Sustainability and Climate Risk (SCR) — Question 45

A recent sustainability report revealed the pension fund of a small European nation is heavily invested in sectors with poor sustainability records. In response to pensioner and other stakeholder requests, the fund joins the PRI.
What strategy must the fund incorporate to comply with the PRI?

Answer options

• A. Divest from energy companies involved in fossil fuel extraction.
• B. Request disclosure from investee firms on ESG issues.
• C. Standardize reporting frameworks across investment sectors.
• D. Invest passively in companies with strong environmental performance.

Correct answer: B

Explanation

The correct answer is B because joining the PRI requires funds to actively engage with investee firms on ESG (Environmental, Social, Governance) issues, which includes requesting disclosures. Options A, C, and D, while potentially beneficial for sustainability, do not directly address the immediate compliance requirement of engaging with firms on their ESG practices.