Which of the following is most likely to develop an investment recommendation for a security that may be suitable for an ESG-integrated portfolio?

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BlackTom AI · Accepted Answer

When considering who would most likely develop an investment recommendation for a security that could fit an ESG-integrated portfolio, we should evaluate the typical roles and responsibilities in investment decision processes.
Option 1: An asset owner. While asset owners (such as pension funds or endowments) set overall investment objectives and mandate ESG requirements, they are generally not the day-to-day analysts producing specific security recommendations. Their role is more governance and mandate-setting rather than selecting individual securities.
Option 2: A portfolio manager. Portfolio managers are responsible for implementing a chosen strategy, allocating assets, and making buy/sell decisions within a portfolio. They may generate and act on recommendations, but their primary function is execution and oversight of the portfolio, often relying on inputs from analysts. Therefore, they are strong candidates, but the question asks who is most likely to develop the specific recommendation for a security in an ESG-integrated context, which implies a research-oriented source.
Option 3: A fundamental analyst. Fundamental analysts analyze a security’s intrinsic value by examining financial statements, business models, competitive dynamics, and, in the ESG context, environmental, social, and governance factors. They traditionally produce detailed investment recommendations (buy/hold/sell) based on core financial and ESG findings, making them the most likely to formulate a specific security recommendation for inclusion in an ESG-integrated portfolio.
In the ESG-integrated framework, incorporating ESG data into valuation and risk assessment is a hallmark of fundamental analysis, as opposed to purely governance or mandate-level considerations. This makes the fundamental analyst the most plausible originator of a concrete recommendation for a security in such a portfolio.
Option 1 also sometimes appears in questions as a distractor because asset owners influence strategy, but they do not typically draft security-level recommendations.
Option 2 is closely related to decision-making within a fund, yet the explicit generation of a security recommendation usually rests with researchers or analysts who evaluate the security on fundamental and ESG grounds before the portfolio manager acts on it.
Option 3 directly aligns with evaluating securities on fundamental and ESG criteria to produce actionable recommendations, which is the core task in question.
Thus, understanding the roles helps clarify why the fundamental analyst is the most fitting source for a security recommendation in an ESG-integrated context.

FINA3401.13791.202610 Chapter 8 Quiz Portfolio Construction

Which of the following is most likely to develop an investment recommendation for a security that may be suitable for an ESG-integrated portfolio?

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