Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test 2025 - Free CESGA Practice Questions and Study Guide

ESG integration is defined by its approach to incorporate environmental, social, and governance factors into the investment analysis process. This method seeks to evaluate how these various factors can affect risk and return, leading to more informed investment decisions. By doing so, it influences the entire investment strategy, making ESG considerations an integral component rather than an afterthought.

This contrasts with ESG exclusion, which specifically involves avoiding or excluding certain investments based on negative ESG criteria. For instance, an investment strategy that excludes fossil fuel companies would fall under ESG exclusion, whereas ESG integration would look at how a diverse set of ESG factors—from environmental risks like climate change to social issues such as labor practices—affect the overall potential of each investment.

The other options do not accurately depict the nature of ESG integration. Focusing solely on governance issues or disregarding social factors contradicts the comprehensive assessment that integration employs. Thus, option B accurately captures the essence of ESG integration, highlighting its holistic approach towards evaluating all ESG factors in investment analyses.