Sustainable Finance Exam

The majority of a product's cost is determined in which phase?

A. Planning/design 80% of a product's cost is determined in the planning and design phase, before it even reaches production

In the Legrand case, which of the following would have confirmed that the project of replacing the light bulbs was worth it financially?

D. ALL OF THE ABOVE the above answers: if the payback period was short enough, if the NPV was positive, if the IRR was greater than the hurdle rate

According to the Mitigation Banking video, residents of Sarasota FL indicated which problem as the most concerning?

A & C - population growth, and over development

According to Virginia Naranjo, companies like AB InBev should set sustainability goals that are both _______ and ________.

A. Achievable; Ambitious. Virginia Naranjo suggests that companies like AB InBev should aim to set sustainability goals that are both achievable and ambitious.

The demand for wetland credits is driven most strongly by:

D. increase in development activities

The following equation is used to determine if a project is worthwhile environmentally: energy intensity / investment costs = x / investment What is x?

Greenhouse Gas use Wrong Answers - Energy intensity, carbon use, NPV

which of the following is NOT an advantage to using the Sustainability Delta versus ESG in measuring sustainability performance?

Incorrect answers - (so apparently this is true about sustainability delta) provides seamless integration with regular DCF, more accurate valuation of firms sustainability impact, more effective allocation of capital for investor) >> OKAY THIS IS A REALLY BAD QUESTION they said the answer was: works very well with both single and multiple product companies

True or False: Impact investing is projected to boom with generational millennials.

TRUE

Which of the following companies was NOT mentioned by Kunal?

Uber Elevate All of the other ones (planet labs, joby aviations, and sail drone) were all mentioned !

Suppose you are a new country commissioner looking to implement policy changes that are pro business-development. How might you suggest adjusting the in-lieu fee that developers can pay to offset wetland losses?

. c. Lower the in-lieu fee to lower the cost of development To offset expected wetland loss, developers can either pay the in-lieu fee or purchase wetland credits on the market. Therefore, lowering the in-lieu fee should lower the cost of offsetting wetland loss and would be a positive change for business development.

You are evaluating a new investment in machinery for your electricity plant, and you have chosen to use the payback period method. Why might you choose to use the payback period method over another method like NPV or IRR?

a. The payback period method is the simplest way to evaluate an investment project and explain it to people who aren't familiar with investment analysis The payback period method is a simple and easy way to evaluate an investment project. It does not account for the time value of money or the cash flows after the payback period, so it is not the most accurate way to evaluate investment projects.

Kenya has lost 70-90% of its wildlife since 1980. What is a major reason for this loss, as discussed in class?

c. The government claims ownership of all wildlife but does not take responsibility by paying compensation for damages incurred. Therefore, people kill these animals.

Which risk of expansion was Hop Compost especially worried about?

A It would be hard to maintain the company's values if the company got bigger. Hop Compost CEO and Founder was very worried about the company losing track of its values if it expanded, so the answer is A. Nothing in the case pointed to the idea that the technology would not work in southern cities (so not B). There are no competitors because of the patent (so not C). There is no evidence that there would not be demand for compost fertilizer in other cities (so not D)

Which of the following are true regarding S&P Global's ESG rating system?

A & B - companies are assigned a score between 0 - 100, ratings are assigned based on forward looking assessments of a companies preparedness with regards to ESG impact. Not all companies will have an S&P rating. The company will have to ask for an assesment (there is no rule requiring them all to have one).

For mitigation banking, what are the drivers of revenue?

A & C - wetland credits and tourism According to RES, tourism and wetland credits are the two main drivers of revenue for mitigation banks.

When would a company choose not to invest in a project based on the NPV method?

A and B - NPV is negative, or there are other avail. projects with higher NPV's avail. to invest in explanation - A company would not invest in a negative NPV project because it would not add value. The company might also choose to accept a different project if the NPV of the second project was higher than that of the original project.

In the Hop Compost Case, what wasn't an argument made for why the company should not immediately seek B Corp certification?

A. B-corp is a for-profit organization- a publicly-run certification would be preferable Although private, there never was a provided argument for why certification from a private corporation would have any less merit or value.

What is the difference between an ecosystem service and natural capital?

A. Ecosystem Services consist of the benefits which people gain from natural ecosystems whereas Natural capital is the stock of natural ecosystems from which these benefits flow. Ex: A forest would be an example of Natural Capital, while timber is the Ecosystem Service it provides.

Which of the following is NOT an example of an output from the MFCA at Random Row Brewing Company?

A. (Correct) - cost of carbon emissions associated with one beer incorrect - the cost of energy associated with one beer, cost of grains associated with one beer, cost of water treatment/disposal associated with one beer, the cost of recycling associated with one beer

What was the primary risk to Hop Compost of undergoing a B Corp certification early in its life as a start-up?

A. A Pursuing the B Corp certification would take away valuable time, human resources and financial capital from Hop as they work towards expansion. explanation - a) Hop's strategic goal is expansion, and pursuing the certification takes resources away from that strategic initiative. b) The B Corp network is more built out in the United States, but it's still useful for a Canadian startup. c) The B Corp certification is useful for accounting, marketing and networking. d) The B Corp certification is a large capital expense, and it is a time-consuming task for the company.

Why do businesses prefer a carbon tax over a cap-and-trade system?

A. A carbon tax makes it easier for businesses to plan future expenses because the price of carbon is more predictable Explanation: A) Businesses prefer a carbon tax over the cap-and-trade system because there is a set price for carbon they can include in their financial statements.

What is the ultimate goal of ESG analysis?

A. Assessing the material risks derived from the company's environmental, social, and governance characteristics. It also analyzes how these risks are managed. ESG analysis looks at many factors to determine the environmental and ethical impact of business decisions. It analyzes their risk and is used for investment research.

Which of the following does NOT fit in the category of institutional investors

A. COMMERCIAL BANKS Commercial banks make money on spread based on loans they give out. This doesn't really fall into the category of investing in the context discussed in class.

What is one way that financial international aid can exacerbate poverty and limit growth?

A. CORRECT - over reliance on international aid may cause a cycle of over dependence and "need" for more aid Incorrect - international aid always works to support growth , none of the above

Loss of Biodiversity has several implications for the environment and society including _____ and _______.

A. Difficulties in producing medicine, and decreased genetic diversity Incorrect Answers - increased ag. production, famine. Habitat loss, increased profitability. None of the above.

What is the main difference between ESG and the Sustainability Delta?

A. ESG focuses on risks associated with sustainability, while the Sustainability Delta focuses on increased firm valuation due to sustainable acts ESG determines a rating on a company based on their non-sustainable actions, while the Sustainability Delta uses a company's sustainable actions to add value to the company.

A recent article published by Starbucks claims that their single-use coffee cups are actually better for the environment than reusable cups. You decide to look into the supplemental data and see that the amount of CO2 emitted/8oz cup manufactured is lower for single-use cups than reusable cups. You still don't buy the argument that single use is better and decide that the _____ chosen by Starbucks is misleading.

A. Ecological Footprint B. CORRECT ANSWER: Functional Unit C. Impact Assessment D. LCA

Of the types of Social Return on Investment, which would be used to verfiy the accuracy of predictions?

A. Evaluative According to the "Beginners Guide to Social Return on Investment", forecast SROIs are useful in planning stages of an activity, and helps to predict how much social value will be created if activities meet intended outcomes, whereas evaluative SROIs are based on actual outcomes that have already taken place.

With recent news that Trump is going to strip the Endangered Species Act of many key provisions, John is extremely worried that this will be the death sentence for polar bears and other endangered species. Though he will never see these endangered species, he goes out of his way to protest against Trump's proposal. He believes that people derive value from just knowing that these endangered species exist. In light of this, what does John place most value on?

A. Existence Value Explanation: This is existence value because John just wants to know that these animals still exist. Though he may care that future generations should be able to see these species, he's focusing on just the existence of these animals. (non-use value)

Joshua is a student who recently graduated from UVA and works at Saildrone. He is thinking of investing some of his income to start saving for retirement. Though he wants a good return, he also wants his investments to be made with the intention to generate positive, measurable social and environmental impacts as well. What form of investing should Joshua take part of?

A. IMPACT INVESTING The correct answer is A, Impact Investing, as impact investors care about generating positive social and environmental impact as well as generating financial return.

Which of the following areas was calculated to bear the greatest benefit of beavers (think ecosystem services)?

A. Improving water quality, removing unwanted sediment from reservoirs, storing them or metabolizing them via aquatic vegetation.

Why did the bonus that Jamie mentioned for each guard protecting the rhinos prove effective?

A. It placed responsibility on every guard to not only guard the rhinos, but also to report others who had potentially accepted bribes because it threatened the bonus of every other employee. Jamie noted that other guards reported those who had accepted bribes because they didn't want to lose their own bonus.

Suppose a large firm has just moved its headquarters to your town. You run the only wetlands bank in town and notice a spike in development due to this new firm. How will this affect the price of the wetlands credits you are selling?

A. It would increase because there is more demand for wetland credits Explanation: As demand increases, so does price. Competition is low, as you are the only bank nearby.

Which of the following is NOT a way to integrate financial and sustainability performance?

A. LCA (only uses environmental footprint analysis)

Which of the following risks can not be solved by diversification?

A. MARKET RISK (correct answer) Incorrect Answer - - project risk - regulatory risk - A & B - B&C

The White Fund, is a hedge fund that specifically excludes securities from companies that deal in tobacco, alcohol or other products deemed harmful to the vitality of human beings. Though there is a lot of talk on the street that 420LIT, a fast growing cannabis company, is going public and many people are trying to take advantage of the opportunity, The White Fund refuses to invest whatsoever. What form of sustainable investment is TWF using?

A. Negative/Exclusionary Screening The answer is negative/exclusionary screening as it is practice of excluding certain securities from a fund or portfolio of certain sectors, companies or practices based on specific ESG criteria.

In the Generation Investment Management Case, investment professionals at GIM develop a sustainability thesis for the company Kingpin; namely the expected positive environmental impacts that Kingpin's products may have. Due to the financial crisis in 2008, Kingpin's financial performance deteriorated but its core business remained unchanged. While the financial crisis hurt Kingpin's performance, GIM's sustainability thesis should __________.

A. Remain unchanged because market performance should not impact the sustainability thesis of a company Explanation: While the financial crisis in 2008 influenced Kingpin's financial performance, the financial crisis did not change Kingpin's business model. Kingpin, during and after the financial crisis, continues to manufacture environmentally-friendly products. Because of this, Kingpin's sustainability thesis should remain unchanged.

Which of the following statements about the Social Discount Rate used in Social Return on Investment Analysis is most likely true?

A. Social Discount Rate is difficult to determine because it is both subjective and challenging to quantify. The Social Discount Rate is difficult to determine because it is both subjective and challenging to quantify. The Social Discount Rate is not related to the risk-free rate or is it typically used as a hurdle rate in determining the enterprise value of firms.

You and your mom are at the grocery store. She doesn't have her credit card, so she must pay in cash. She's $10 short, so she asks you for a quick loan. You give her the $10, but she then offers you two repayment plans: 1. She gives you $10 + $1 extra as soon as you return home, or 2. She gives you $15 in a week. Your sister, who's also there, tells you the immediate cash is the best since it has the shortest payback period. For what reason would a smart investor disagree with your sister?

A. This logic doesn't account for the time value of money. Option 2 has greater value at the time of the loan. Explanation: The pay back period analysis, although quick, doesn't account for cash flows received after the payback period.

As discussed in class on the Generation Investment Management case, when ROCE, or Return on Capital Employed, is equal to the WACC of an investment, or the Weighted Average Cost of Capital, which of the following occurs?

A. Zero Growth Explanation: We learned this from the Generation Investment Management case. If your return rate in the long run equals your costs of capital, growth rate is zero as a result.

According to Jamie Gaymer, the problematic market for rhino horns is met with what kind of supply and demand?

A. as the supply of fake horns increases, so does the demand for real rhino horns

Which of the following is not one the "five" in Porters Five forces?

A. bargaining power of the govt (haha)

What does a "technical externality" refer to?

A. refers to the production or consumption of a specific good or service that impacts a third party that is not directly related to the production or consumption of that particulary good or service.

You recently opened a chocolate shop and your business is struggling due to a rise in the price of cocoa beans. Which of Porter's Five Forces are in play in this situation?

A. seller power In this scenario, the suppliers of the cocoa beans are charging a higher price for their product. This exhibits the power of the supplier because without cocoa beans, the business is unable to make their product. Hence, the force at play is seller power.

From what aspect of a wetland bank specifically does a wetlands bank credit owner profit from?

A. the ecosystem service of the wetland Incorrect answers - - asset of the land - protection of wildlife living in the wetland - inhibition of development of the land

According to the Aberdeen website, risk management is becoming ever more important to asset managers as risks develop and evolve with change market - how do ESGs help these asset managers?

ALL OF THE ABOVE - ESGs help managers have a solid understanding of the risks and opportunities that every companies have, ESGs help managers better price the asset they invest in, ESG help investors engage with companies on issues that will have significant impacts on their businesses, ESG integration helps manage the downside risk

Why do Beavers build dams?

ALL OF THE ABOVE: provide access to food, raise their young, protect them from predators

The following statements have been made about material flow cost accounting: (1) In material flow cost accounting, waste is treated as a negative product and given a cost. (2) Material flow cost accounting should encourage management to focus on ways of achieving the same amount of finished output with less material input. Which of the above statements is/are true?

ANSWER - BOTH 1 & 2 Explanation: In MFCA, a distinction is made between good finished output (positive output) and waste and emissions (negative output). Both types of output are given a cost. Performance can be improved by finding ways to reduce the amount of negative output - and so achieve the same amount of output with less input materials.

In Zeidan and Spitzeck's article "The Sustainability Delta: Considering Sustainability Opportunities in Firm Valuation," what is suggested as a way that a sustainability delta may increase firm valuation?

ANSWER IS D: Both A & C - which are: Increase future cash flows, and decrease cost of capital Explanation: The Sustainability Delta argues the opposite of answer E, that in the past finance practitioners have viewed sustainability efforts as a way to mitigate risk, but not to create value. Financial practitioners should consider ways that sustainability creates value according to the authors - which is done through A and C, where they argue that for ESG banks can increase future cash flows and decrease the cost of capital in order to increase enterprise (firm) value.

The major difference between Life Cycle Analysis (LCA) and Material Flow Cost Accounting (MFCA) is

ANSWER: MFCA has a much more limited scope than LCA explanation: Since it only considers the actions of the firm itself (within its own quantity centers), MFCA does not analyze the upstream and downstream effects of production. This also means that MFCA has a much more limited scope than LCA. LCA looks at the entire life cycle of a product, before and after its production by a single firm. LCA is not focused on the monetary cost of the life cycle of a product, but rather its ecological footprint.

Of Porter's Five Forces, which force(s) would concern a company's position being signifigantly weakened if a competitor entered into the same market in less time with low costs?

ANSWER: NEW ENTRANTS Explanation: Power of Suppliers has to do with how easily suppliers can drive up the price of goods and services Power of Buyer has to do with the ability of buyers to drive costs down Substitutes address competitor substitutes that can may be used in place of a company's services or goods

Local grocery stores likely carry out-of-season produce transported from greenhouses and tropical climates. Joining a Community Supported Agriculture (CSA) program does what?

All of the above - supports local farmers, ensures fresh and seasonal produce, saves shipping energy As an alternative to buying produce in the grocery store, membership in a Community Supported Agriculture program gives the benefit of having a wide variety of fresh, seasonal, and often organic herbs and produce delivered from local farms. Members who sign up buy a share of each season's harvest, and proceeds from memberships go toward farm costs like seeds, equipment maintenance, and labor.

Which is an example of a retail investor?

An individual Explanation - Insurance companies, endowment funds, and hedge funds are all examples of institutional investors. A retail investor is an individual who typically trades in much smaller amounts.

According to Virginia Naranjo of AB InBev, financial models are limited in that they often don't measure the ________.

Answer: Costs associated with environmental degradation and climate change Explanation: Financial analysis often focus on calculating financial benefits using tools like Net present value and Internal rate of return. Virginia Naranjo suggests that traditional financial models often don't measure the costs associated with environmental degradation and climate change. An example that Virginia Naranjo used is that financial models may overlook the additional costs associated with more extreme weather events caused by climate change.

While most view S&P Global's ESG rating initiative as a good thing, some worry about possible conflicts of interest stemming from the fact that:

Answer: Participating companies will have to pay S&P in order to receive a rating

Kunal Doshi mentioned in his presentation that Capricorn holds investments for about 12 years, longer than the typical 5-7 year holding period for a VC firm. Why does Capricorn do this?

Answer: The longer holding period allows an investment to truly create an impact, which is what Capricorn aims to do Explanation: Kunal mentioned holding investments for at least 10 years and usually 12 to make sure they have ample time to make a real impact.

Suppose you are conducting investment analysis, and each of the possible answers is a series of cash flows. You first use payback period to decide whether or not to invest, then you use NPV to decide whether or not to invest. For which of the following series of cash flows are your payback period and NPV decisions most likely to disagree?

B. -100, 10, 10, 10, 10, 10, 10, 10, 10, 10, 10, 1000000000000000000 incorrect ones: A -100, 100, 100, 100, 100 C -222, 222, 222, 222, 222 D -100, 50, -25, 100, 100, 100 The answer is B, because it would have a high payback period, but the NPV on this series of cash flows would be enormous. For A,C, or D the payback period and NPV methods would not drastically change one's decision to invest

Generation Investment Management is looking for a business whose current earnings don't borrow from future earnings. Based on this criteria, which of the following business would Generation rule out?

B. A business that contributes to current deterioration of environmental conditions From class discussion - future generations will bear the burden of current business models that exploit the environment.

The efficiency of a company's use of its assets in generating sales revenue or sales income to the company is measured by ____.

B. Asset Turnover Asset turnover measures a company's ability to generate sales from its assets. The formula is the revenue divided by the total assets of the company.

In the flying beavers case, how was it possible to determine the economic benefit of beavers capturing nutrients with their dams?

B. CONTINGENT VALUATION METHOD (Correct Answer) Incorrect Answers: - Benefits Transfer Approach, Travel Cost Method, Conservation Finance

Beau Nelson is working with an environmental consulting firm to assess a piece of land that he plans on using as a mitigation bank. When considering all the risks to this project, he makes sure to include the risk that the mitigation bank will not have as many wetland credits as he anticipated it would before the assessment. What type of risk is this?

B. CORRECT - YIELD RISK: (NOT - regulatory or credit revenue risk) EXPLANATION - In the case, Beau Nelson cites regulatory risks if the mitigation bank is not approved by the Army Corps of Engineers, yield risk from the mitigation bank yielding fewer credits than anticipated, credit revenue risk if the market price of credits is lower than anticipated, and development cost risk if the mitigation bank is more expensive to develop than anticipated.

According to Virginia from AB inBev,, how does a climate risk assessment work?

B. CORRECT - analyzing outputs based on different IPCC climate predictions Incorrect: comparing past data to future projections based on IPCC projections, comparing weekly output to future monthly weather predictions, none of the above

In his presentation, Mr. Spethmann mentioned that the first mover advantage applied to the conservation finance space in which of the following ways?

B. CORRECT ANSWER - first movers invested in the most attractive projects, capturing a return of approximately 35% Incorrect Answers - A. first movers were able to best secure land holdings C. secure govt funding for projects D. dominant position and secure investments

What is the biggest climate change risk that Virginia from AB InBev was concerned about finally modeling?

B. Decreased Crop Yields leading to price impacts Virginia mentioned that from a financial standpoint, she was concerned about decreasing crop yields and the financial impact they will have on the business. She was also concerned with water scarcity, given its a huge input necessary for production.

While the Materials Flow Cost Accounting (MFCA) method provides insight into materials flow and costs, MFCA is limited in that it does not measure the _______ generated by a company's supply chain.

B. Ecological Impact Materials Flow Cost Accounting (MFCA) helps users measure the materials flow and costs associated with certain processes examined. While the metrics provided by the MFCA method like energy use or material wastage can provide some understanding of the ecological impact of certain processes, MFCA does not directly measure ecological impact.

What is the definition of negative screening in sustainable investing?

B. Excluding certain investments from consideration based upon specific ESG criteria. Negative/exclusionary screening is the exclusion from a fund or portfolio of certain sectors, companies or practices based on specific ESG criteria. Note: not all SRI is like this. SRI can be optimized through other standards, such as positive screening.

Many corporations and organizations are promoting their own methods to combat fast fashion waste- why does Patagonia's approach work? (According to the Economist's Fast Fashion Video)

B. Focus on investing in quality materials and encouraging consumers to fix their items when needed as opposed to disposing of them and repurchasing. Patagonia acknowledges that Fast Fashion culture is causing people to wear their items less, throw away more, and purchase more. This is also resulting in lower quality goods. Patagonia is hoping to make goods that'll stand the test of time and is encouraging people to mend their items even when they may wear and tear.

Given the local nature and expertise required to excel within a market given Hop's value proposition and business model, what might be the best model for expansion?

B. Franchise Model Prof. White mentioned in class that a franchise model may be the best way for Hops to grow given the local nature of the value proposition. It would be challenging for corporate to form relationships necessary within each local market, whereas a franchise knows the local market and can concentrate its focus on it.

In 2010, the United Nations declared that water is a necessity for life and a right for all humans. How does this declaration create a challenge, particularly for businesses?

B. Fundamentally, if something is a right it cannot be bought or sold Despite this declaration, water is obviously still a commodity that is bought and sold. However, this declaration will most likely pose a greater significance when water availability worldwide decreases, especially within more marginalized and poorer communities.

In the "General Investment Management (GIM)" case study, how did their unique investment valuation method differ from traditional valuation methods?

B. GIM's valuation method normalizes cash flows and scales economic success to account for future economic success (e.g. account for growing and declining growth), while the traditional valuation method assumes a set cash flow increase or decrease every year.

Which of the following is not a commonly used metric in measuring sustainable performance:

B. IRR (bc this is a financial metric) The internal rate of return (IRR) is primarily a capital budgeting tool used to evaluate the financial performance of existing projects or prospective investments. As such, the IRR is less commonly used as a primary metric for evaluating the sustainable performance.

(1) Provide capital, (2) expectations of financial returns, (3) businesses designated with intent, and (4) to generate positive social and/or environmental benefit are all characteristics of...?

B. Impact Investing

George, a Virginia resident, just returned from the Ol Jogi Wildlife Conservatory in Kenya. While there, he paid the conservatory $200 to "adopt" a critically endangered white rhino and receive annual updates on the animal. The value George receives from the white rhino is most closely related to:

existence value George derives value from knowing that the white rhino exists, which he can be sure of every time he receives an annual update. He is likely too far way to derive much use or non-use value from white rhinos. Bequest value refers to valuing the existence of biodiversity for future generations.

You are a retail investor who wants feels passionate about reducing the amount of food waste in America and as such would like to invest in a company that is devoted to compost collection and management. It is important to you that the company you invest in measures and reports on their ESG impacts as well. Which type of investing are you participating in?

B. Impact Investing Impact investing is the best answer choice because impact funds typically not only seek to create positive impact, but measure and report their impact in a transparent way whereas sustainable investing focuses less on ESG and more on using screening techniques to weed out companies that participate in negative activities

Biodiversity is proven to add both ecological and economic benefit as multiple species process resources more efficiently than a smaller number of species. How would a conservation group best be able to retain biodiversity in a threatened ecosystem?

B. Including the land in a development deal as a natural preserve to prevent the existing biodiversity from threats. Including the land in a development deal would ensure that the existing biodiversity remains untouched and is able to flourish within the area. New species could potentially prove invasive and destroy biodiversity. Additionally, human tourism could threaten biodiversity, and protesting development would not actually prevent the loss of biodiversity.

You would like to complete a spreadsheet investigating the net cost and net revenue from running your cookie factory. What are you going to use?

B. Income Statement - An income statement includes revenue and expenses, and is meant to calculate net income.

Which of the following would not increase economic value added?

B. Increase Weighted Average Cost of Capital Based off the formula: Economic Value Added = NOPAT - (WACC * ICAP). Increasing WACC decreases economic value added

Tipsy - T is a start up alcohol bubble tea company trying to disrupt in the consumer beverage industry - do you believe there is a high or low supplier power in this case?

B. LOW - (How the **** would you know that)?

According to our guest lecturer, mitigation banking is often opposed by certain parties. One of the more controversial aspects of the practice is the way it can ___________.

B. Lead to a reduction in nearby home values.

The "B Corp" certification signals a business's commitment to society and the environment. One of the benefits a business may receive from attaining "B Corp" certification is a lower cost of capital. Which of the following would be the biggest benefit of having a lower cost of capital?

B. Lower Quarterly Interest Expense A company with a lower cost of capital can borrow the same amount of money, but pay a lower interest rate.

The total population of koalas is declining in the south of Australia for a number of reasons. Which of the following reasons is not explained by Professor White's declining natural capital variables or HIPPO.

B. Native Predators - Explanation: Human development can be an example of either Habitat loss or Population (human). Loss of habitat due to climate change obviously falls under habitat loss. Native predators, while a prevalent issue for koalas in Australia, is not one of the variables referenced in HIPPO. If it had been an invasive predator, it would have qualified.

What info do you need to calculate the ROE ?

B. Net Income divided by service fee Explanation - ROE is calculated by dividing net income by the service fee. Other options are other types of financial ratios A. Net Profit Margin: net income / total revenue B. return on equity - net income / service fee C. asset turnover - total revenue / total asset D. debt ratio: debt / total asset

Aaron Revere was pleased that the US pulled out of the Paris Accords. What was his reasoning?

B. Pulling out of the accords puts climate issues in the more capable hands of private firms Aaron indicated that he through pulling out of the accords allowed the US to place the issues in the "more capable hands" of private firms

Which of the following is a key difference between SRI and impact investing?

B. SRI uses negative screening, while impact investing uses both negative screening and positive screening. Impact investing goes beyond doing no harm by aiming to create positive environmental and social impacts.

What best describes the business model for conservation finance?

B. Similar to hedge funds - make money through carry on projects above a certain hurdle rate Conservation Finance business model is exactly like a hedge fund, typically has "2 and 20" fee structure

Which of the following was not considered one of the Velux Foundation's impact objectives?

B. Sociability The four pillars of VF's investment thesis in impact investments include intentionality, additionality, measurability, and scale.

In the Legrand case, for what reason was NPV analysis not sufficient for sustainability considerations of the company's operations?

B. The monetary value of carbon emissions avoided was not used to calculate NPV. There is currently no market for carbon where Legrand is located, meaning it has no value. NPV determined whether this project should be invested in or not, but did not account the monetary value added due to the carbon emissions avoided by switching lighting fixtures at Legrand.

As discussed in class, what was the main reason that Hop Composting decided to obtain a B Corp certification?

B. They wanted access to a large network of member corporations.. (honestly kinda disagree with this ... hmmm... )

Coca Cola produces more than 20% of the world's plastic bottles, and the company is aiming to increase its use of recycled plastic to 20%. Let's say that several shareholders have access to research that says that a large corporation like Coca Cola needs to incorporate something like 40% recycled plastic into their supply chain. They want to maintain a good relationship with the corporation, but also feel like they must address this percentage. Which method of corporate engagement will they pursue?

B. They will pursue constructive engagement to bring forth their research and create a dialogue. B is correct because it emphasizes the pursuit of dialogue, based on research and constructive debate. Option C is maybe too confrontational right now, and A isn't an option because the topic is not necessarily up for a vote. D doesn't find a solution. Other Answers - bring up through active corporate governance, start shareholder advocacy campaign, take shares elsewhere

Which of the following of Porter's five forces correctly and accurately describes the success of Bodos?

B. Threat of rivalry is low, considering other bagel options (from Einstein or Starbucks) are not as popular. ' A few comments to explain these: (A) is not a realistic threat. (B) - Correct answer (C) I would argue the buyer power is quite high, because there are many buyers, and their continued choice of Bodos has likely encouraged low prices over the years. Nothing to do with a constant menu. (D) This would be correct, except that with this example, supplier power would be low because there is nothing unique about the meats/cheeses etc at Bodos - could easily switch to a cheaper supplier.

Why might Hop Compost want to expand into the US (as opposed to other Canadian cities) after getting B Corp certified?

B. US citizens respect/know more about B Corp certification than Canadian citizens. A is wrong - they already have a patent C is wrong - B corp is acknowledged in Canada D is wrong - Cap and trade does not exist in the US for the most part B is correct because Americans know more about B Corp certification than Canadians, so if a company is a B Corp, it might be easier for them to expand in the US than in Canada because they could attract more customers.

According to Porter's Five Forces analysis, which of the following would be the most attractive for a given industry?

B. low threat of substitutes and low supplier power In Porter's Five Forces, the attractiveness of an industry corresponds to the weakness of each of the 5 forces. A given industry is more attractive when the buyer power, supplier power, threat of new entrants, threat of substitutes, and riverly (competition) are low.

Suppose you are an investment portfolio manager that engages in Sustainable and Responsible Investing (SRI). Seeking greater returns, you look to grow your investment portfolio by investing in a publicly traded company. You come across a manufacturing company in a booming industry that shows promising growth prospects in the near future. However, after additional research, you learn that the company uses highly inefficient manufacturing processes that are both energy intensive and highly pollutant. Under the strategy of ESG Integration, the fundamental approach suggests that the company's growth and earnings prospects may be ________.

B. lower than you originally expected - The Fundamental Approach of the ESG Integration strategy encourages users to adjust their assumptions or expectations of investments based on their respective ESG rankings. In this case, the company has a poor 'Environment' component of ESG due to its energy inefficient and highly pollutant manufacturing processes. Applying the ESG Integration approach, the company's poor 'Environment' ranking suggests that the company's growth and earnings prospects will be lower than you initially expected.

Of Porter's Five Forces, which did we discuss as having the most debate surrounding it relative to the Random Row case? (a.k.a. for which force did our answer remain unsettled?)

B. seller power - Seller Power is low if there is a significant amount of substitutes. Since the barley is somewhat plentiful, with many sellers, the seller power for that raw material is low. On the other hand, however, seller power for hops should be higher, as there are not many substitutes (hops grow in certain climates). Thus, seller power for Random Rowing's case looks undecided, dependent on which raw material for brewing we are discussing.

All discussed in class, what was the main reason the Hop Composting decided to obtain B Corp cert?

B. they wanted access to the large network of members corporations incorrect - thought it would help them convince investors to support them, wanted to use it as a way to solidify company culture/values, thought it would help marketing to consumers

True or False: A stop loss order is an automatic trade order given by an investor to his or her brokerage that can limit losses and lock in gains on a stock

B. true

A species of tigers is going extinct. You donate financially to the cause of keeping the population alive because you want your future children to live in a world where this species is still around. What is this sentiment called?

BEQUEST VALUE Bequest value is the value of satisfaction from preserving a natural environment or a historic environment, in other words natural heritage or cultural heritage for future generations

In a relatively recent Guardian article (https://www.theguardian.com/environment/2017/may/30/us-coral-reefs-global-warming-climate-change), there is research supporting the fact that coral reefs will disappear within 20-30 years. Mary, an environmental conservationist, worries that her grandchildren would never be able to see these marvelous sights when they grow up. In order to prevent this from happening, she dedicates the rest of her life to preserving these reefs. What does has the most value to Mary?

BEQUEST VALUE In this case, the answer is bequest value because Mary cares most that her grandchildren will not be able to see these reefs. Though she may have existence value as she wants these reefs to exist, she focuses more heavily on future generations.

Where is the majority of the worlds money being traded?

BONDS - The correct answer is bonds with approximately $100 tn being traded per year. However, Public Equity and Property are the second largest sectors of money trading.

Why did we recycle in china? why aren't we now?

BOTH A & B - had less restrictive laws, recently tightened restrictions, increasing costs, was cheaper, now more expensive

A decrease in genetic diversity, risk of famines, and less medical innovation are all implications of:

Biodiversity Loss Biodiversity allows us to study many organisms and learn about drugs they naturally produce which could be useful in medicine. Genetic diversity of crops helps prevent a single disease from wiping out an entire field of crops. When this is lost, there is an increased risk of famine.

Which of the following is NOT one of the most practical ways for a corporation to decrease impact on the environment and cut costs?

C - do less business Incorrect - virtual meetings, water recycling, using more efficient light bulbs

From the wheels to meals case, why is it important that the measurement of deadweight remains low?

C - lower DWL suggest that the new "wheels" portion of this program was actually offering something valuable to elderly was not occurring within the regular Meals and Wheels program

What are the "Big Six" Sustainability Challenges?

C. 1.Climate and Energy 2.Biodiversity Loss 3.Water Issues 4.Deforestation and Land Use 5.Waste and Pollution 6.Equity and Social Justice "Poverty, nor Health and Well Being" are apart of the "Big Six" sustainability challenges.

A clothing company has conducted a MCFA on their most popular jacket. In the production of this one jacket, 85% of the material input flows into the product output, and 15% flows into the material loss output. Respectively, these outputs cost $3,825 and $700. Why would the material loss portion of costs ($700) end up accounting for more than 15%?

C. $25 of waste management costs are added onto the cost of material loss. The correct answer is the only one that gives the necessary details to explain why the 15% turns out to be $700 - if you check the calculations reversely. $3,825 + $700 = $4,525 The question infers that $700 is more than the expected 15%. $700 - $25 = 675, which when added to the product costs (3,825) = 4,500. Checking the percentage breakdown within 4,500 checks out with the correct information that was provided (that 85% totaled 3,825).

Which of the following are examples of non-use value?

C. A&B - existence values and bequest value

According to the "looking ahead to a bright future video" - what is something that Climate Solutions investors want to see their investments used for?

C. Both A and B A - renewable energy and efficient technologies B - infrastructure that can help combat physical effects of climate change events

Which of the following is not something an inventor would consider when using a traditional approach to evaluate an investment?

C. CORRECT - ESG Score Incorrect - - Return - Risk - Impact

Jane has just been hired as an analyst at Orion Energy Partners, a firm that makes equity investments in eco-friendly companies around the United States. She has been tasked with giving each of the portfolio companies a grade that speaks to both their profitability and sustainability. Which of the following metrics could potentially be used to integrate the financial and sustainability performance of each business?

C. Carbon dioxide emitted per sales dollar. C is the correct choice as it takes into consideration both the financial performance (sales dollars) and the environmental performance (carbon dioxide emitted).

As discussed in class, why doesn't S&P invest on own?

C. Insider Trading

Which of the following exemplifies strong supplier or seller power as defined by Porter's Five Forces?

C. Jewelry manufactures source rare stones from relatively few suppliers Supplier power corresponds to the level of the pressure that suppliers can exert on businesses in a given industry. Some factors that can contribute to high supplier power: suppliers in given industry are small/concentrated in number, few substitutes are available, and product is critical to the end product in given industry.

Which of the following is not an element of the Life Cycle Assessment?

C. Life Cycle Investment Analysis The elements of the LCA are (1) Goal & Scope, (2) Life Cycle Inventory, (3) Impact Assessment, and (4) Interpreting 1-3.

An example of an indirect ecosystem service is:

C. Mangrove swamps protecting the coastline from erosion. (this one was kinda weird... mixed responses from other people) explanation: A) is an example of a direct ecosystem service as is B). D) is an example of the aesthetic/ethical effect of ecosystem services. According to the video on biodiversity loss, "Ecosystem Services," California Academy of Sciences, 2014, 9:02 min, https://www.youtube.com/watch?v=BCH1Gre3Mg0, the only indirect ecosystem service of these choices is C).

The fishing industry has a number of revenue source. Which of the following is NOT one of them?

C. Marine Tax (correct) Incorrect - - catch shares - fish levies - revenues from aquaculture - fines for illegal fishing

A key goal of the Life Cycle Assessment (LCA) is to:

C. Measure the environmental impacts associated with a product or service across all stages of its life cycle EXPLANATION: A key goal of Life Cycle Assessment (LCA) is to evaluate the environmental impact of products and/or services across all stages of its life cycle. The analysis includes but is not limited to: (1) Materials Acquisition, (2) Materials Processing, (3) Manufacture, (4) Packaging and Distribution, (5) Use, and (6) Disposal. The Life Cycle Assessment does not evaluate the economic implications of products or is it a tool commonly used to determine the financial performance of firms.

In our Conservation Finance guest lecture, ecozoic philosophy was mentioned. How might you best describe this?

C. Recognition that humans are members of the ecologic community consisting of all living things The definition is C as mentioned in the lecture. This was a main motivation behind the firm.

Which of the following were not one of the six "R"s of sustainability in the video "how much plastic in the ocean?"

C. Rot (correct answer) INCORRECT ONES - - Rethink - Refuse - Repair

Which of the following is NOT one of Hop Compost's revenue streams?

C. Selling impact reports to clients to quantify their weekly efforts in reducing their environmental footprint C is a value-added service that was not charged for. Correct ones: -Sale of carbon credits -pick up of food waste -distribution of compost for fertilizer

Why did Jamie suggest that drone surveillance would not be an optimal use of resources for his conservancy?

C. Small drones are not effective enough with their current flight duration and camera capacity, but large drones are too expensive to work with the existing budget. Jamie mentioned that current small drones can only fly for a few hours at most with a weak camera, but a much larger drone with the appropriate flight range and camera equipment would prove far too expensive.

What is the most accurate comparison of the social discount rate to the financial discount rate?

C. Social Discount rate is lower than the financial discount rate: Explanation: C is the correct answer because the social discount rate is 3.5% versus a typical financial rate is around 7 or 9%, they are less commonly considered for corporations, and are most relevant for manager's decisions.

Which of the following did not represent risks for Hop Compost to invest in a B corp certification?

C. Standard operating procedure (SOPs) changes Incorrect Answers - - Limited HR, uncertain cash flow, carbon market variability This is the correct answer bc while they would have to change their SOPs, this would probably be beneficial for the company overall and probably would happen even without B Corp certification

Which of the following is NOT one of the three primary financial statements?

C. Statement of Equity

Which of the following are NOT aspects of financial health?

C. Sustainability Sustainability is the one option listed above which is not recognized as an aspect of an organizations financial health. Another aspects of financial health not included in this list is asset management.

According to Jamie Gaymer, a SWOT analysis conducted by Save the Rhinos was a critical turning point in establishing the point of view that:

C. Synthetic rhino tusks simply increase the rarity of authentic tusks and create upward price pressure. Explanation - Jamie explained that after a long case study their opinion is now that artificial tusks only create additional scarcity for real tusks, thus driving the price up even further.

We, the all knowing environmentalist, knows for a fact that Company B's face wash is more environmentally friendly than Company A's. It so happens that Company A recently received some bad press regarding the negative environmental impacts of its new face wash. Company A decides to run an MFCA of their face wash to compare it to an MFCA of Company B's face wash (their biggest competitor) to prove that their product is in fact SUPERIOR and creates less of an environmental impact. After running the analysis we see that based on their data, their face wash appears to be more environmentally friendly. What could have allowed Company A to come out on top?

C. The MFCA boundary they set is too narrow in scope Answers A & B are incorrect because the data extrapolated from the MFCA would reveal if using 2 vs 4 production centers made a difference and B just doesn't make sense. Answer C is correct because although Company A might appear more environmentally friendly within the boundary they set for the analysis they may not be more environmentally friendly when we consider the upstream and downstream affects of their production. A Life Cycle Assessment is a more appropriate technique to use when comparing the environmental impacts of different products.

Your company is considering implementing a health and wellness program for employees. Which of the following is not a reason that you would use the Social Return on Investment (SROI) method to evaluate the program?

C. The SROI will forecast the capital gains that the company could glean from a new program like this one From Sinzer's "Beginner's Guide to Social Return on Investment: "There are three main benefits of good impact measurement: 1. The ability to generate value for all stakeholders. This impact goes beyond a simplistic focus on the needs of a potential investor and instead drives at ensuring value creation for investors, investees and beneficiaries. 2. The potential mobilisation of greater capital into areas of positive social impact creation. 3. Increased transparency and accountability for delivering on the intended area of impact."

Which of the following are NOT fundamental to a business when conducting Investment Analysis?

C. The payback period must occur within 5 years for the project to be considered profitable. The payback period, or the length of time required to recover the cost of an investment, is not fundamental to investment analysis since it is too surface level of a calculation. For instance, it does not take into account additional cash flows after the payback period or correctly account for the time value of money.

Which of the following points were NOT mentioned as benefits of the "Saildrones", the oceanographic data platform powered by a fleet of unmanned autonomous sailboats, discussed in Kunal Doshi's guest lecture?

C. The structures have direct benefits to ocean mammal life. All of the above points were mentioned as benefits to the Saildrone technology except for C, that they provided direct benefits to ocean mammals. Instead, we discussed how the structures were non-intrusive.

Which of the following is an example of existence value?

C. The value I get from the fact that polar bears exist. A is an example of option value B,D are examples of use value C is an example of existence, or non-use value.

Which of the following is NOT true about the millennial generation, based on our discussion in class?

C. They are more likely to invest their money than any other demographic Though more likely to invest based on social and environmental issues, studies have shown that millennials are investing at a lower rate than other demographics like the Baby Boomers. See article here: https://money.usnews.com/investing/investing-101/articles/2018-02-01/why-rich-millennials-arent-investing stuff that is true though - They have a strong propensity to invest based on their values When investing, they care more about social and environmental issues than investment returns They are the beneficiaries of the largest transfer of wealth in decades

When conducting a lifecycle analysis, why is it important to determine system boundaries?

C. To define which inputs and outputs on a product's supply chain will be included in the analysis It's important to set system boundaries so that you know which inputs and outputs you will be analyzing. The other three answer choices are from the material flow cost accounting reading, but they do not relate directly to the concept of system boundaries.

A fourth grade teacher is purchasing Halloween candy for her students. She polled the class on their favorite types of candy. 65% said Reese's, 30% said Hershey's, and 5% said Skittles. She knows that one student has a minor peanut allergy and wouldn't be able to eat peanut candy (the student's health is not at risk being in the same space as peanuts). The teacher elects to purchase Reese's. Which ethical approach did she take?

C. Utilitarian: The teacher took the majority's interest into priority. This is the Utilitarian approach.

In the Legrand case, we decided that we could not put a price to carbon because no one was going to be willing to buy it. Under what circumstance would we be able to start charging for this?

C. We can price it when there is actually a defined market for this. This could be either in the compliance market when government asserts a cap on the total amount of emissions an entity can emit, or in the voluntary market. The answer is C because this is the only case where we could get a defined amount of money that Legrand could realistically get money from.

Although philanthropists have good intentions, philanthropy is not an adequate, long term method of conservation finance bc

C. it is not scalable incorrect answers - - donations are inconsistent - many conservation efforts do not accept donations - taxes outweigh income from donations

Your CIO on grounds "Hannah's that Hike" (a group of individuals who are all named Hannah that go hiking together) wants to create a proposal to get a grant from the University to pay for shuttle busses so that the Hannah's can easily transport their members without worrying about others having cars/paying for gas/stinky feet etc. You decide to use SROI as a metric to measure the social impacts of the CIO to hopefully convince the University that the club holds real value and you are deserving of the grant. You outline how going on hikes gives Hannah's a way to connect, increases the feeling of connectivity between the Hannah's and nature, teaches the Hannah's many practical skills about what plants are safe/unsafe to eat, and a portion of their dues are even donated to the World Wildlife Fund (WWF). Which of the following are all examples of "use value" that the Hannah's get from being a member in "Hannah's that Hike"

C. the plants they eat on the trails, the view they see at the summit C is the correct answer because the "use value" is the direct value that people derive from resources and also includes values that people derive from activities that may not affect the amount or quality of the resource (such as looking at a view or hiking on a trail)

In the Hybrid Truck case, the Canadian company had to buy trucks with US dollars. Suppose the company decided to buy the trucks in a year because they wanted to use the old trucks for one more year. How would the power line company best hedge this currency risk (in case the exchange rate changed a lot from what it is now)?

CORRECT ANSWER - A: Use a financial derivative to lock in the $Canadian / $US exchange rate in one year Not the answers but other choices... B. Buy a bunch of $US now, a year before the company needs it C. Set aside a lot of $Canadian for use in a year just in case D. Currency exchange rates are too volatile, so the currency risk cannot be hedged

The McIntire Company is considering two projects. Project A costs $100,000 up front. It will yield cash flows of $50,000 for the first two years, and $30,000 in the third year. Project B costs $200,000 up front, but will yield cashflows of $50,000 for the first two years, and $100,000 in years three and four. This scenario provides a good example of why the __________ method is not sufficient because ___________.

CORRECT ANSWER - B. Payback Period; It ignores cashflows beyond the point at which initial outlays are repaid. Explanation: The pay back method (while sometimes a helpful measure of risk) is not sufficient as it entirely ignores those cashflows coming in after the initial outlay has been repaid.

What is an example of use value that you could assign to the Florida manatee if you were estimating its value to Citrus County, Florida?

CORRECT ANSWER - B. TOURISM REVENUES FROM HOMOSASSA STATE PARK Incorrect Answers: - Citrus Govts WTP for manatee future survival - Florida Fish and Wildlife Commission spending on manatee protection -Citrus County's residents' willingness to donate to manatee protection Explanation: According to "Measuring the Economic Value of the Environment and Natural Resources" by Elizabeth Pienaar, "The key characteristic of use value is that people must directly benefit from the resource themselves." In this case, the county gets direct benefit from tourism revenues.

Suppose Mary owns 50 acres of land along the Shenandoah River in Virginia. She placed a conservation easement on the land to permanently restrict any development. Although Mary personally values its natural beauty, she was most interested in protecting the land for the enjoyment of her future grandchildren. In placing the conservation easement on the land, Mary was most motivated by:

CORRECT ANSWER - BEQUEST VALUE: Explanation: Bequest value refers to the value one places on ensuring the availability of biodiversity/ecosystems for future generations

As discussed in class, when calculating the EVA (Economic Value Added), the NOPAT (Net Operating Profit After Tax )is focused on

CORRECT ANSWER - Increasing revenue, and decreasing costs Explanation: nada

As discussed in class, which investment typically provides a "low-hanging-fruit" result in terms of SROI?

CORRECT ANSWER - LED Lighting Incorrect Answers: A. Double Paned windows C. New HVAC system D. Low Flush Toilets Explanation: Replacing old lighting provides excellent return from an SROI standpoint an is typically viewed as a "low-hanging-fruit" investment.

There is word that the e-cigarette company, JUUL, is about to IPO and many people are talking about how there will be extremely high returns for this company due to the pace it is growing at. Bill, a current UVA student is completely against the company's values and mission because vaping is against his morale principles and thus excludes the company from his portfolio, even though he knows he'll get high returns if he invests. What form of SRI is Bill practicing.

CORRECT ANSWER : ETHICAL INVESTING - LOL (not I hate JUUL investing I'm dead) The correct answer is A as ethical investing is the practice of investing one's money in accord with one's ethical, moral or religious principles.

Looking at the micro-brewing industry in Charlottesville, which of the following assumptions about Porter's Five Forces is incorrect?

CORRECT ANSWER IS C - Threat of new entrants is low because there are high capital requirements to starting a brewery in Charlottesville. Brewers also need capital to distribute their beer to people in the community and in the larger market. Explanation: A) There is an abundance of choice of craft beers in stores, and there are also several craft breweries right in Charlottesville. B) Brewers do pay more for products in some cases, but there are also some commodity products. C) There are very low capital requirements to starting your own craft brewery, and many people start brewing beer in their homes. D) There are many alternatives to craft breweries, so the threat of substitutes is much higher.

What are the differences between Institutional and Retail Investors?

CORRECT ANSWER: A. Institutional investors generally invest for other people and move large blocks of shares all while having tremendous influence on the stock market. Retail investors are non-professional investors who buy and sell securities. LOL - this was probably dwight greenhouse question, explanation was literally - "discussed in lecture."

Albert works at a local non-profit called Affordable Housing Charlottesville. His team is considering starting a program where people can live in a transitional home for up to 6 months while they pursue education, work, or rehabilitation services. It is a tricky program because the cost of the running it is rather high, but Albert feels like it will be well worth it. The board is scrutinizing his program. What could you recommend to Albert to help him make this decision, or to show if the program is well worth it?

CORRECT ANSWER: Albert should consider performing a SROI analysis to see if the benefits outweigh the costs, and present his findings to the board explanation: Due to the social benefits of free housing and non-profit nature of the problem, the SROI (social return on investment) is best-suited in this case. C would not be the best answer because a pure NPV or IRR analysis would not sufficiently quantify the social impact. EROI is not really applicable in this case (Answer D). A would not be the case because SROI exists.

What's a difference between carbon trade programs and Wetlands Mitigation Banking?

CORRECT ANSWER: D. Carbon trade has seen voluntary efforts by corporations to reduce their emissions through buyback programs, whereas wetlands mitigation has proven to be primarily forced through permits. EXPLANATION - Carbon credit trading is seen in both cap and trade programs which regulate emissions, as well as in markets where corporations choose on their own accord to become carbon-neutral. Wetlands mitigation, according to the in class presentation, has failed to be driven on a voluntary basis. It is driven by requirement in order to secure permits.

If you are a project manager trying to evaluate the social value (beyond what can be captured by financial returns) of your past two projects, which metric would you focus on?

CORRECT ANSWER: Evaluative SROI Definition question. Evaluative SROI is retrospective, focusing on the actual outcomes that have already occurred

Say a non-profit organization is looking to see the overall social value they accrue from their current investments. What analysis would best provide serve this purpose?

CORRECT ANSWER: SOCIAL RETURN ON INVESTMENT Social Return on Investment (SROI) is the correct answer because its goal is to measure the social value a firm produces to gain a more accurate picture of the overall impact a firm has based on financial investments.

Which of the following are important things to keep in mind about Mitigation Banking?

Correct Answer - All of the above are true and things to keep in mind about Mitigation Banking - Mitigation banking is lucrative, but complicated - mitigation banking involves selling something that "no one wants to buy" - happens worldwide, but primarily in the US as regulation drives it in the states

When Generation Investment Management evaluated Kingspan, the fact that it was a family-owned company was an important consideration in their decision to invest. What part of their proprietary rating system would include this factor?

Correct Answer - Management Quality Explanation: Management quality and business quality are both ratings in Generation's proprietary investing model. Management quality has to do with management culture, executive compensation, diversity and gender equality. Business quality has more to do with barriers to entry, externalities, and products that contribute to a better society. ESG score and risk factors are not part of Generation's proprietary model.

Auria and Plumbonia have similar-sized human populations and similar reputations for enjoying the best things in life. Yet Aurians have roughly half the environmental impact on the planet as Plumbonians. What might account for this observation?

Correct Answer: B. AURIAN GOODS AND SERVICES REQUIRE MUCH LESS ENERGY TO MANUFACTURE AND DELIVER Wrong Answers: A. The average Plumbonian is about 6" taller than the average Aurian C. Plumbonians import much of their basic foodstuffs from other countries D. Aurians work approximately 36 hours per week, while Plumbonians work 44 hours per week EXPLANATION: According to the I=PAT equation, since Auria and Plumbonia have similar values for P (population) and A (per-capita consumption), the difference in overall environmental impacts (I) must be due to different values for energy intensity (T). Auria's lower environmental impact is likely the result of more energy-efficient manufacturing and distribution processes.

When ecological demand exceeds ecological supply we are considered to be ________

Correct Answer: C. IN OVERSHOOT Explanation: Overshoot is when the Earth experiences growth beyond its carrying capacity. In 2018 Overshoot day was August 1.

Why is CO2e used to measure the effect of a substance on the environment?

Correct Answer: CO2e allows us to standardize the effects of different greenhouse gases, providing a functional unit for comparison between different processes. Explanation: CO2 is the most notable greenhouse gas, so people want to express all global warming potential in terms of CO2. CH4 is not the most common greenhouse gas. Other measures of global warming potential (i.e. a hypothetical CH4e would not fall outside of the system boundary as one could still make comparisons) CO2 is not the strongest greenhouse gas

Which of the following is not a tool for measuring financial performance?

Correct Answer: Life Cycle Assessment explanation: C) Life Cycle Assessment is used primarily for assessing environmental impacts of a product up & down the supply chain. The remaining choices were discussed in lecture on 1/28.

Some believe family-owned corporations are better suited for the future. According to the argument, this is true because

Correct Answer: Managers are incentivized to employ a business model that will work for future generations. Explanation: Theoretically, family-owned corporations will not sacrifice long-term viability for short-term gain, given the nature of the managers relationships with the business Entity.

Which of the following are trouble facing recycling?

D - A & B A: China stopped accepting american recycling, B: american standards for contamination are higher, so many products are non-recyclable WRONG ANSWER - utilizing recycled materials isn't popular in the interest of most private corporations/manufacturers

What is the economic value added for a company whose net operating profit after tax was $7,345, weighted average cost of capital was 7.22%, and invested capital was $56,097 in one year?

D. 3,294.80 - The equation for economic value added is EVA= NOPAT - (WACC*ICAP). Plugging in the values gives EVA= 7345 - (0.0722*56097). EVA=3294.80.

Which of the following would make a wetland banking project less attractive?

D. All of the above Taking longer to sell credits, higher percentage of revenue put into escrow, uncertainty of the number of credits that could be salvaged

Which of the following is not true about Impact Investing?

D. All of the above are true Other answers - impact investing is a solution and not just a tool or problem(?), there is no credible way to justify impact from impact investing, impact investing is investing with the intention to generate measurable, beneficial social or environmental impact alongside a financial return

Ryan Mallany, the summer intern for Erie Thames Powerlines, is analyzing the decision to acquire hybrid trucks as opposed to diesel trucks. He determines that the Hybrid trucks will reduce noise pollution in residential areas. Ryan wants to incorporate this element into his analysis and determine the value of the reduced noise pollution. He consults outside research articles on the economic impact of traffic noise to determine a reasonable estimate for his own analysis. Which valuation method is Ryan using?

D. Benefits Transfer Method - Benefits transfer method uses pre-existing studies done in one context and applies/uses the results for estimates in another context. We discussed benefits transfer as it related to how the writers of the 'wheels to meals' case most likely estimated their numbers.

Why in the Ol Jogi talk was it pointed (the primary reason) out that synthetic ivory is unsustainable and potentially capable of furthering the poaching crisis?

D. By increasing the supply of synthetic ivory, natural and real ivory will become more rare and thus its value will increase

What did Generation Investment management Fail to consider when investing in Kingspan?

D. CORRECT ANSWER - failed to consider the cyclicality of the construction industry Incorrect Answers: - family ownership structure - regulations that would stop energy efficient construction - changes in european tax rates - kingspan debt securities

What is a key benefit for the internal operations of a business as a result of displaying a LCA externally, as Walmart did in their turkey supplier video?

D. Can aid in setting a standard of sustainable practices that other partners or suppliers will have to follow. D most closely follows the bolded terms in the question - a benefit that occurs internally in a business after LCA is used externally. A and C can be seen more as external benefits, and B is actually more negative than positive.

According to the videos assigned, what is wetland mitigation banking?

D. Created by environmental protection agencies and is the establishment of new wetland areas in advance of anticipated losses

The BHP Mining Project (from the RES video), which included restoring a levee and planting trees, did not result in which of the following?

D. Divestment in the community, as the company bought new offshore assets from BP INCORRECT - A. asset protection for the company B. Resiliency protection for the community C. Investment in the community, as the company sold their offshore assets to BP

A renewable energy company has tasked their employee, Stephen, to analyze the effectiveness and return on an educational program the company initiated with a local middle school five years ago. In an effort to increase their brand awareness, educate younger generations about renewable energy, and hopefully increase sales, the company began a program where they teach middle schoolers about solar, using one solar panel the company installs on the school's property. To look at the educational side of this investment, Stephen should conduct a(n) _________ __________.

D. Evaluative SROI The question is asking about the educational part of this new program, which deals with a social factor (educating students, investing in younger generations). This requires an SROI, and it is evaluative because the company started the program 5 years ago and wants to measure how well it is doing.

Unmanned sailing drones are a fraction of the cost of alternative methods of data collection. According to Kunal Doshi, what was the most common method for data collection from remote parts of the ocean prior to the creation of the drones?

D. Exploration research ships

Which of the following is not a key characteristic of impact investments?

D. Impact Investments include monetary donations to organizations Impact Investments seek to provide capital to businesses with a socially or environmentally focused mission. Impact Investments also seek to generate a return on invested capital. Donations are not considered Impact Investments as they are provided without the expectation of a return.

Deforestation, or the clearing of Earth's forests on a massive scale, can negatively impact the environment in numerous ways. Which of the following is NOT an adverse effect of deforestation?

D. Increased Water vapor in atm D is incorrect because deforestation is the clearing of trees, which are crucial to the water cycle. They absorb rain fall and produce water vapor that's released in the atmosphere. Clearing the forests disrupts this water cycle and less water vapor is released.

Which of the following represents an option value placed on the existence of bees?

D. NONE OF THE ABOVE - Incorrect answer choices: bees should continue to exist just because they are part of our ecosystem like any other living or nonliving specimen, bees are valuable because honey is currently a valuable commodity, bees are valuable because the crops they pollinate are valuable

An entity is considering a renewable energy project. It has a negative NPV but a positive SROI. The entity decides to move forward with the project and commits the $200,000 required to set it into motion. Based off of this information alone, one might conclude the entity is a:

D. Non profit The entity appears to give more weight to the social cost-benefit analysis of a project rather than the financial cost-benefit analysis.

Which of the following was NOT one of the types of nonprofit organizations that could make use of SROI analysis in their decisions?

D. Political PACs Political PAC's are funded by donations for a specific candidate or cause. They would not use SROI because their decisions depend on their stated goal more than environmental and sustainability concerns.

Which of the following are key areas, as named in class, causing declining natural capital?

D. Pollution, Habitat Loss, Emerging Diseases

According to Porter's 5 forces, low market growth is often associated with which of the following?

D. Price Competition and reduced profitability If the market is declining, it's less likely that new entrants would pose a threat. Existing players would resort to competing over price, which would likely lead to lower profitability as competitors undercut one another on prices to attract customers.

Suppose Working Lands Investment Partners is in the project origination phase and has identified a tract of land in Virginia that fits in well with their existing and well-diversified portfolio. During class discussion with Working Lands, we identified portfolio risk, project risk, market risk and regulatory risk as the most important factors in risk management. Which of these risks relating the the Virginia land project should Working Lands focus its efforts on mitigating?

D. Project Risk and Regulatory Risk The portfolio risk has already been considered given that Working Lands has identified that the project fits in well with their well diversified portfolio. Market risk refers to factors that impact the overall market, such as a global recession, and is difficult to mitigate/avoid. Working Lands can probably have the most impact on mitigating the project specific risk and regulatory risk (D).

Why might investment managers consider using the sustainability delta when valuing a company?

D. Sustainability deltas incorporate ESG metrics in firm valuation, which can help paint a better picture of a firm's future than traditional financial analysis. Sustainability deltas, while they can be sort of used to show how much a company is hurting the environment and to show what might happen in the future, are used to adjust company valuations based on ESG metrics.

After he had purchased the land in Gloucester, VA, which of the following was not a risk associated with Beau Nelson starting Middle Peninsula Environmental Bank?

D. The land could be built on by another developer Once a piece of land receives wetland status, no one can develop it.

We learn in VF case that there is no one way to measure impact investing. As a solution, Anders Kristofferson has incorporated an "impact thesis" measurement system into overall impact strategy plan for VF. The "impact thesis" is comprised of four different categories. Which of the following fictional assessments would answer question of additionally?

D. VF Included a renewable energy storage company in Cali within their portfolio, the company could then expand, but the state of CA also began to subsidize energy storage companies in the state - making VF's investment less correlated with he company's expansion. >> this is the correct answer because this is a case where the impact could have happened even without VF's investment - Additionally is defined as the impact would have occurred even without VF's capital

Imagine this scenario: Construction is being done on a highway that you drive on every day to get to work. Due to the construction the right lane must merge into the left lane. This merging process creates a back up everyday during peak commuting times adding 30 minutes to your drive. You're tempted to stay in the right lane, which moves more quickly, and then right before the construction cones cut into the left lane in front of the cars that had been waiting for the additional 30 minutes. Do you cut in? After thinking ethically, you decide that although saving the 30 minutes during your commute would make you a more attentive and engaged spouse/parent, that the lesson you give to other drivers - that selfishness pays - imposes too great a social cost and so you decide to stay in the left lane & endure the longer commute. Which ethical approach did you use to make this decision?

D. Virtue Approach The Virtue Approach asks "what kind of person should I be? What will promote the development of character within myself and my community?" You chose to stay in the left lane and endure a longer commute because you didn't want to impose the wrong values to your community thereby making the virtue approach the best answer for this question

which of the following is NOT a feature of Hot Rot composting system?

D. takes 30 days for Hop to produce compost (???) - not sure about this... Apparently all of the rest of them were correct: does not require compost to be sorted, organic even though inputs are not, tracks volume of food collected and waste averted, does not require sorting before composting

Which of the following is NOT an example of an institutional investor?

DAY TRADERS All of the above except for day traders are institutional investors. (mutual funds, CALPERS, University Endowment)

Which of the following are considered to be risks in creating a wetland mitigation bank in the Middle Peninsula case?

E - A & B: Yield cost to develop, approval by the relevant agencies Answers A and B are correct. C is not considered a risk because as we learned from our guest speaker, creating a wetland mitigation bank does not restrict recreational hunting use after development.

Impact Investing finds a balance between?

E - A&B bc Finance first and Impact first, and high social returns and high financial returns

According to the "saving kenya's eastern black rhino" video - the value of a kilogram of rhino horn is approximately?

E. $65k (not all the other options... just remember that it was the higher option!)

According to the Mitigation Banking video, residents of Sarasota FL indicated which problem(s) as the most concerning in a recent poll?

E. - A&C (population growth and over development) Clearly stated in the video and descriptive of the major problems in both Sarasota and the state as a whole.

What were the products of Kingspan?

E. A and C A - insulated panels , and C - industrial boards Incorrect: heat pumps, and A and B

Which of the following are true of Wetlands Mitigation Banking?

E. A&B - It seeks to establish protection in anticipation of predicted ecological loss., Critics are concerned it allows for the deemphasis of preserving wetlands. Wetlands Mitigation allows for establishing, at the minimum, net neutral loss of wetland environments. In the 'destruction' of one, another wetland is preserved or maintained. Wetlands are often destroyed due to population and over development/prioritization of societal growth.

Jeff is a recent grad who wants to start saving money in order to invest in a Tesla as he is very sustainable minded. Jenny, Jeff's friend and a Tesla owner, tells Jeff that he should invest in zero coupon bonds that are $750 today has a face value of $1000 at the end of the year. Jeff did not take Comm 4822 so he does not understand why people are willing to pay more money for money today. Which of the below explain how this works?

E. A&B - time value of money and to adjust for the risk that Jeff Incurs by investing This is both A and B because as Jeff is investing, there is a risk that he will not get his money back. As an incentive for Jeff to take on this risk, the bond needs to give more money to Jeff in the future. Furthermore this is also due to the time value of money because a dollar today is worth more than a dollar tomorrow.

What made changing the lightbulbs in the Legrand case such a no brainer?

E. ALL OF THE ABOVE All of these answers are reasons why Legrand should go through with this project. This way was not just a way to be more environmentally friendly, but it also has a huge cost savings; the fact that the old bulbs had to be replaced was an extra perk.

The purpose of grants in 2013 legislation that was enacted to provide grants and loans was to -

E. ALL OF THE ABOVE Other answers it refers to: design the bank sites, work on the banking agreements with the DEQ, work to resolve any resolutions, notify local units of govt. at the bank site (key - this is from the Wetland Banking assigned video)

Sail drones are sustainable drones used for what purpose?

E. Just A and C : measuring wind, temp, and salinity >>> AND for Ocean Research (not fishing)

An intern named Jane has been tasked with investigating investors' perceptions about the company for which she works. Which aspect of financial health is she specifically researching?

E. Market Sentiment - Market sentiment questions how investors assess a firm's performance.

What are the steps of an investment analysis used by Aaron Revere at Sustainability Solutions?

E. all of the above - initial cash outlay/cost analysis, cash flows/future returns analysis, discount cash flows back, NPV or IRR to make a decision

The payback period is a flawed method of evaluating projects because it doesn't take into account _____.

E. all of the above - social return on investment, time value of money, financial performance, hurdles rate on a project The payback method doesn't account for any of the above factors, only focusing on when the initial investment would be recouped.

Which of the following is false?

E. all of the above are true SRI apparently promotes environmental stewardship, consumer protection, human rights, and diversity Taken from the SRI slides -- all of the above are true

What are the components of the Life Cycle Assessment?

E. all of the above. - goal definition and scoping, impact analysis, improvement analysis, life cycle inventory There are four linked components of LCA: 1. Goal definition and scoping: identifying the LCA's purpose and the expected products of the study, and determining the boundaries (what is and is not included in the study) and assumptions based upon the goal definition. 2. Improvement analysis: evaluating opportunities to reduce energy, material inputs, or environmental impacts at each stage of the product life-cycle. 3. Impact analysis: assessing the impacts on human health and the environment associated with energy and raw material inputs and environmental releases quantified by the inventory. 4. Life-cycle inventory: quantifying the energy and raw material inputs and environmental releases associated with each stage of production.

Impact Investing finds a balance between ?

E. both A and B (finance first and impact first, high social returns and high financial returns)

Which of the following is NOT a risk in mitigation banking?

E. cost of purchase incorrect answers - yield, cost to develop, market for sale of credits, approval

Which is the most popular form of SRI in the US?

E. the Fundamental Approach (which is.... ?) haha (Correct) Incorrect answers - for engagement, quantitative approach, financial approach, impact investing

A table manufacturer in Charlottesville acknowledges it's existing social value is unsatisfactory and does not meet organization goals. A mid-level manager has decided to calculate a new SROI given its brand new supplier change and changed marketing strategy to evaluate whether or not these changes will produce better results. Which type of SROI calculation is this?

FORECAST This is a forecast SROI. The question discusses previous performance, however the answer expected is to label the SROI calculation for future changes.

Bob is in his early 40s. He invests entirely in stocks, and does not intend on getting married or having children. His brother Quinn is a few years older and has three kids getting ready to go to college. His investment portfolio allocates a smaller percentage of his wealth to stocks, and invests in a number of other assets such as corporate bonds and treasuries. Relative to Bob, one might say that Quinn:

He is more Risk Averse (forgot what other choices were)

A colleague tells you that SRI focuses solely on public equity investments. Which would be a correct response?

INCORRECT - that is actually a common misconception of SRI

Life cycle assessment isn't...

IT IS NOT: The amount of environmental degradation that the average person creates within their lifetime, expressed in monetary terms. Explanation: Life-cycle assessments (LCAs) involve cradle-to-grave analyses of production systems and provide comprehensive evaluations of all upstream and downstream energy inputs and multimedia environmental emissions. It is a process to evaluate the environmental burdens associated with a product, process, or activity by identifying and quantifying energy and materials used and wastes released to the environment; to assess the impact of those energy and materials used and releases to the environment; and to identify and evaluate opportunities to affect environmental improvements. The assessment includes the entire life cycle of the product, process or activity, encompassing, extracting and processing raw materials; manufacturing, transportation and distribution; use, re-use, maintenance; recycling, and final disposal.

You currently run the most popular bakery in NYC with your best-selling cookie the "compost cookie". This cookie has pretzels, chocolate chips, potato chips, sea salt, and caramel in it. While you do your best to implement sustainable practices in your cookie production you are curious what is the total environmental impact your cookies have. You've decided that if when producing one cookie it takes more than 30 gallons of water and a carbon footprint of more than 150g than you will take the cookie off your menu. What kind of analysis should you perform to see the overall impact of your cookie?

LCA - SROI is a good analysis for social programs, MFCA will give us the cost of each stage of production for the cookie not the environmental impacts, and ESG is a metric for measuring a companies overall performance in environmental responsibility. LCA is the best metric to measure the net impact of the cookies.

In general, a company would most prefer...

Low WACC and low ICAP The answer is A: See equation EVA = NOPAT - WACC*ICAP (economic value added equals net operating profit after tax minus weighted average cost of capital times invested capital). In order to add the most economic value, a company would want that last term to be as small as possible, which is achieved with low WACC and low ICAP

The net present value is one technique firms use when determining whether or not to accept projects they'd like to invest in. Firms must compute the present value of all future cash flows and then subtract the initial investment of the project. Future cash flows will be discounted at a specified discount rate. The higher the discount rate the _____ the present value of the future cash flows and the ______ likely a firm is to accept a project.

Lower and Less

Which of the following entities is most likely to regularly use Social Return on Investment (SROI) when evaluating potential projects?

NGOs Incorrect Choices: C Corporation, S Corporation, Sole Proprietorships, None of the above Social Return on Investment analysis is typically used by Non-Governmental Organizations and Governmental bodies; these entities are largely concerned with the social implications of projects or investments. When evaluating investments, C Corporations, S Corporations and Sole Proprietorships may focus more on financially-oriented methods for evaluating investments.

For what kind of organizations is SROI the most beneficial analysis?

Non-profits and Govts. SROI is the best analysis for organizations whose goal is to provide social benefits, not to make a profit.

Economic Value Added (EVA) increases when ______ increase(s).

None of the above - Economic value added (EVA) is calculated with the following formula: Economic Value Added = Net Operating Profit After Tax - (Weighted Average Cost of Capital * Invested Capital). The net operating profit after tax is calculated as Revenues - Operating Costs - Taxes. The equation for EVA shows that increases in operating costs or taxes leads to a decrease in calculated EVA. Additionally, increases in a firm's weighted average cost of capital and/or invested capital also leads to a decrease in economic value added. As such, an increase in revenues, all else equal, increases economic value added.

What is a difference between ESG and SRI investing?

OKAY SHITTY QUESTION - but this person says SRI Focuses on overarching themes or client driven requirements that are super-imposed on a portfolio Explanation: Both have a lot more going on than investing in low-carbon companies, so not A or B. D is the answer because SRI focuses more on what clients want to invest in as "good" companies, while ESG focuses on the risk and opportunity of environmental, social, and governance outcomes.

What was the primary differentiating factor in Random Row Brewing Case? Was it successful or competitive with other local breweries?

Okay fair warning weird question - but D. both A and C / Yes (production efficiency and resource use) The case described resource use and production efficiency as areas of focus for improvement. Another leading craft brewery, New Belgium Brewing Company, is on track to achieve a 3.5:1 water use ratio by 2020. Random Row surpassed this ratio with a 2:1 water use ratio. However, addressing potential double-counting or other potential calculation errors along the supply chain, within their system boundaries, is yet to be seen.

A local business has determined that the amount of greenhouse gasses it emits into the atmosphere is unacceptable. Management wants to eliminate the operation that would contribute the most to global warming over the next few years. Based on the data below about the emissions of each operation, which should management eliminate? -Operation 1 emissions: 100 kg Carbon Dioxide (C02) per week -Operation 2 emissions: 100 kg Methane (CH4) per week -Operation 3 emissions: 100 kg Water (H20) per week

Operation 2 bc methane has a high warming potential ! explanation: Global warming potential measures how much heat a greenhouse gas traps in the atmosphere over a given time horizon, relative to carbon dioxide. 1 kg of Methane has a more detrimental effect on the climate than 1 kg of carbon dioxide or water.

The desire to preserve a rainforest for future travel or scientific purposes is an example of which type of economic value?

Option Value Use value is defined as the direct value attained from consuming resources, including eating fish and looking at a beautiful mountain. Non-use value has to do with how a person values something intrinsically, or simply for its existence. Option value involves valuing something for how it can be used in the future.

The number (and complexity) of contingencies in a contract has a _______ relationship with the eventual price of exchange on the asset. (Think: If the number of contingencies go up, what happens to the price of the asset?)

Positive The more the buyer requires, the more the seller will require. Think of buying a car. The one with a warranty will be more expensive, all else equal.

As it concerns the craft beer industry, which of Porter's Five Forces pertained to ingredients like hops and barley?

Supplier Power - Supplier power in the industry is the force that pertains to the ingredients that a brewery such as Random Row would order.

According to the Aberdeen website(https://thinkingaloud.aberdeen-asset.com/en/thinkingaloud/the-bigger-picture/elements-esg), "risk management is becoming ever more important to asset managers as risks develop and evolve within constantly changing markets." How do ESGs help these asset manager in their endeavor?

THIS PERSON SAID ALL OF THE ABOVE ... so ESGs help managers to .... A. ESGS help managers have a solid understanding of risks and opportunities that every companies have B. ESGS help managers better price the asset they are investing in C. ESGS help investors engage with companies on the issues that will have the most significant impacts on their businesses D. ESG integration helps manage the downside risk ^^ all of the above EXPLANATION: According to the website, all of the above are true. (lol)

True or False: Investing in renewables is an example of a Thematic Investment.

TRUE

True or False: Thematic investments are not the same as ESG and Negative Screen investments.

TRUE (brought up in lecture)

What is the overshoot day?

The day humanity consumes all of the productivity the Earth will produce in one year This is how people have defined overshoot day, and it's meant to show people how quickly they use all of the resources that they should use over the course of a year.

Hop Compost operates from a centralized location to collect food scraps from restaurants and transform it into nutrient rich fertilizer which it can then sell for profit. Kevin Davies, Hop Compost CEO, is considering scaling his business by opening up another operation in Vancouver. Vancouver is located a considerable distance away from their current facility in Calgary. Which of the following aspects of Hop Compost might be the biggest obstacle for Davies in his plan to scale the business?

The degree of localness of its business model As discussed in class, Hop Compost has a local business model. If Hop moves into another city, it must forge new relationships with the resaturance/farmers in the area. We discussed how it would be possible to expand and retain the company values/culture (a) and train employees (c). "B corp" certification isn't a direct obstacle for expansion unless Hop is unable to get funding without the certification.

What might you consider to be a good net profit margin?

it depends Several times in class we mentioned the idea of relative understanding of financial metrics (i.e. $15 net profit vs. $500 net profit for which type of business).