You have a portfolio with the following Environmental Risk Scores for each of your investments. Given the weights in each investment, what is the Environmental Risk Score for your portfolio? If the weights don't sum to one then the remainder is in cash with no environmental risk. (Answer to one decimal place, 6.1)

Tesla Ford Chevron Home Depot JP Morgan Starbucks Microsoft
Weight (in %) 10 13 8 4 10 12 9
Env Risk Score 3 10 17 5 3 9 7

Question

You have a portfolio with the following Environmental Risk Scores for each of your  investments. Given the weights in each investment, what is the Environmental Risk Score for your portfolio? If the weights don't sum to one then the remainder is in cash with no environmental risk. (Answer to one decimal place, 6.1)

Tesla	Ford	Chevron	Home Depot	JP Morgan	Starbucks	Microsoft
Weight (in %)	10	13	8	4	10	12	9
Env Risk Score	3	10	17	5	3	9	7

BlackTom AI · Accepted Answer

To determine the portfolio's Environmental Risk Score, we treat each investment's weight as its share of the total portfolio (percent) and compute a weighted average of the Environmental Risk Scores, while any unassigned portion (cash) has zero risk.

First, sum all provided weights to see how much of the portfolio is accounted for: 10 + 13 + 8 + 4 + 10 + 12 + 9 = 66%. This means 34% of the portfolio is cash with no environmental risk, contributing 0 to the weighted average.

Next, multiply each investment’s weight by its Environmental Risk Score:
- Tesla: 10% * 3 = 30
- Ford: 13% * 10 = 130
- Chevron: 8% * 17 = 136
- Home Depot: 4% * 5 = 20
- JP Morgan: 10% * 3 = 30
- Starbucks: 12% * 9 = 108
- Microsoft: 9% * 7 = 63

Then sum these products: 30 + 130 + 136 + 20 + 30 + 108 + 63 = 517.

Since the weights are percentages of the total portfolio, the weighted average Environmental Risk Score is the sum of these products divided by 100 (to convert from percentage points to a relative score): 517 / 100 = 5.17.

Finally, round to one decimal place as required: 5.17 rounds to 5.2.

Thus, the portfolio Environmental Risk Score, to one decimal place, is 5.2. The cash portion (34%) contributes zero risk and is implicitly included by not contributing to the weighted sum beyond reducing the effective weights of the invested assets.

FINA3401.13791.202610

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