Avoiding long term transition risk can most likely be achieved by:

Avoiding long term transition risk can most likely be achieved by:
A . investing in companies with stranded assets.
B . divesting highly carbon-intensive investments in the energy sector.
C . reducing exposure to companies exposed to extreme weather events

View Answer

Answer: B

Explanation:

Avoiding long-term transition risk can most likely be achieved by divesting highly carbon-intensive investments in the energy sector.

Here ’ s why:

Long-term Transition Risk:

Transition risk refers to the financial risks associated with the transition to a low-carbon economy. Carbon-intensive investments are particularly vulnerable as regulations and market preferences shift towards cleaner energy.

Divesting from these investments reduces exposure to potential losses from stranded assets and regulatory penalties.

This strategy aligns with the need to mitigate long-term transition risks, ensuring portfolio resilience as the global economy transitions to sustainable energy sources.

CFA ESG Investing

Reference: The CFA ESG Investing curriculum discusses strategies for managing transition risks, highlighting divestment from carbon-intensive sectors as an effective approach to mitigate long-term risks and align with sustainable investment practices.