Taxes) - $87/year for 6 years --- Gross Cash Flow - $203/year for 6 years Depreciation - $250/year for 6 years --- Operating Cash Flow - $453/year for 6 years Scrap Value - $500 in year 6 --- Net Cash Flows: -$2,000 in year 0, $453 in years 1-5, $953 in year 6 NPV=$255

In the Bay Game scenario, which group of people has historically been the most difficult to convince to pull back on their practices? Maryland Watermen Maryland Developers Pennsylvania Developers Pennsylvania Farmers Virginia Farmers

D Pennsylvania Farmers - Pennsylvania is not directly connected to the bay (and hence, there are no Pennsylvania watermen), and the farmers are unlikely to see the direct effects of having too much animal waste running off of their farms.

Andrea works at a family foundation that's interested in scaleable financial products that can be used to move more capital to solving the $2.5 trillion gap in funding to reach the UN Sustainable Development Goals. They are sector and investment vehicle agnostic. An example of an investment they have made is in the Forest Resilience Bond with Blue Forest Conservation in the US. It is a "A pay-for-performance mechanism for private investors to invest in forest restoration". Which kind of investor would you say Andrea is? A impact / community investor who invests in companies with financial and measurable social / environmental returns. A sustainability themed investor who only invests in the environment and conservation An investor who works with corporations and their management while also using their voting power to influence corporate behavior An investors who looks for products where a user of an ecosystem service makes a direct or indirect payment to the provider of that service. The idea is that whoever preserves or maintains an ecosystem service should be paid for doing so. An investor who systematically and explicitly includes environmental, social, and governmental factors into their traditional financial analysis.

D The example above comes from the Rockefeller Foundation. This department makes investments in payments for ecosystem services -- "By investing in restoration projects that protect forest health, we can mitigate both wildfire and drought risk. Contracting with both public and private beneficiaries to monetize the multifaceted benefits of forest restoration, the FRB creates value for a diverse set of stakeholders (including the US Forest Service, water and electric utilities, private water-dependent companies, state governments, and insurance companies)." See video here for explanation: https://youtu.be/Oohmi1KS-w4

Your Great-Aunt Martha has run short on cash on your birthday and wants to incentivize you to postpone this year's gift until next year. She offers you two choices: $25 today or $35 one year from now. What is the minimum discount rate you would have to require in order to not take the $35 next year? 10% 20% 30% 40% 50%

D Using the formula (Cash Flow)/((1 + Discount Rate)^(Time Period)), we can compare the present value of each of the options vs. the $25 present-day gift. A) $35/((1+0.1)ˆ1) = $31.82 - Choose the $35 B) $35/((1+0.2)ˆ1) = $29.17 - Choose the $35 C) $35/((1+0.3)ˆ1) = $26.92 - Choose the $35 D) $35/((1+0.4)ˆ1) = $25.00 - Minimum discount rate required; can choose either option E) $35/((1+0.5)ˆ1) = $23.33 - Choose the $25 today; but not minimum discount rate

According to Lloyd's which is NOT an example of one of the six water-related business risks? Physical Risk Regulatory Risk Investment Risk Trade Risk Reputational Risk

D - Trade risk The six business related water scarcity risks are: Physical, regulatory, community, reputational, investment, and geopolitical Physical risk refers to the quantity and quality of water - ranging from scarcity to flooding to pollution Regulatory risk involves the enactment of government-related water restrictions, including pricing and waster discharge Community risk focuses on tensions around access to and quality of water in localities Reputational risk involves public perceptions of a company's branding and actions. This can impact purchasing decisions. Investment risk suggests that as understanding of water risk expands, disclosure requirements will be placed on retailers and investors Geopolitical risk refers to potential political conflict over water resources through trade restrictions or national imperatives "Trade Risk" is, therefore the correct answer. Water-related trade issues would fall under Geopolitical Risk

Which of the following is an example of a scope 2 emission? A) Emissions leaving a smokestack at a factory B) Employee travel C) Emissions coming from distribution of their products D) Emissions coming from purchased electricity

D - emissions coming from purchased electricity

Tom is interested in socially responsible investing. Which of the following reasons for investing/not investing does not match up to the type of screening strategy? A Ethical Negative Screen: Due to religious reasons, Tom does not consume alcohol. In turn, he does not invest in alcohol companies. B Environmental/Social Negative Screen: Tom does not invest in oil companies because they greatly harm the environment. C Positive Screen: Tom invests in Patagonia because of its mission to help the environment. D Best-In-Class Rankings: Tom invests in Toms Shoes because across all the industries, it delivers high levels of societal benefit as it donates a pair of shoes for every pair of shoes purchased. E All of the above answers correctly match the screening strategy with a reason to invest/not invest.

D is incorrect. Best-in-Class rankings is concerned with investing in the firms that are leaders in the peer groups (industry) in terms of social and environmental impact. It is not concerned with all industries available to invest in

The "Promise of Impact Investing" Harvard Case refers to five major investment sectors: housing, water, health, education, and financial services/microfinance. Why have affordable housing and microfinance been more successful than other impact investing sectors? Housing and microfinance are typically less capital-intensive sectors than water, education, and health. The talent in the housing and microfinance sectors has made these areas more profitable than other impact investing sectors. Water, health, and education are all more heavily regulated and therefore more difficult to operate in for impact investors. Housing and microfinance have natural business models entailing repayment of principal and interest as part of the terms of the loan; other sectors have found it more difficult to develop successful business models that recover the cost of capital.

D is the best answer. All of these sectors can be fairly capital-intensive. Microfinance and affordable housing are also fairly regulated, and the talent pool is not cited as a major reason for the success of these two sectors of impact investing.

Which of the following is NOT describing an offsite ecosystem service? A kayaking company that provides tours of a public bioluminescent bay in Puerto Rico helps maintain water quality in the watershed leading to the bay. A logging company pays another company to replant trees in another area in order to preserve biodiversity. A city government pays farmers in the area not to spray pesticides so that public parks will still be pollinated by bees. A cidery in Virginia decides only to grow apple varieties native to Virginia on its land, and to grow apples pesticide-free.

D is the only answer that deals with Ecosystem services on-site, for land that the company owns, and directly benefits them on their own land.

Blue & Orange is a firm that is looking for local projects to invest in. They are actively looking for ventures that intentionally measure their social, environmental, and financial return. What type of sustainable investing does Blue & Orange fall under? A) ESG Investing B) Negative Screening C) Sustainability themed investing D) Impact/Community Investing

D) Impact/Community Investing

Coca Cola agrees not to sell its products in Atlantis, a developed high technology island found recently, as long as the it is compensated by other firms for its loss of potential revenue. Based on our discussion about ASEAN and Yasuní-ITT, which of the following firms is most likely to contribute to this initiative? A) Saudi Aramco B) General Electric C) Kraft Heinz D) Pepsi Cola

D) Pepsi-Cola We discussed that countries like Brunei would invest in the Yasuní-ITT offsets primarily for the PR benefits, but also to decrease competition.

Aside from doing nothing, what is the most environmentally-friendly action a real estate developer can take to protect their local watershed? A) Sustainable greenfield projects B) Conventional infill projects C) Conventional greenfield projects D) Sustainable infill projects

D) Sustainable Infill

Clark Kent works for Woodworks Industries. Woodworks makes custom tables from exotic wood that have become insta-famous in the past few months. Last week the government announced a new regulation stating that US companies can cut down no more than 1,000 trees per year in developing countries, which just so happens to be where Woodworks sources the wood for its insta-famous tables. The government is hoping to incentivize wood companies to implement more sustainable practices. Currently Woodworks cuts down 750 trees per year, but will need to cut down more to meet rising demand. What is the most probable risk of this mitigation strategy in regard to incentivizing wood companies to use more sustainable practices? A) Clark could decide to cut down trees in the US instead of improving practices B) Clark could decide to cut down more than 1,000 trees and ignore the rule C) Clark could buy carbon offsets to circumvent the new rule D) Clark could only cut down 1000 trees and not make any sustainability efforts E) None of the above

D? That makes no sense Strategy= Command and Control Pros: easy to administer, effective on a large scale Cons: subject to political process, no incentive to go beyond compliance, limited flexibility Carl can still run his business and just go up to the maximum and may not be incentivized to implement sustainability measures.

Why should you add back the depreciation expense related to an asset to the change in gross cash flows when finding the NPV of a project? A) Depreciation expense related to an asset has no effect on the valuation process in a capital budgeting decision. B) Depreciation expense must be added back to the change in gross cash flow because it is a non-cash expense and thus should not affect the valuation of the future cash flows of a project. C) Depreciation expense must be added back because it reduces the discount rate at which one must discount the future cash flows of a project. D) Depreciation expense must be added back because these expenses are non-taxable and should be added back after taxes have been taken out of the pretax income.

Depreciation expense is a non-cash deduction and thus it should be added back to accurately reflect the future cash flows of a project.

Ron owns 10% of a large, publicly traded manufacturing firm. The firm has not have a history of being environmentally and socially responsible. Ron would like to change that through corporate engagement/shareholder activism. Which of the following is not a strategy he would use through this method of sustainable investing? A Active Corporate Governance: he should vote on any policies that would favor the firm going into an environmentally and socially responsible direction. B Constructive Engagement: he should speak to the company often to try to sway the minds of management to go in a more environmentally and socially responsible direction. C Advocacy: he should speak with his elected representatives and try to get more legislation passed that would require all firms to spend more on the environment and socially responsible programs. D All of the above answer choices are actions he would engage in through the method of corporate engagement/shareholder advocacy.

Disregard below, D is correct!! Answer C is incorrect. Corporate engagement/shareholder advocacy is using your ownership in the firm (through stocks) to try to encourage more environmentally and socially responsible actions through the firm. Answer C would not be using your stock to try and create change.

Disregard below. D is the correct answer because they are all correct!!!! Answer C is incorrect. Corporate engagement/shareholder advocacy is using your ownership in the firm (through stocks) to try to encourage more environmentally and socially responsible actions through the firm. Answer C would not be using your stock to try and create change.

Why do companies publicly report their ESG (environmental, social, and governance) metrics, following standards of reporting? Better public relations (e.g. A company can provide greater transparency into its operations) Avoid the "gotcha" moment - by reporting and providing transparency now, a company can avoid damaging its reputation in the future Evaluating and reporting ESG metrics always outweighs the costs All of the above A & B

E A is true B is true C is not necessarily true - Standardized reporting does raise time and costs, and the benefits do not necessarily always outweigh these costs. This is still a point of contention.

Ecuador proposed issuing Yasuní Guarantee Certificates (YGCs) as collateral to back up their promise to not extract oil from Yasuní National Park. These certificates would not have yielded interest and would not have a maturity date. The only way investors would recoup their money is if Ecuador decided to drill in the protected area. Why might some investors feel that that these guarantees are still not enough to protect their investment? Time Value of the Investment since YGCs do not yield interest Uncertainty that President Correa or a future Ecuadorian leader would honor the terms of the agreement Concerns that the certificate would be too illiquid to trade if it is apparent that Ecuador will not drill in the protected area. All of the Above Both A & B

E The answer is E. Since the securities do not yield interest, the money recouped in 20 years will be worth less than the investment made today. There was also uncertainty that President Correa might not honor the terms, given that he chose to do so recently with other bonds. C is not correct because, If it is apparent that Ecuador will not drill, the certificates have no future value and there is no need to trade.

In the Bay Game, what likely caused the price of sustainable farming products to drop below the price of conventional farming products? Consumers don't like sustainable farming products. Farmers saw that sustainable farming products were initially more profitable, so they all boosted their output without collaborating with each other to limit supply. Regulators took away subsidies for sustainable farming products. Farmers in one state acted without regard for farmers in another state. B & D

E A - is incorrect. B - supply of sustainable products was too high relative to demand C - subsidies are not directly related to prices. D - is related to answer B, and is also correct.

Regarding the 4 categories of ecosystem services, which of the following is paired incorrectly? Nutrient recycling in soil - Supporting service Food (crops, seafood, game) - Provisioning service Pest and disease control - Regulating service Ecotourism and ecotherapy - Cultural service None of the above

E All of the above are classified correctly!

Which of the following is not true of offset markets? They can incentivize the creation of new markets to buy/sell environmental services They can offer a way to get around implementing measures to decrease pollution They can support and perpetuate the consumptive lifestyles of developed countries They are more vulnerable to corporate influence and can be ineffective None of the above

E Answer choices A-D were all aspects of offsets covered in lecture.

One benefit of the Yasuni ITT trust fund was that Ecuador would avoid emitting 407 million mtons of carbon, valued at $8.14 billion USD (currently, $20 per mton). This benefit alone, before considering deforestation or foregone oil production, outweighs the $3.6 billion investment requested from the international community. This seems too good to be true! What risks are involved? The current carbon bond market is small. Carbon bonds aren't currently (at the time of the case) worth $20 per metric ton - they're overvalued! The price of carbon bonds may experience a steep drop if the Ecuadoran government floods the carbon market with its carbon certificates. All of the above A & C

E C describes the main risk associated, with A a supporting factor. Carbon bonds would experience a steep drop in price because the carbon market is so small, relative to the 407 metric tons that the Ecuadorian government would offer. With such a steep increase in supply, price would almost certainly drop, valuing each ton as low as 2-3 dollars. B is unlikely true, or a major risk. The breakeven point considering just the avoided emissions turns out to be about $8.50 per metric ton, and it's unlikely that carbon bonds are overvalued at over 130%.

What was the expressed intent of the 1977 Community Reinvestment Act (CRA)? A) To encourage cofmmercial banks and savings associations to help meet the needs of borrowers in all segments of their communities B) To encourage banks and other financial institutions to invest a percentage of total holdings in community-based sustainability initiatives C) To reduce "redlining," or discriminatory credit practices against low-income neighborhoods D) A & B E) A & C

E. "The Community Reinvestment (CRA) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining." (Wikipedia)

Which of the following is NOT an example of Supporting Services? Primary productivity Nutrient recycling Education Biodiversity

Education falls under Cultural Services

Which of the following is considered a "Believability" principle (and NOT "Effectiveness" principle) of SROI? Involve stakeholders Do not over-claim Understand what changes Value the things that matter Only include what is material

Effectiveness Principles of SROI Involve stakeholders Understand what changes Value the things that matter Only include what is material Believability Principles of SROI Do not over-claim**** Be transparent Verify the result Therefore B is the correct answer

Which of the following correctly pairs the category of carbon credit (allowance or offset) and the type of credit that Yasuni would have been classified as? A) Allowance -- Cap and Trade B) Offset -- Cap and Trade C) Allowance -- Certified Emission Reductions (CERs) D) Offset -- Certified Emission Reductions (CERs)

Emission Reductions (CERs) The correct answer is D. Part A of the case expected it the Yasuni Guarantee Certificates to be traded at European Markets. Part B of the case gave information about the price for CERs as the Yasuni Guarantee Certificates would command a similar price. Additionally, CERs are classified as offsets and not allowances.

Paper Mill Co. produces paper. Which is not considered a Scope 1 emission for this company? Paper Pulp run-off Burning coal at the paper plant for company processes The employees' car emissions from commute

Employee car emissions are considered to be a Scope 3 emission as it is not involved with the company processes.

According to the GHG Protocol when calculating emission sources of companies, employee business travel or commuting would fall under which scope? 1 2 3

Employee travel and commuting would fall under Scope 3 since it is an indirect emission associated with transportation.

Sari Organik is an organic farm in Bali that was created to grow organic food and serve as an education center for small-scale farmers to encourage them to use sustainable practices. The farm both grows food and has a restaurant that attracts tourists. Could the payments for ecosystem services model be applied in this scenario? Why or why not? A) Yes, because the farm is providing food which is an ecosystem service. B) Yes, because the farm is providing education on environmental issues. C) No, because the food is being grown offsite by the owners. D) No, because the benefit is being generated for Bali at that specific farm, not somewhere else.

Example of an onsite, ecotourism model that does not fall into PES because it has to be offsite and benefiting someone else somewhere else.

Tom's philanthropy "Books For Kids" looks to improve child literacy and get children excited about reading in an increasingly digital age. To see the impact of his work, Tom has decided to conduct SROI analysis. Looking out with a five-year horizon, Tom has discounted back his yearly impact values to a total present value of $97,600.23. If the initial (total) input is $15,600, what is the NPV and SROI? NPV: $56,023.10 SROI: $2.51 : 1 NPV: $82,000.23 SROI: $6.26 : 1 NPV: $82,000.23 SROI: $3.33 : 1 NPV: $56,023.10 SROI: $6.26 : 1

For NPV, just subtract out the initial input from the total present value ($97,600.23 - $15,600 = $82,000.23). For SROI, divide the total present value by initial input ($97,600.23 / 15,600 = $6.26)

Company A is spending $12,000 on a more energy efficient heating system. Their EBIT for the year is $110,000, and they plan to pay 30% on taxes. If they will receive an Investment Tax Credit of 10%, what will their Net Income be? $98,000 $88,000 $75,800 $78,200

ITC is 10% of the investment cost (in this case, 10% of $12,000 = $1,200), which will be added back after taxes. If taxes are 30%, ($33,000), then their Net Income will be $110,000 - $33,000 + $1,200 = $78,200.

If a social impact fund's key activity is to support social purpose organizations through grants and investments and use venture-capital approach to drive the impact of these organizations, which one of the following investing strategies is the most accurate description of this fund? A) Impact-first impact investing B) Finance-first impact investing C) Responsible investing D) Venture philanthropy

Impact-first impact investing: Focus on areas where market-based solutions could effectively solve a social/environmental issue and produce positive returns (trade-off/ higher risk tolerance) Finance-First impact investing: Investing in areas where social/environmental problems create a compelling business opportunity (no trade-off) Responsible investing: Screening out certain types of investments (weapons, tobaccos, alcohol, etc.) Venture Philanthropy: Supporting social purpose organizations through grants and investments (willing to accept significant financial trade-off)

Which of the following examples details a command and control method for managing negative externalities? The government forcing all companies to be carbon neutral by buying carbon offsets or carbon credits. The government levying a tax on fishing during certain months of the year. The government capping carbon emissions per employee to a set amount with no exceptions. A large company decides to go paperless for one of their financial products.

In answer A and B financial incentives are involved rather than just the government banning something outright which is typical of the command and control method. In answer D, the decider is a company rather than the government. Answer C is an example of the government implementing strong policies to mitigate negative externalities.

What was Generation Investment Management's competitive advantage? A) Its ability to use a negative screen and say no to companies that harm society B) By being a long-only fund, it was able to buy shares of companies that they believe were undervalued (buy low..sell high) C) Its valuation methods allowed them to incorporate ESG metrics that better forecasted the value of a company D) Long investment horizons (hold an investment longer than traditional firms) and HR strategy (bonus structure, mission alignment, invest their own money) E) Its due diligence process of determining business quality and management quality allowed them to judge companies in ways no one else could

In class we discussed how the discipline brought upon by the longer holding periods and incentive structure allowed them to get above market returns. "Screen out bad investments and hold!"

Assume Carbon Crushing Corporation aims to restore and maintain the integrity of our worlds wetlands. In an effort to do so, Carbon Crushing Corporation purchases a location within the same watershed as their factory and receives a permit and credentials noting their mitigation through compensatory measures on this land. This is an example of what? Traditional permittee-responsible compensatory mitigation Third party mitigation banking

In permittee-responsible mitigation s permit applicant may implement compensatory measures at the impact site while in mitigation banking a permit applicant may purchase credits from a mitigation bank.

KayakSouth ME is a company that leads kayaking tours on Damariscotta Lake in Maine. On the other side of the lake, Wiscasset Maple Co., a local maple syrup company, has been dumping residue (a by-product of the maple syrup production process) into the lake. This waste has been polluting the lake and creating bad business for KayakSouth ME. Representatives from the kayaking company approach the maple syrup company with a proposal: if Wiscasset Maple agrees to stop polluting the lake, KayakSouth will promote and sell Wiscasset Maple's products in KayakSouth's lobby. Wiscasset Maple Company agrees. Which of the following tools for mitigating externalities is described in the scenario above? A) Negotiation B) Command-and-Control C) Taxes D) Marketable Permits

In this small-scale scenario, two companies work together to negotiate a solution that is both environmentally-friendly and promotes business.

Annie is deciding to invest most of her life savings of $12,000 towards a startup she really believes in. She expects to gain $2500 for the first six years, and $5000 in year 7 if all goes well. She alternatively would have placed her money in a mutual fund with 10% annual returns, so she hopes she is making the right decision. What is the NPV of Annie's investment in the startup? A) 171 B) 1454 C) 1260 D) (2490) E) (1600)

Initial Outlay: 12000 Discount Rate: 10% PV of Future Cash Flows: Year 1: $2,272.73 Year 2: $2,066.12 Year 3: $1,878.29 Year 4: $1,707.53 Year 5: $1,552.30 Year 6: $1,411.18 Year 7: $2,565.79 Sum of PV of Future Cash Flows: $13454 minus initial outlay $12000 = $1454

Which of the following may be considered "leakage" of carbon emissions? Investing in an ecological preserve only to displace a lumber company that will clear an area of jungle elsewhere. Creating reactive by-products in the atmosphere based on particular quality and quantity of carbon emissions that synergistically contribute to the greenhouse effect. Failing to consider the up-stream and down-stream production of carbon emissions for a company or corporation quantifying carbon emissions.

Leakage is essentially (possibly inadvertently) creating change in the market through offsets that only partially or momentarily displaces the addition of GHG emissions.

Mapping stakeholders > Mapping outcomes > Evidencing outcomes and giving them a value > Establishing the impact > Calculating return (see Dalmia Bharat case, exhibit 4).

Which is NOT an advantage of mitigation banks over traditional permittee-responsible compensatory mitigation? A) Mitigation banks reduce uncertainty over whether the compensatory mitigation will be successful in offsetting project B) Mitigation banks assemble and apply extensive financial resources, planning, and scientific expertise not always available to many permittee-responsible compensatory mitigation proposals; C) Mitigation banks reduce permit processing times and provide more cost-effective compensatory mitigation opportunities D) Mitigation banks enable the efficient use of limited agency resources in the review and compliance monitoring of compensatory mitigation projects because of consolidation. E) Mitigation banks are efficient in not only offsetting, but also increasing the level of biodiversity in a region.

Mitigation banks are criticized because they often don't reach the same level of biodiversity as the land they are meant to offset.

NPV: Revenues - $0/year for 6 years (Operating Costs) - $540/year in savings for 6 years --- EBITDA - $540/year for 6 years (Depreciation) - $250/year for 6 years --- EBIT - $290/year for 6 years (Taxes) - $87/year for 6 years --- Gross Cash Flow - $203/year for 6 years Depreciation - $250/year for 6 years --- Operating Cash Flow - $453/year for 6 years Scrap Value - $500 in year 6 --- Net Cash Flows: -$2,000 in year 0, $453 in years 1-5, $953 in year 6 NPV=$255

Batman&Company (BNC) is a consulting firm based in Boston, Massachusetts. The firm is known for its long workdays (70+ hours/week) and immense employee travel (entry level analysts fly out to their client every week; managers can oversee projects in 2 cities; partners can oversee projects in 4 cities). BNC went public in 2014, and shareholders have recently voted for the firm to focus more on its environmental impact. In response, the firm has allowed employees to teleconference one week per month, renovated its office buildings to be LEED-certified, and invested in carbon offsets. Moving forward, BNC is unsure whether it report its impact. Which of the following are valid (TRUE) considerations? BNC would like to wait a few years to see which impact reporting system will emerge as the dominant one, because there are currently too many standards. BNC wants to publicly report its impacts to please stakeholders because it is 100% certain that doing so will eliminate any further shareholder questions on the firm's environmental impact. BNC is weary of the true impacts of reporting any ESG metrics because it believes shareholders can't distinguish between "goodwashing" and true efforts anyways. All of the above A and C

Notes from class: A is valid: There are many different reporting standards (IRIS, etc.) B is false: (or at least not 100% true) ○ Companies who voluntarily committed to ESG reporting - always more requests for information from investors, NGOs, stakeholder groups C is valid: ○ Companies "goodwashing" - investors unable to distinguish goodwashing from true efforts

Why do the managers of a firm often get their way when voting on an issue? A The board can use an executive order to override the owner's decision B When owners are unable to participate in the vote, their proxy vote by default goes to the the board C The board always make the right decisions, so owners tend to vote in agreement with the the board D All of the above are correct E None of the above are correct

One of the difficulties of being the owner of a company, as in owning stock, is that it is difficult to organize other owners to vote in one's favor due to the sheer abundance of voters. It is so complicated for a group of owners to push their agenda, that usually the board's choice ends up winning the vote.

Which of the following investments has the second shortest payback period? A) Bob's burger shop is thinking of investing in an additional grill that costs $45000 and will generate an additional $5000 in profits every year. B) Joe's IT company is thinking of purchasing a software that costs $40000 that will allow them to charge a $50 premium for their design services. This premium is estimated to amount to an additional $1000 of profits every fiscal quarter. C) Jim's bike shack is thinking of investing in a new bike repair machine that could bring in an additional $7500 every year. The cost for this new software is $30000. D) Sam's convenience store is thinking of investing in a soda machine that costs $5500. This machine is said to bring in an additional $1500 every year. E) Tommy is thinking of investing in a one time gym membership that costs $1000 but will allow him to save $15/month on his health insurance.

Option D has the second shortest payback period of 4 years. Option A: 9 years Option B: 10 years Option C: 4 years Option D: 3.67 years Option E: 5.55

In the UBS case, their carbon footprint was largely made up of energy consumption (31% of the bank's electricity was produced from fossil resources) and business travel (UBS personnel took more than 300,000 flights annually). Which of the following correctly assigns the scope and type of emissions? (Format: Scope - Type) Scope 2- Purchased electricity, heat, and steam in their buildings Scope 3 - Stationary combustion from the production of electricity, steam, heat, or power using equipment in a fixed location Scope 1 and 3 - Stationary combustion from the production of electricity, steam, heat, or power using equipment in a fixed location AND mobile combustion in transportation and construction sources, including cars, trucks, tractors, and airplanes. Scope 1 - mobile combustion in transportation and construction sources, including cars, trucks, tractors, and airplanes. Scope 2 and 1 - Stationary combustion from the production of electricity, steam, heat, or power using equipment in a fixed location AND mobile combustion in transportation and construction sources, including cars, trucks, tractors, and airplanes.

Page 3 in "Carbon Footprints" tells describes Scope 1 as: Direct emissions are those that occur "from sources that are owned or controlled by the reporting entity," including its industrial activities and any onsite energy production. These include four types of sources: Stationary combustion from the production of electricity, steam, heat, or power using equipment in a fixed location. Mobile combustion in transportation and construction sources, including cars, trucks, tractors, and airplanes. Physical and chemical processes such as the manufacturing of cement and aluminum. Fugitive sources from unintentional leaks and evaporation, such as methane leakage from natural gas pipelines.

What is the definition of the term "physical scarcity" with regards to water supply? A) The lack of infrastructure for reliable water supply B) The low availability of water per capita C) The long period of abnormally low rainfall D) The low availability of water purification devices

Physical scarcity is defined by Lloyd's as "the low availability of water per capita" Economic scarcity is defined as "related to lack of infrastructure for reliable supply" A drought is defined as a "a prolonged period of abnormally low rainfall" The fourth answer has no specific terminology

How are venture capital firms different from private equity firms? A) Venture capital firms must have less than 50M in assets under management whereas private equity firms have no limit B) Venture capital firms are classified as B corps whereas PE firms are classified as S corps C) Venture capital firms invest in less established companies that can be anywhere from pre seed to late stage whereas PE firms invest only in established companies D) Venture capital firms have more institutional investors whereas PE firms have more HNW individuals and family offices E) None of the above

Private Equity invests in more established companies with a long track record of profitability whereas VCs sometimes invest in companies that are "two guys and a dog in a garage".

In 205, Bill Gatsby (nephew of Jay Gatsby) invested in Generation Music, a media-streaming company that focuses on songs that have an environmental or social justice theme, such as "Big Yellow Taxi." His initial investment of $250,000 in the start-up in 2005 bought an 8% stake in the company, and up until January 2018 (when Generation Music was bought by Spotify) Bill has maintained that 8% holding with further investments. In doing so, Bill has most likely exercised - A) The right to transfer ownership B) Pro-rata rights C) His entitlement to dividends D) Due diligence

Pro rata rights are defined as the right to invest in later rounds, maintaining the current level of ownership.

DownstreamGreenFarms (DGF) owns an 400 acre farm in Missouri, where it plants and harvests organic produce including sweet potatoes and kale. DGF's owner realizes that its crops have some fertilizer on their leaves. After running a few tests, DGF identifies that the fertilizer comes from Mark's farm, located just upstream. To ensure the quality of its crops, DGF pays Bill $500 per month to stop using fertilizers, in order to compensate for lower crop yields. This trading scheme is known as a(n) Voluntary market trade Public payment scheme Compliance market trade Self-organized deal

Public trading scheme - government payments and tax breaks, and philanthropic conservation programs. Self-organized deal (this is correct) - parties self-organize a trade Markets - this isn't a cap-and-trade market, an offset market, etc.

Tencent Inc, a Chinese technology company, is taking more social responsibilities to attract more socially-aware talents and bolster its company image. The sustainability investment department of Tencent is planning to use its investment to renovate the school systems in 250 rural Chinese villages. Although this project will cost $50 million, it will impact 10,000 children and teenagers in these villages, with an economic impact of $7,500 per person. Assuming 15% deadweight loss and 10% attribution, which one of the followings is the SROI multiple of this project? A) 1.26x B) 1.17x C) 1.15x D) 1.35x E) 1.03x

Quantity times financial proxy = 10,000 x $7,500 = $75 million Impact after deadweight and attribution = $75 million x (1-0.15) x (1-0.1) = $57.375 million SROI multipes: $57.375 / $50 = 1.15x

In the Erie Thames Powerlines case study, Ryan Mallany is tasked with deciding whether to substitute its current fleet of diesel utility trucks for hybrid trucks. This case would be best classified as which type of capital budgeting project?Mutually exclusive project Replacement decision Expansion decision Independent project None of the above

Replacement decision

Corporation ABC spent roughly $13.3 million in direct and indirect electricity costs in the fiscal year 2017. ABC's factories account for 74% of this energy usage and all of these factories purchase electricity from state and local utility companies. Which operational 'scope' of greenhouse gas emissions should be applied if ABC aims to reduce its direct and indirect GHG emissions and thus its electricity costs as well? Scope 1 Scope 2 Scope 3 Scope 4

Scope 2 ---------- Scope 1 direct GHG emissions [that] occur from sources owned or controlled by the company Scope 2 GHG emissions from the generation of purchased electricity consumed by the company Scope 3 All other indirect GHG emissions that are a consequence of the activities of the company, but occur from sources not owned by the company, eg employee travel, raw materials extraction and processing, transportation, product use and disposal

Scope 2: Purchased electricity, heat, and steam Scope 1: Things associated with the organization's operations It does not include things relating to raw materials used to produce the product, distribution of the product, consumption of the product, or disposal of the product (scope 3).

Financial services companies have difficulty reducing their overall emissions because most of their emissions come from Scope __. 1 2 3

Scope 3. Financial services companies often can't reduce their emissions because a lot the companies' emissions come from the portfolio companies that these invest in.

Silver Cloud is a startup that has just written out its business plan, formed a management team, and proved that they have a couple of clients for their cloud-platform-technology. What stage would Silver Cloud be considered in? A) Pre-seed B) Seed C) Early D) Expansion E) Later

Seed Stage: Needs to have proof-of-concept, management team, and a business plan

BlackRock is designing a ETF (exchange traded fund) tailored to sustainability-minded investors. This ETF will be made up of stocks of companies with strong commitments to sustainability. One company creates and innovates solar technology. Another is focused on designing and manufacturing energy-conscious devices such as efficient lightbulbs. What type of sustainability investment is this? A) Positive/Best-in-class screening B) Norms-based screening C) Impact investing D) Sustainability themed investing

Sustainability themed investing invests in themes or assets specifically related to sustainability, such as clean energy, green technology, or sustainable agriculture --- some commented there wasn't enough info---

What was an unintended economic consequence of hyper-active government intervention in the class' Bay game simulation? A) Rebounding crab populations made the prices too stable B) Developer outcomes had a lagging effect on social well-being C) Sustainable farming prices fell below conventional farming prices, removing the assumed economic incentive of sustainability D) Farmers repurposed nutrient runoff and monetized a negative externality

Sustainable farm prices did fall below conventional farming, hurting economic well-being

BlueCo is a corporation with a 15% equity stake in RedCo. BlueCo is interested in reporting its carbon footprint to its shareholders and hires a consulting firm to oversee the project. The consulting firm takes the equity share approach to reporting all of BlueCo's emissions. Which of the following best explains how BlueCo's consultants will handle reporting any emissions attributable to RedCo? BlueCo will not report any emissions committed by RedCo; Each corporation will report their own emissions separately. Since BlueCo has a significant ownership stake in RedCo, BlueCo will include all of RedCo's emissions in addition to its own when reporting carbon footprint. BlueCo will only report RedCo emissions that can be attributed to purchases BlueCo made from RedCo. BlueCo will report its own emissions plus 15% of RedCo's emissions, corresponding with its equity share in RedCo.

The Carbon Footprints case reading discusses the equity share approach to reporting emissions. In the equity share approach, an organization reports emissions from sources that are wholly owned; for partially owned sources, it reports the share of emissions that corresponds to its equity share. The answer is D.

Coca Cola recently announced efforts to become water neutral. Pepsi has decided to purchase a series of water offsets in order to remain competitive with Coca Cola. Peter, a Pepsi analyst, looks into purchasing the "Lean, Mean, Water Machine" offset. The website for the offset reads as follows: The Lean, Mean, Water Machine (LMWM) offset funds the production of the LMWM, a machine that creates water out of thin air! This machine can be deployed in areas where water is scarce to provide easy access to drinking water for over 30 years. The LMWM has been proven to increase economic output of an area due to the reduced amount of time spent by people fetching water. In the fine print, Peter notices the following message: "The LMWM requires vast amounts of fossil fuels to operate". Which characteristic of Offset Quality does the LMWM violate? Conditionality Additionality No Leakage Permanence None, the LMWM is a flawless offset for Pepsi to Purchase

The LMWM is quite the atypical offset, but through this goofy question I was hoping to assess you on the four characteristics of offset quality. Conditionality - In class we saw that conditionality refers to the removal of GHG, but this is for carbon offsets. The LMWM is a water offset, and indeed it accomplishes its goal of creating water. Additionality - The LMWM meets this characteristic because without the LMWM there would not be any more water in a given area. No Leakage - The LMWM violates this characteristic because it requires "vast amounts of fossil fuels" to produce water. So even though it provides drinking water, it is polluting its environment at the same time. Permanence - The LMWM meets this characteristic because it lasts for over 30 years

Husk Power systems is a social enterprise that is trying to solve the problem of widespread lack of access to power in rural India. They discovered that there is a way to generate power from husks, a resource traditionally thrown away. Husk is looking for potential impact investors. When preparing their slide deck what would be the best potential "addressable impact" of their venture to present to the investors? A Number of husks that would be wasted B Number of homes without power in rural India C Number of people in the world without power D Number of electrical wires used

The addressable impact is how Husk would quantify the size of the problem. While the total market may be all people without power, the market their solution addresses is the number of homes without power in rural India (B)

Brandon is the President of a large corporation. His investors are really concerned about reducing carbon emissions. In response to this, he decides that he wants to reduce his Scope 2 greenhouse gas emissions by 50%. The following are a few of the activities his firm engages in: (1) His firm purchases electricity generated by fossil fuels from Dominion Power (2) His firm's manufacturing plant uses 5000 tons of carbon a day (3) His firm transports goods from one of his factory to another through the use of diesel trucks Which of the following activities should he focus on if he wants to reduce his Scope 2 emissions? Activity 1 Activity 1 and 2 Activity 2 Activity 2 and 3 Activity 1, 2 and 3

The answer is A. Scope 2 emissions, as defined in the lecture, is the "GHG emissions from the generation of purchased electricity." Activity 2 and 3 are Scope 1 activities as they are "direct GHG emissions that occur from sources owned or controlled by the company."

__________ investing involves incorporating the use of non-financial environmental, social and governance (ESG) factors into one's investment decision to generate higher returns. Impact Sustainability Ethical None of the Above

The answer is B, as per the definition of sustainable investing given in class.

Contributing to the Yasuní-ITT Trust Fund can initially seem attractive to countries given that the price of carbon bonds was around $20/mtCO2 in 2009. Why would the certificates created through the success of the ITT Fund likely NOT hit this market rate? A) The certificates created would not be tradable within existing carbon bond markets B) The success of the ITT Fund would grossly overpopulate the carbon bond market C) The Ecuadorean Constitution grants rights to ecosystem services and prohibits their financial valuation D) The Great Recession dramatically decreased global demand for carbon offsets in the late 2000's

The answer is B. The carbon offset market, as it stands, was relatively small in 2009. Adding a vast number of offsets to the market through the success of the ITT Fund would dramatically increase supply and drive market prices down.

The band Toto is going on tour again after the reemergence of popularity in its song, "Africa." They are looking to go on tour more sustainably, so they are conducting an analysis of their predicted carbon footprint to find opportunities to reduce their future emissions. Which of these is an incorrect pairing of the activity and the scope it falls under (Scope 1, Scope 2, or Scope 3)? A) Scope 3: Toto is purchasing carbon offsets to mitigate the effects of the emissions of the estimated travel of concertgoers. B) Scope 1: Toto is choosing a concert venue that purchases its electricity from a wind-powered energy plant. C) Scope 3: The distribution company for Toto's remastered CDs uses hybrid trucks with lower emissions. D) Scope 2: The recording studio used by Toto to record their remastered song recordings purchases electricity from a hydropower plant. E) Scope 1: The hybrid van used by Toto's band members uses a solar panel as a secondary power source to reduce its vehicle emissions.

The answer is B. Purchased electricity falls under the category of Scope 2 emissions since it is not directly produced by the entity.

What is problematic about the United Nations Programme on Reducing Emissions from Deforestation and Forest Degradation (REDD+)? A) It does not adequately incentivize developing countries to change deforestation practices B) It disproportionally benefits countries with more forested areas C) It overpopulates the carbon credit market and reduces the market price of carbon offsets D) It fails to address emissions resulting from fossil fuel consumption

The answer is C. As discussed in class, the REDD+ program makes it relatively easy to generate carbon offsets. The increased number of carbon offsets in the market drives the price of carbon down, which inherently reduces the financial benefits associated with reducing emissions.

Which of the following is not a fundamental precept of the investment decision-making process? Maximize returns Address risks Minimize beta Account for the time value of money All of the above are principles

The answer is C. Beta is the measure of a stock's return relative to changes in the return of the market. A low beta does not imply that a stock is a good investment, only that it tends to react less to changes in the market.

Increases in investor demand should theoretically be raising the market price of carbon offsets. In reality, the price of carbon offsets is declining. Which of the following is NOT partially responsible for this price decrease? A) The demand for untapped oil reserves is decreasing as firms become more wary of stranded assets B) The cost of renewable energy development is declining C) The increased supply of offsets exceeds any increases in demand D) All of the trends listed above are partially responsible for the decline in carbon prices

The answer is D. As mentioned in class, all of the above trends are contributing to an artificially low price for carbon offsets - which fails to adequately incentivize programs that reduce carbon emissions.

Jordan is a fund manager in charge of an SRI portfolio. He is currently assessing whether to invest in power plant that has been involved in a number of sustainability initiatives. One of these actions is that it now derives 30% of its energy from wind turbines, which have lower carbon emissions and are a cost-effective energy source. Because wind energy continues to decrease in cost as the technology improves and also lowers business risk involved in fluctuating fossil fuel prices, Jordan places more value on this initiative than others with less of a business impact. Which of the following SRI strategies does this decision fall under?A)Ethical negative screening B)Norms-based screening C)Impact/community investing D)Financially-weighted best in class

The answer is D. Financially-weighted best in class is a subset of best-in-class screening and is defined as giving more weight to sustainability aspects most likely to impact financial performance. Because using wind turbines as a power source is cost-effective and lowers business risk related to uncertain fossil fuel costs, it falls under this category.

Alex is concerned about her greenhouse gas emissions for her company and their operational classification. The following are some of her firm's business activity: (1) She often flies to different clients all around the world for marketing meetings. (2) She often drives herself to work from New Jersey to New York (3) Her company uses a lot of fossil fuels for electricity. (4) Her company acquires a lot of paper for marketing materials and the trucks that deliver it drive long distances. Which of the following does NOT correctly pair the business activity with the correct operational scope? A Business Activity 1 - Scope 3 B Business Activity 2 - Scope 3 C Business Activity 3 - Scope 2 D Business Activity 4 - Scope 1

The answer is D. The emissions from the trucks are not owned by the company and therefore is a Scope 3 activity

Which ecosystem services are being provided in the following scenario? Crystal River flows through Citrus County, Florida. The river offers opportunities for boating, diving, swimming, fishing, and even opportunities for snorkeling with manatees. The river is a six-mile long waterway, and the Crystal River Springs group is the second largest springs group in Florida. The springs and their associated rivers are home to countless plants and animals, with water pure enough to reflect the sandy bottoms. Crystal River was also once a center of cedar timber logging, and additionally has historical and cultural significance to native populations. A) Provisioning Services B) Regulating Services C) Cultural Services D) All of the above

The area provides wood through timber logging (Provisioning services), regulating services by purifying water from the springs, and cultural services through eco-tourism and spiritual significance for native populations. Information comes from the following websites: http://www.crystalriverfl.org/page/about_crystal_river https://www.fws.gov/refuge/Crystal_River/wildlife_and_habitat/Springs.html

What best describes the failure of the Yasuni-ITT Trust Fund? A) Countries were not willing to absorb the private costs to provide the benefits of a public good (collective action problem). B) The Ecuadorian government demanded more money than the oil reserves were worth. C) The Ecuadorian government's poor relations with other countries made it difficult to garner funding. D) The number of offsets provided from the trust fund was not enough to get countries to donate.

The correct answer is A - in a tragedy of the commons type situation, the international community was unwilling to pay the private cost (funding) for the benefit of a more environmentally-sustainable society.

When it comes to CO2 emissions, countries and businesses can choose to purchase either carbon offsets or allowances. Which of the following is NOT true about offsets and allowances? A) Countries are required to purchase offsets. B) Offsets are largely purchased for reputation and feeling "good" about releasing carbon emissions. C) Allowances are mainly purchased for regulation compliance. D) Allowances only need to be purchased in designated emissions trading schemes.

The correct answer is A. Countries are not required to purchase offsets - they often do so for reputation purposes.

The screening characteristics for social/environmental impacts that Better Ventures uses when evaluating potential startups are fundamental impact, intrinsic impact, and measurable impact. Suppose they are considering investing in Solar Panels Inc, a startup that develops improvements to solar panel technology and then sells these patented improvements to manufacturing firms. Their business model includes measurement of how much more efficient their solar panel technology is compared to traditional solar panels. However, their supply chain is without a focus on creating social or economic impact within it. Which two categories of impact does this startup fulfill? A) Fundamental impact and measurable impact, but not intrinsic impact B) Intrinsic impact and measurable impact, but not fundamental impact C) Fundamental impact and intrinsic impact, but not measurable impact

The correct answer is A. This startup fulfills fundamental impact because creating improvements to solar panel technology will create improvements in the clean energy space and society as a whole. It also fulfills measurable impact because they measure how much efficiency is improved because of their technological improvements. However, it does not fulfill intrinsic impact because they do not include a focus on creating social and/or economic benefits from their supply chain or use of their product.

When picking investments for their VC fund, should the co-founders of Better Ventures employ a "rifle" or "shotgun" approach? Why? A) Rifle approach; making a few large investments & building a small portfolio reduces risk for a VC fund B) Rifle approach; if investments are ultimately successful, the rifle approach results in higher financial/social returns per investment and allows BV to spend more "hands-on" time with chosen firms C) Shotgun approach; making many small investments & building a large portfolio reduces risk for a VC fund D) Shotgun approach; if investments are ultimately successful, the shotgun approach results in higher financial/social returns per investment and allows BV to spend more "hands-on" time with chosen firms E) None of the above

The correct answer is B. While C is true for most traditional VC funds, BV is unique in that it is impact-driven and the co-founders like to spend a large degree of "hands-on" time with their firms. Because of their unique mission and operating model, BV would opt for a selection process more closely resembling a "rifle approach."

One of the preconditions of Payments for Ecosystem Services is related to the amount of intrinsic motivation for environmental conservation. Which of the following statements about the intrinsic motivation for environmental conservation is FALSE? A) PES is most effective when there is a low intrinsic motivation for environmental conservation B) Low intrinsic motivation for environmental conservation is positively correlated with income C) High intrinsic motivation for environmental conservation is positively correlated with education D) If you have a high intrinsic motivation for environmental conservation, you do not need a financial incentive in order to choose a more environmentally-friendly option

The correct answer is B. High intrinsic motivation for environmental conservation is positively correlated with income because if you are comfortable financially, you have a stronger ability to choose the more environmentally-friendly option, even if it is more costly. As a contrast, if you are less affluent, you will be motivated to choose the option that is the least expensive because you do not have as much financial flexibility. Therefore, PES is an effective option because you will be compensated for choosing the more environmentally-friendly option.

In class, Professor White discussed the UN Global Compact. This initiative has the participating firms report on whether they meet a basic level of environmental, social, and economic standards created by the UN. If a firm does not meet these minimum standards or does not participate in the UN Global Compact, some investors will not choose to invest in that firm. Avoiding investing in firms that do not meet the UN Global Compact standards falls under which SRI strategy? A) Positive screening B) Exclusionary screening/norms-based screening C) Impact/community investing D) Corporate engagement and shareholder action

The correct answer is B. Norms-based screening (a sub-category of exclusionary screening) is defined as the screening of investments against minimum standards of business practices based on international norms. The UN Global Compact is an example of this.

The Chesapeake Bay, both within the context of the Bay Game and in real life, can be used as an example of the Tragedy of the Commons. Which component of the Bay Game best exemplifies this? A) The Pennsylvania farmers are physically removed from the Chesapeake Bay, so their influence on the Bay from their farming nutrient runoff is not as salient to them B) While the watermen depend on having sufficient populations of finfish and crab species in order to maintain their livelihood, they are simultaneously economically incentivized to fish as much as possible C) When the natural resource regulators provide incentives to farmers for sustainable farming practices, this incentivizes them to produce more sustainably farmed products, which leads to an oversupply, which causes the prices of these products to drop D) A regulator may provide an incentive to their constituent to adopt more sustainable practices, but if the constituent ignores it, the incentive is useless

The correct answer is B. The Tragedy of the Commons is when there is a common resource that multiple users depend on for their livelihood. Each individual is incentivized to maximize their own wellbeing by drawing on the resource as much as possible, but this causes a negative impact on the common resource. If they all do this, this causes the common resource to be destroyed. Within the Bay, the common resource is the fish/crab populations. The watermen would each like to fish as much as possible to make the most money. However, if they all did this, the fish/crab populations would collapse from overfishing and their livelihoods would be ruined.

Megan is deciding which place she should implement a payment for environmental services (PES) system. Which of the following places meets all of the preconditions for implementing such a system? A Place A: where people have many property rights, the government is good and will help with enforcement, and there is high intrinsic motivation to help the environment. B Place B: where people have many property rights, the government is good and will help with enforcement, and there is low intrinsic motivation to help the environment. C Place C: where people have few property rights, the government is good and will help with enforcement, and there is high intrinsic motivation to help the environment. D Place D: where people have few property rights, the government is bad and will not help with enforcement, and there is low intrinsic motivation to help the environment.

The correct answer is B. The preconditions for a PES system is a "well-defined and enforced system of property rights, sufficient administrative, enforcement, and monitoring capacity" and "low intrinsic motivation for environmental conservation), as discussed in class.

Brendan's company has to reduce the amount of carbon his company is producing. Currently, he is omitting 200 million metric tons of carbon in the air. However, he needs to get his carbon emissions to 150 million metric tons. He has two options: Brendan can either buy carbon emission reduction credits or pay $800 million to make changes to his company this year and reduce the carbon himself. At the following price points, which of the following is the maximum he would pay per CER (1 CER = 1 million metric ton)? A $5 per 1 metric ton of carbon B $10 per 1 metric ton of carbon C $15 per 1 metric ton of carbon D $20 per 1 metric ton of carbon E He would be willing to pay all of the above prices

The correct answer is C. He needs to reduce his carbon emissions by $50 metric tons. At $15 per metric ton of carbon, he would be paying $750 million which is less than his alternative of $800 million. At $20 per metric ton of carbon, he would be paying $1000 million which is more than his alternative of $800 million.

Brendan's company has to reduce the amount of carbon his company is producing. Currently, he is omitting 200 million metric tons of carbon in the air. However, he needs to get his carbon emissions to 150 million metric tons. He has two options: Brendan can either buy carbon emission reduction credits or pay $800 million to make changes to his company this year and reduce the carbon himself. At the following price points, which of the following is the maximum he would pay per CER (1 CER = 1 million metric ton)? A) $5 per 1 metric ton of carbon B) $10 per 1 metric ton of carbon C) $15 per 1 metric ton of carbon D) $20 per 1 metric ton of carbon E) He would be willing to pay all of the above prices

Suppose Brad is a landowner with a huge tract of forest. He is considering cutting down the forest in order to sell the timber. However, the local government has noticed that there is an increase in reported breathing problems from their constituents from various sources of pollution. Because of this, they are offering to pay Brad to maintain his forest as it stands to help mitigate the local air pollution. Which of the following categories of ecosystem services does this activity fall under? A) Cultural services B) Provisioning services C) Regulating services D) Supporting services

The correct answer is C. Improving local air quality by maintaining forests and other natural resources is considered a regulating service.

A big takeaway from the Bay Game was the idea of working within a system regulated by supply and demand and the associated externalities that arise. Which of the following is NOT an example of a negative externality? A) High amounts of nutrient runoff from developing land B) Air pollution from farmers operating mechanical gear on crop fields C) Private treatment for contagious diseases D) Secondhand smoke from cigarette smokers

The correct answer is C. Private treatment for contagious diseases actually provides a positive externality with the social benefit being that there's a smaller likelihood of catching contagious diseases.

Megan is currently in the early stages of venture capital financing. She has developed a prototype of her product and she believes that she is ready for the next stage. Which of the following is NOT an action she would take in the next step of venture capital financing? A Scaling: Megan will research and implement ways to produce more of her product beyond current capacity. B Improvements: Megan will improve her prototype before production. C Business Plan: Megan will develop a business plan. D Series A Funding: Megan will look to more investors to fund the next stage of her business growth.

The correct answer is C. The making of a business plan should happen in the seed stage and not the next stage (expansion stage). The next stage is the expansion stage because she developed a prototype which happens in the early stage.

Which of the following correctly pairs the category of carbon credit (allowance or offset) and the type of credit that Yasuni would have been classified as? A Allowance -- Cap and Trade B Offset -- Cap and Trade C Allowance -- Certified Emission Reductions (CERs) D Offset -- Certified Emission Reductions (CERs)

The correct answer is D. Part A of the case expected it the Yasuni Guarantee Certificates to be traded at European Markets. Part B of the case gave information about the price for CERs as the Yasuni Guarantee Certificates would command a similar price. Additionally, CERs are classified as offsets and not allowances.

A large component of the Bay Game was the integration of systems thinking. Which of these is NOT an example of how actions in the Bay Game influenced the system? A) When the Natural Resource regulators gave incentives for sustainable agriculture, this caused an increase in the supply of the sustainable agriculture products, which caused the prices of these products to drop B) While physically more disconnected, the runoff from PA farmers was the largest and had the most influence on the Bay nutrient levels, which affected the population of the finfish and crab species C) When the fishing limits were imposed on the watermen, the catch amounts were decreased, which both increased the price of the crab/fish products and increased their populations within the Bay D) While the Virginia waterman and the Maryland waterman had similar financial outcomes, the Maryland waterman was more satisfied because his values were less focused on economic outcomes and the Virginia waterman was more focused on economic outcomes

The correct answer is D. The system of focus is the Bay. Systems thinking is focused on how actions in one part of the system affect outcomes in other parts of the system, which is described in answer choices A, B, and C. D is an example of the importance of values on your satisfaction with your outcome.

One method that investors can use to evaluate potential investment projects is the Net Present Value method. Which of following is not a characteristic of the Net Present Value (NPV) method? A) It incorporates the concept of the time value of money through the use of a discount rate. B) The formula for calculating NPV includes the sum of the present values of the future cash flows minus the initial cash outflow. C) An advantage of the NPV method over the payback period method is that it incorporates cash flows received after the payback period. D) As the discount rate increases, the present value of the future cash flows increases, all else equal.

The discount rate is a major component of the NPV method. As the discount rate increases, the present value of the future cash flows decreases, all else equal. This is because the future cash flows are being discounted at a higher rate. You can think of it like receiving a discount while shopping: the higher the discount, the lower the price of the item.

In discussing the Dalmia Bharat case, we discussed five steps in computing SROI. Of these steps, which was the central problem that is most scrutinized in SROI analysis? A) Mapping stakeholders: understanding who will be involved in the processes and how they will be involved B) Mapping outcomes: developing an impact map that shows the relations between inputs, outputs and outcomes C) Evidencing outcomes and giving them a value: finding data to show whether outcomes have happened and then ascribing some value (typically a monetary value) D) Establishing the impact: understanding the impact introduced by your project and eliminating impact from aspects of change that would have happened regardless of the project E) Calculating returns: sharing findings with stakeholders and verifying processes/reports.

The economic outcomes of a CSR initiative are largely estimates; in using the evaluative approach, we examine historic data and try our best to ascribe monetary values to outcomes. The central problem in the Dalmia Bharat case was whether or not the assumptions behind the SROI analysis were sound: was the metric of benefit per beneficiary correct? Answer C is typically the biggest challenge with SROI analysis, as demonstrated by this case.

Can the government use taxes to incentivize farmers in the Chesapeake Bay watershed? A) Yes B) No

The farmers lobby is very powerful and farmers have thus been protected from negative tax incentives. Government must use subsidies to incentivize farming practices.

Large companies often work with other corporations in a variety of efforts and operations (e.g. a joint venture). For operations that are jointly owned, the Greenhouse Gas Protocol offers two approaches: the equity share approach and control approach. Which of the following statements are false about the equity share approach? In the equity share approach, an organization reports emissions from sources that are wholly owned. In the equity share approach, an organization reports the share of emissions that corresponds to its equity share for partially owned sources. In the equity share approach, all partially owned sources are reported as 50/50 in terms of share of emissions. None of the above.

The first two are both correct statements about the equity share approach just based on whether sources are wholly owned or partially owned. C is false unless the breakdown is actually half-half in terms of equity.

What is one theory of why impact investing has the potential to be profitable? A) Entrepreneurs have an intrinsic motivation to succeed B) Consumers will want to buy in because of the mission C) Workforce talent and engagement will be higher because of mission D) All of the above

The founders in the Better Ventures case believed that all of the factors listed contribute to the ability to leverage the mission of impact investments to make them profitable.

Which of the following would NOT be considered acts of corporate engagement and shareholder action for sustainable investment? A) Proxy voting guided by comprehensive ESG guidelines B) Communication avenues to senior managment C) Filing shareholder proposals D0 Increasing dividends

The increased payment of dividends to shareholders does not contribute to increasing corporate engagement or shareholder action although it may influence the actions or well-being of sharholders.

As explained in the case "UBS and Climate Change -- Warming Up to Global Action?", there are a number of methods for purchasing carbon offsets to artificially lower a company's carbon footprint. One of the markets for offsets uses certified emissions reduction units (CERs), through which purchasers fund carbon-cutting projects in developing countries. Why is funding carbon-cutting efforts in developing countries seen as more desirable than funding carbon-cutting efforts in developed countries? A) Investing in carbon-cutting measures in developing countries yields more positive externalities in those communities where the projects take place, while carbon-cutting projects in developed countries do not have as strong of impacts on the communities involved. B) From the perspective of marketing corporate social responsibility, funding carbon-cutting efforts in developing countries is seen as a greater humanitarian service, whereas cutting emissions of companies in developed countries is seen as an expected practice. C) The social/health impact of cutting CO2 in developing countries is greater than cutting emissions in developed countries, where air pollution impacts are already well mitigated. D) The marginal cost of abating CO2 in developing countries is far less than cutting an equivalent amount in a developed country.

The marginal cost of abating a ton of CO2 in 2005 in a developing country was only $5-$10, so corporations investing in CERs could make large carbon-cutting strides for very low cost.

I'm thinking about opening a basketball court on a wetland. In order to destroy this wetland, I've decided to built a wetland somewhere else to mitigate the impact of my basketball court. Which wetland should I open? Wetland A: Location: Down the street Wetland Quality: Similar quality to wetland being destroyed Wetland B: Location: 500 miles away Wetland Quality: Similar quality than destroyed wetland Wetland C: Location: Down the street Wetland Quality: Poorer quality to wetland being destroyed Wetland D: Location: 300 miles away Wetland Quality: Higher quality than wetland being destroyed

The most important part of a wetland mitigation is that it needs to be in the same region and within the same quality of the wetland being destroyed. For that reason, wetland A is the correct answer as it is close in proximity and of similar quality.

The Relief Investment Fund is a financial organization that makes money for its investors by investing in relief projects that provides resources and medicine to impoverished countries. They are currently deciding between two possible projects that would provide vaccines to children in poor South American villages. Both projects would require a $200,000 investment and the details are below: Project A: 500,000 vaccines; 12% returns over 5 years Project B: 300,000 vaccines; 16% returns over 5 years The company ultimately decided to move forward with Project A, as it is more aligned with the fund's investment goals. What category of investing best describes this fund's decision? A) Sustainability Investing B) Finance First Impact Investing C) Responsible Investing D) Impact First Impact Investing

The nature of this fund is impact investing. Because the company passed up greater returns in favor of providing more vaccines, the type of investment is impact first rather than finance first. A finance first fund would have invested in project B.

Spin is a Dockless biking company that has demonstrated it's GPS tracked bike sharing concept works and began business operations. Currently, they operating and conducting the platform in 18 different cities and 30 campuses. Now, it has begun looking for money to negotiating contracts with additional municipalities and to scale their platform. Based upon the above description, Spin is looking for which stage of financing? A) Seed-Stage B) Early-Stage C) Expansion-Stage D) Later-Stage

This company has become past seed/early stage due to already having a proof of concept and running the business in multiple cities and campus. However, it likely has not reached levels of steady growth due to it's plans for scaling and adding many new cities with the financing. Thus, it is likely in expansion stage.

Stetho Inc. is trying to categorize there green hours gas emissions for an upcoming board meeting. Which of the following with Stetho Inc. most likely not include as a Scope 1 GHG emission? Combustion of petrol in order to maintain the temperature of running machinery in Stetho Inc. plant. Combustion of diesel from forklift working on main construction area of Stetho Inc. Emissions created as byproducts in the process of making ammonia for large quantity sales to industry Leakage of emissions stemming from combustion and compression of natural gasses from the energy supplier.

This option is a scope 3 emission which is an indirect GHG. Scope 3 is defined as 'emissions that are a consequence of the operation of an organization but are not directly owned or controlled by the organization'.

As a student at UVA, you have been tasked with helping a local entrepreneur evaluate a investment project. He plans on starting a new restaurant which will cost $500,000 to start but will lead to returns of -$30,000 the first year and $6,000 for nine years after. The investor then plans to sell the restaurant at the end of that year for $750,000 as an establish restaurant. If he requires an hurdle rate of 5%, what is the NPV of the project?

This question is a basic NPV problem that can be solved using excel. With a year one loss of of $30,000 and gains of $6,000 one has the basis for the cash flows. The $750,000 should be recognized as a gain at the end of the 10 years and thus should accompany the gain of $6,000 in the last year. Using the NPV equation with a 5% rate (hurdle rate) finds the NPV of these cash flows to be $472,479.64. We then subtract the $500,000 initial investment to find a ($27,520.36) NPV.

Suppose you are in charge of UTS here at UVA and are attempting to request additional funding to hire additional staff for more bus routes during the busiest times of the day. While this proposal will cost $10,000 for the year, you anticipate 2,000 less student tardies throughout the year which you calculate the value per tardy to be around $20 dollars with a dead weight loss of 10% and an attribution percentage of 20%. Assuming no other effects, what is the expected gross SROI leverage for this proposal? 2.88x 1.88x 2.34x 2.56x 1.56x

To calculate leverage, we want to measure the value of our impact against the costs. The value of this proposal is $20* 2,000 or $40,000. We then need to multiply by 90% and 80% to find our marginal value generated of $28,800. Dividing this value by the initial cost of $10,000 gives us a leverage of 2.88x.

Jim is deciding which online course would be a better option for his career. Both courses have an upfront cost of $10500. Option A is anticipated to provide $3000 yearly value for the first three years and $5000 for four years after that. Option B is anticipated to provide $1500 yearly value for the first two years and $5500 for five years after that. What is the IRR for each option, and which should Jim pursue? (Answer will have the correct IRR's for each option.) A) Option A IRR: 30% Option B IRR: 30% Jim could choose either options: they provide the same value. B)Option A IRR: 30% Option B IRR: 28% Jim should pursue option A: it provides the higher IRR. C) Option A IRR: 31% Option B IRR: 39% Jim should pursue option B: it provides the higher IRR. D) Option A IRR: 12% Option B IRR: 10% Jim should pursue option A: it provides the higher IRR.

Type out all of the cashflows for the seven years. Then run the IRR function across the cashflows, including the initial outlay. This provides option A with an IRR of 30% and option B with an IRR of 28%.

Arnold is one of the last hunter-foragers in the US. He subsists off of protein packed trout from a nearby lake. Recently Arnold has had a hard time catching trout and suspects it is because of farmer John dumping his manure into the lake. Under a payments for ecosystem services model who would be the service user and provider in this scenario? A) User: Arnold, Provider: Trout B) User: Farmer John, Provider: Arnold C) User: Arnold, Provider: Farmer John D) User: Farmer John, Provider: Manure

Under the PES model the user would be Arnold because he is the person consuming the services (trout) from the environment, but farmer John is the provider since he is the one Arnold would have to pay to stop polluting the lake to save the trout.

What is generally the minimum desired IRR for a venture capital firm? A) 20% B) 25% C) 30% D) 35% E) 40%

VC firms want an IRR of 30%. They take bigger risks so they also desire a larger reward.

Matt wants to know what what the value of his ownership percentage for a firm he invested in will be in five years. The P/E ratio is 15x, current earnings for the firm is $50 million, and Matt made an original investment of $30 million in the firm. Five years from now, the earnings of the firm is projected to be $70 million and the P/E ratio is 17x. What is the undiscounted value of his investment five years from now? A $35.3 million B $42 million C $47.6 million D $55.6 million

Value of firm = P/E number * earnings = 15 * $50 million = $750 million Matt's investment percentage = Amount invested / Value of firm = $30 million / $750 million = 4% Value of firm five years from now = P/E number * earnings = 17 * $70 million = $1190 million Value of Matt's investment five years from now = Value of firm * Ownership Percentage = $1190 million * 4% = $47.6 million

According to the Credit Suisse case, which of the following impact funding strategies is one that "support[s] social purpose organizations through grants and investments" (page 12)? A Traditional Philanthropy B Venture Philanthropy C Impact Investing D Sustainable Investing

Venture Philanthropy is the correct answer. The following are the definitions of how the case defines the other types of impact strategies (page 12 of the case): Traditional Philanthropy: "grant-based funding of social-purpose organizations" Impact Investing: "investing with the intention to create measurable impact and financial return" Sustainable Investing: "investing in ESG leaders and in sustainable sectors [...] engaging on ESG issues"

Mark has 50 acres of land that he wants to use to sell offsets to carbon emissions. He has the land surveyed and verified as a suitable candidate to produce carbon offsets. He begins collecting payments for protecting his land and recapturing carbon. However, a small forest fire breaks out on part of his land and destroys all the plant life there. The fire adds more greenhouse gases to the atmosphere, and the reduction of plant life makes it impossible for him to capture enough carbon that year to offset the emissions from the forest fire. He covers up the forest fire and continues to collect payments for his carbon offsets. Which aspect of offset quality has Mark failed? Conditionality Additionality No Leakage Permanence

While additionality may also be compromised since Mark's carbon recapturing has presumably dropped below the baseline of what would have occurred otherwise, conditionality is the center of what Mark has done wrong in his offset program. Conditionality requires that payments are conditional on the actual removal of greenhouse gases from the atmosphere. Because he had a net addition of greenhouse gases, rather than a net reduction, and he still collected payments for his offsets, Mark has failed the conditionality aspect of offset quality.

Soccket is a charging soccer ball manufacturer with an interest in bringing soccer and power to the developing world. However, assume that the company expects to never achieve profitability and in fact is likely to lose some equity. Nonetheless, for a small price, there are HUGE positive social and environmental impacts. Would typical impact investors consider investment? A) Yes, it's okay if the company loses money as long as there are large environmental impacts. B) Yes, it's okay if the company loses money as long as there are large social impacts. C) No, the impact investor aims to generate a financial return. D) Both A and B E) None of the Above

While impact investors are concerned with the positive impacts that an investment will generate, there is typically the expectation of financial return as well or at least the return of nominal principle.

Which of the following is NOT true about Impact Reporting and Investment Standards (IRIS)? It describes the social and environmental performance of an organization. It keeps management accountable for the environmental performance of a company. It standardizes communication in reporting language. It enables comparisons between companies and investors in terms of environmental performance.

While it is true that IRIS allows for a common language of environmental performance and can allow for comparisons between companies, it does not necessarily hold management accountable for better performance. This may, however, be a possible effect when using IRIS to compare one company's performance against others for norms-based screening, etc.

Bethany wants to build a workout studio (a Barre.[d] franchise) over a wetland. However, because of the No Net Loss rule, she must purchase wetland credits. Which of the following is the best type of credit to purchase if she is concerned about the quality of her credit and there impact of her credit on the environment? A Bethany should purchase a wetland credit for a naturally occurring wetland located 1000 miles away from where she intends to build. B Bethany should purchase a wetland credit for a man made wetland located down the road from where she intends to build. C Both of the credits are of equal quality.

While there are arguments that a man made wetland is not the same as a naturally occurring one, answer B is still the best choice. Because it is located near the wetland that is about to be built over, this wetland will likely contain the same species of life (biodiversity) and therefore, will be a closer substitute. A naturally occurring one that is far away likely has a different composition of species.

An investment bank is deciding whether or not to invest in Bob's Burgers. Established in 1987, Bob's Burgers has been extremely profitable and can reliably expect cash flows of $25,000/year. Bob's Burgers has approximately $10,000 in non-operating assets, holds $7,500 in debt, and has 5,000 outstanding shares. Although he has achieved success over the course of his career, Bob is ready to settle down and spend more time with his grandchildren. Bob fully expects to retire and close up shop after 10 more years of operation. He has started some preliminary market research and expects to sell his restaurant equipment at the time of his retirement for a considerable sum. Currently, the market value of a share of stock in Bob's Burgers is $35. Using a 10-year valuation, what is the minimum salvage value required in year 10 to make Bob's Burgers a promising investment? Assume a 10% discount rate. A) 75,000 B) 74,000 C) 49,000 D) 50,000

Year 1: $25,000/(1+0.1)^1 Year 2: $25,000/(1+0.1)^2 Year 3: $25,000/(1+0.1)^3 Year 4: $25,000/(1+0.1)^4 Year 5: $25,000/(1+0.1)^5 Year 6: $25,000/(1+0.1)^6 Year 7: $25,000/(1+0.1)^7 Year 8: $25,000/(1+0.1)^8 Year 9: $25,000/(1+0.1)^9 Year 10: ($25,000+X)/(1+0.1)^10 Minimum value of X, salvage value, is calculated to be $49,000. $172,505.8 | PV of Cash Flows + $10,000 | Non-Operating Assets = $182,505.8 | Value of the Firm - $7,500 | Debt of Firm = $175,006.8 | Equity of Firm / 5,000 | Shares of Stock Outstanding = $35.001 Price per Share The investment bank will choose to invest in Bob's Burgers when the intrinsic value of the stock is greater than the market price. The intrinsic value is greater than the market value of $35/share when the salvage value is at least $49,000.

You operate a fund similar to the RIIF fund discussed in the Credit Suisse case. Your clients (capital providers) demand a gross IRR* of 28%. Your initial investment in 2018 is $5M for a 10% equity stake in the company. We also know that the company is expected to IPO in 2022 with projected revenue in 2022 at $15M. Given this information, what revenue multiple do you need to achieve your desired IRR? Round up during IRR calculations. *Gross IRR = IRR before performance fees are taken into account. A) 3x B) 9x C) 7x D) 5x

Your initial outflow of $5 million gives you a 10% interest in the company. Assuming revenue of $15 million in 2022, you can multiply the different multiples by 15. $15 x 3 = 45 $15 x 5 = 75 $15 x 7 = 105 $15 x 9 = 135 The numbers above represent the total value of the company. Of that, we'll have a 10% stake when the company IPO's. Thus, we can take 10% of each value to figure out what our equity is worth. You can then run an IRR function with a $5 million initial outflow and a cash inflow in year 2022. This will reveal you need a 9X revenue multiple.

In calculating an organization's carbon footprint, the decision between using the equity share approach or the control approach relates to which scope of emissions? 1 2 3 across all three

author says scope 1

Which is NOT considered a public payment scheme for a PES approach? Government payments to farm property owners Judicial punishment or fines for Chesapeake Bay polluters Government tax breaks to incentivize sustainable actions Philanthropic payments

tbh I question if this is right B Three schemes of payment considered "public" payments for PES measures are: Gov. payments to property owners Gov. tax breaks Philanthropic

Nelson Power Co. had depreciation of $220,000 and operating cash flows of $290,000 in 2017. While the company currently pays a corporate tax rate of 30%, new tax laws will drop this figure to 22% in 2018. Assuming their EBIT remains the same and their depreciation decreases by $15,000 in 2018, will Nelson Power's operating cash flows increase or decrease? By how much? A) Increases; $3,000 B) Increases; $7,000 C) Decreases; $7,000 D) Decreases; $3,000 E) Remains the same; $0

100,000 EBIT - 30,000 Taxes (30% Corporate Tax Rate) 70,000 Net Income + 220,000 Depreciation 290,000 Operating Cash Flows 2018 100,000 EBIT - 22,000 Taxes (22% Corporate Tax Rate) 78,000 Net Income + 205,000 Depreciation 283,000 Operating Cash Flows While Nelson Power Co. will receive a boost in net income of $8,000 from decreases in the corporate tax rate, the decrease in depreciation of $15,000 will cause the firm's total operating cash flows to decrease by $7,000, from $290,000 in 2017 to $283,000 in 2018.

During which stage does a start-up business typically introduce prototyping and pilot testing? A) Pre-seed B) Seed C) Early Stage D) Series A / Expansion E) Later Stage

As discussed in class lecture, and in the Better Ventures case: Pre seed: concept Seed: proof of concept, management team, business plan Early Stage: prototyping, trial runs Series A: scaled growth, improvements

In our Bay Game what was the issue with subsidizing the farmer's sustainable practices too heavily? A) Moral Hazard, farmers could afford to be less efficient therefore wasting resources B) The farmer's sustainable produce became much cheaper than their conventional produce C) There was not enough money left to help the waterworks buy new equipment D) The stimulus caused farmers to overproduce, which ended up harming the bay's health

In the Dalmia Bharat Case, what incentivized the head of the Dalmia's social responsibility arm to analyze the SROI of past projects (what is the 'issue' in this case)? A) The arm needed to be able to prove their positive social impact in some regions where their future business proposals were being questioned. B) The arm needed to quantify the social impacts of their projects in a convincing manner to justify the past funding from the main Dalmia corporation and attempt to receive more. C) The arm wanted the positive media and government attention for quantifying the positive results of their past projects, since India's pollution issue has been perceived as irreversible across the globe.

B The arm needed to quantify the social impacts of their projects in a convincing manner to justify the past funding from the main Dalmia corporation and attempt to receive more. The Dalmia Group parent corporation funds the ongoing and future social responsibility projects, so the head of the arm needed to justify its prior projects' expenses.

Why are there dead zones in the Chesapeake bay? A) Nitrogen and other fertilizer run off is toxic to life in the bay B) Animals have started avoiding areas of high boat traffic C) Nitrogen causes algal blooms, which upon decomposing suck oxygen out of the water D)The currents of the Chesapeake create a very salty area where life cannot grow

C - Eutrophication

Which of the following is NOT an externality from a coal power plant? A) Carbon and other gaseous emissions from burning coal B) Chemical runoff discharged to the water supply C) Coal shipments to power factory D) Local jobs and economic stimulus via tax payment E) Infrastructure investment by factory to link roads and rail

Coal shipments are an input, while the other four are results of the factory's processes

In Xville, company V currently emits 5,000 tons of carbon por year. On the other hand, company Y emits 5,000 tons of carbon per year. The Xville local government passes a law stating that these two companies can only emit 5,000 tons of carbon per year in total. It costs company V $1,500 to reduce each ton. It costs company Y $500 to reduce each ton. The current Carbon ton is trading at $1,000 per ton. What is the total cost? A) 1,000,000 B) 1,500,000 C) 2,000,000 D) 2,500,000

Company Y would choose to reduce its 5,000 tons of carbon per year at a cost of $2,500,000 ($500 x 5,000). Furthermore, Company Y would then sell 2,500 of those carbon credits to Company V. Company Y Revenue would then be: 2,500 x 1,000 = $2,500,000 The cost for Company X would be $2,500,00 as well. That means that the total cost is of $2,500,000

The SROI framework and the Dalmia Bharat case discuss two approaches for looking at social impact: the evaluative approach and the forecast approach. Which of the following best describes the difference between the two approaches? A) The evaluative approach focuses solely on assessing what your firm has done, while the forecast approach looks at competitors. B) The forecast approach focuses more on traditional, concrete financials while the evaluative approach looks solely at the social revenues and costs of a project. C) The evaluative approach looks only at primary stakeholders: employees, shareholders, and customers. The forecast approach considers secondary stakeholders such as affected communities and supply chain participants. D) The evaluative approach is conducted retrospectively and based on actual outcomes that have already taken place. The forecast approach predicts how much social value would be created if the activities meet their intended outcomes.

D is the correct answer, taken directly from the Dalmia Bharat case. The other three answers don't describe this key difference.

What are the 3 main ESG Metrics? Equity, Sustainability, Governance Environmental, Sustainable, Geographical Equity, Social, Governance Environmental, Social, Governance Ecology, Sustainability, Governance

Environmental, Social, Governance

On a graph of increasing Financial Return against increasing Social Return, which of the following would best describe and investment with high Social Returns and below market average Financial Return? A) Traditional Investment B) Financial First Impact Investment C) Treasury Note D) Philanthropy E) All of the Above

I don't like this question.... While a philanthropy can be used to characterize a number of different types of investments, say a scholarship or grant, none of the above sacrifice financial below market value as a philanthropy does.

Ken owns a two story building in RIchmond, VA. Out of this building he owns and operates a bar and music club, the Canal Club. Ken has a contract with a buyer to purchase the building in 8 years for $400,000. The Canal Club also profits $100,000 per year. In a surprising turn of events, his buyer has offered to purchase the building today for a substantial sum, but Ken is worried about losing out on 8 years of profits. How much would the buyer have to offer so that Ken should accept the offer? (Assume a 10% discount rate) A) $690,224 B) $720,096 C) $746,789 D) $810,246

If Ken keeps the bar, he will receive $100,000 for 7 years and $500,000 in the 8th year. By discounting those values back at a 10% discount rate, the present value of 8 years of cash flows is $720,096.

The net income in a year for a start-up company called BeeFresh is $150,000. They anticipate a tax rate of 30% for this year, with an annual depreciation expense of $15,000. What is BeeFresh's operating cash flow for this year? A) 94,500 B) 120,000 C) 109,500 D) 165,000

Net income is the value after taxes have been deducted, so in order to calculate operating cash flow, you only need to add depreciation value back in. $150,000 + $15,000 = $165,000

Goldman Sachs decides to upgrade its lighting and air-conditioning system to become more energy-efficient and improve its image to attract more socially-aware talents. Moreover, Goldman will receive financial benefits in the form of an Investment Tax Credit (ITC). This sustainable project will cost $3 billion, and the company's old projection of earnings before tax is $40 billion. After taking into account of the project cost and the ITC, Goldman released its new estimated Net Income to be $24.65 billion. What is the estimated percentage of ITC on the project that the company will receive? (35% corporate tax rate)

New Earnings Before Tax(EBT) = 40 - 3 = 37 EBT x 35% Tax Rate = 37 x 0.35 = 12.95 20% ITC Tax Deduction = 0.2 x 3 = 0.6 Tax Payable = 12.95 - 0.6 = 12.35 New Net Income = 37 - 12.35 = 24.65

With the massive reductions to bee populations worldwide, what type of ecosystem service are we most in danger of losing? Provisioning Service, honey from bees can be consumed Regulating Service, the pollination of plants maintains healthy ecosystems Cultural Service, Bee Movie (2007) made over $287,000,000 in the box office Supporting Service, the carcasses from dead bees break down and release nutrients back into the soil

Regulating Service, but tbh should be Bee Movie

The Small Company has revenues of $100,000 and operating expenses of $30,000. Given a depreciation of $10,000 and a tax rate of 35%, what is the company's operating cash flow? $19,000 $29000 21000 $49000 $39000

Revenues 100000 - Operating Expenses 30000 ________ EBITDA 70000 - depreciation 10000 _______ EBIT 60000 - taxes 21000 _____ EBT 39000 + Depreciation 10000 _____ Operating Cash Flow 49000

EcoPaper is a national leader in the production of sustainable paper-materials. They minimize the raw materials used, and maximize their use of recycled materials for their lower-quality paper products. The company wholly owns nearly all aspects of production, with the exception of their raw material extraction. EcoPaper uses the services of A.K. Lumber, Inc. for the extraction of raw materials for their production. The paper factory holds 30% equity of this deforestation company. The CEO has decided it is worth the time, money and effort to calculate EcoPaper's total carbon foot print--including scope 1, 2 and 3 emissions. They will be using the "control approach" to calculating their organizational carbon footprint, as opposed to the "equity share approach". Which of the following should they exclude from their calculations? A) emissions from unintentional leaks and evaporation during production B) emissions from purchased electricity C) emissions from employee travel to the factory D) emissions from deforestation by A.K. Lumber, Inc E) These are all relevant emissions and should all be included in calculating the carbon footprint.

See pages 2 and 3 of "Carbon Footprints: Methods and Calculations" (Toffel & Sice, 2013). A - this is a scope 1 direct emission B - this is a scope 2 indirect emission C - this is a scope 3 indirect emission D - had they used the "equity share" approach, this would not be included since the operation is not wholly owned. However, the control approach means that "an organization reports all emissions from sources that are under the entity's control, including both wholly and partially owned sources," therefore it should be included.

Which of the following was NOT a tradeoff players experienced in the Bay Game? A) Regulators balancing budget deficits/surpluses with environmental improvements B) Waterman balancing revenue generation with overall bay health and animal populations C) Politicians weighing reelection with constituents' economic well-being D) Farmers balancing nutrient runoff with managing demand for food production (organic and non-organic)

The Bay Game did not really touch on political consequences of the many decisions players needed to make. The game instead focused on food production, environmental tolls (on fish/crab populations and nutrient runoff), and governmental budget

Which of the following did NOT contribute to bay health? A) Farming operations in Pennsylvania B) Property development in Virginia C) Fishing in Maryland D) All contribute to bay health

The bay is regionally connected. Each activity is an example of something that impacts the health of the bay

Which of the following concepts are correctly paired? A) Allowances; Certified Reduction Units B) Allowances; Certified Emission Reductions C) Offsets; Voluntary Emissions Reductions D) Offsets; Emissions Trading Systems

The only correct pairing is C. Answer choice A does not exist.

Jimmy, a young boy genius, has created a battery capable of generating unlimited renewable energy. The US government has offered to pay him $1,000,000 every year for 10 years for the rights to this technology. But being a young boy genius, Jimmy understands the time value of money. He has gone back to the Government with a counteroffer: give me $7,000,000 today and you can have the battery right now. Knowing that he can invest this money at a 10% interest rate, he believes this is the better deal. Is he right? A) No, he would need at least $500,000 more to make it a good deal B) No, the deals are worth the same amount C) Yes, because the present value of the payments is less than $7,000,000

The present value of 10 years of payments of $1,000,000 with a 10% discount rate is $6,144,567.11, so Jimmy would be benefiting $855,432.89.

Mr. Ford is an owner of a local factory that manufacturing small leather goods for men. As demands of his product increasing in the market, Mr. Ford needs to purchase new equipment to increase the manufacturing capacity. Assuming his expected cash flow generated from this new equipment is $5,000 per year for 8 years (starting 1 year after the equipment installed), what's the HIGHEST acceptable initial investment for the equipment if Mr. Ford is looking for at least 10% IRR? A) $26,675 B) $25,731 C) $24,838 D) $27,674 E) $28,733

Using solver in Excel, we can set the IRR to be 10% and backsolve the initial investment to achieve this IRR. The result is $26,675.

Lightsaber is a startup that hopes to be a leader in the sustainable electricity industry. While the product uses solar technology to power lightbulbs, the entire process creates more packaging and processing waste than normal lightbulbs. What type of offset quality does this violate? A) conditionality B) additionality C) no leakage D) permanence

no leakage: when an improvement in one region is offset by damage in another

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