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bhanu29
Joined: 02 Oct 2024
Last visit: 30 Apr 2026
Posts: 363
Given Kudos: 263
Location: India
Schools: Anderson '27 Booth '27 Foster '27 Haas '27 Kellogg '27 Kellogg Mashall '27 McCombs '27 Ross '27 Scheller '27 Tepper '27 Yale '27 Sloan (MIT) Stanford '27
GMAT Focus 1: 675 Q87 V85 DI79 
GMAT Focus 2: 715 Q87 V84 DI86
GPA: 9.11
WE:Engineering (Technology)
Products:
Schools: Anderson '27 Booth '27 Foster '27 Haas '27 Kellogg '27 Kellogg Mashall '27 McCombs '27 Ross '27 Scheller '27 Tepper '27 Yale '27 Sloan (MIT) Stanford '27
GMAT Focus 2: 715 Q87 V84 DI86
Posts: 363
17 Dec 2025, 19:10
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Bunuel
Premises:
A major asset management firm is considering divesting from companies that score poorly on environmental, social, and governance (ESG) metrics, under the belief that such companies pose long-term financial risks.
The firm’s research indicates that ESG-aligned portfolios have, on average, outperformed traditional portfolios over the past five years.
Conclusion:
Therefore, the firm concludes that shifting to ESG-focused investments will likely improve long-term returns for its clients.
This is a evaluate question, so for correct answer "Yes" should either strengthen or weaken the conclusion and "No" should do the opposite.
(A) Whether the companies with low ESG scores operate in sectors that are currently under regulatory scrutiny or subject to rising compliance costs.
The answer to this question Yes/No doesn't affect the conclusion, as we have know info on how they'll behave in future and it may/not affect high ESG metrics portfolios. Eliminate.
(B) Whether the ESG-aligned portfolios that outperformed had comparable levels of sector and regional diversification as traditional portfolios.
Answering yes to this question strengthens the claim that return is due to ESG aligned investments, No to this question weakens the claim because the high RoI in the past might be because of diversification not because of alignment with ESG. Looks pretty good. Keep.
(C) Whether the clients of the firm are primarily interested in short-term returns or long-term capital appreciation.
We have no idea about ESG investments short term returns. Eliminate
(D) Whether the firm’s research adequately excluded companies that made recent ESG improvements but had not yet seen changes in their ESG scores.
Answering Yes/No to this question doesn't affect the claim that returns is due to ESG alignment, even if some recent ESG impoved companies were included overall trend of RoI still remains same, if B wan't convincing we could have thought about this choice bit more. Eliminate.
(E) Whether companies with strong ESG scores are more likely to reinvest earnings into sustainability initiatives rather than dividend payouts.
We don't know if return on investment expected includes dividend, it might be other things like buying shares of the company, So Yes/No to this doesn't really affect ESG claim. Eliminate.
Correct Answer: B
17 Dec 2025, 21:05
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When the firm is looking to divest from traditional companies to companies that are ranked high on ESG metrics. The firm should look for those parameters that it will not loose on those which are in traditional companies and essential such as presence in sectors in which traditional companies are operating and diversification.
Therefore option b talks about this specific criteria whereas other options aren't
Hence answer is b
Therefore option b talks about this specific criteria whereas other options aren't
Hence answer is b
Bunuel
17 Dec 2025, 21:11
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Premise:
ESG portfolios outperformed others in the past 5 years,
Conclusion:
So shifting to ESG will give better long terms results.
Gap:
- what if the past 5 years record doesn't hold for long term ? May be in past 5 years the economy or geopolitical situation supported ESG
- what if the cause is misattributed ? meaning it is not ESG but there is something else common among those companies ?
A. Whether the traditional ones have other costs or not doesn't impact the argument - because we dont know how those costs at company level affect the returns on investment. May be the costs far exceed the returns ?
B. Whether ESG has as good of diversification as traditional ones or somewhat less won't have much impact since what is the link between diversification at same levels to ROI is not mentioned or can be understood reasonably
C. what clients are interested in is not the argument. It is about whether the firm can get long term returns to clients or not.
D.Correct. This points to a potential error in calculation. If answer to this question is true, then calculation is correct since it is based on past data. If it is false, then those which are supposed to be traditional companies are counted under ESG, resulting in wrong takeaways.
E. dividend payouts vs reinvestment -> how this affect long term returns is not mentioned
ESG portfolios outperformed others in the past 5 years,
Conclusion:
So shifting to ESG will give better long terms results.
Gap:
- what if the past 5 years record doesn't hold for long term ? May be in past 5 years the economy or geopolitical situation supported ESG
- what if the cause is misattributed ? meaning it is not ESG but there is something else common among those companies ?
A. Whether the traditional ones have other costs or not doesn't impact the argument - because we dont know how those costs at company level affect the returns on investment. May be the costs far exceed the returns ?
B. Whether ESG has as good of diversification as traditional ones or somewhat less won't have much impact since what is the link between diversification at same levels to ROI is not mentioned or can be understood reasonably
C. what clients are interested in is not the argument. It is about whether the firm can get long term returns to clients or not.
D.Correct. This points to a potential error in calculation. If answer to this question is true, then calculation is correct since it is based on past data. If it is false, then those which are supposed to be traditional companies are counted under ESG, resulting in wrong takeaways.
E. dividend payouts vs reinvestment -> how this affect long term returns is not mentioned
