Net zero portfolio construction involves multiple challenges, especially regarding carbon accounting and Scope 3 emissions (indirect emissions from value chains). The CFA’s sustainable investing guidance notes there isno universally accepted standardfor carbon risk netting (disproving option A) andno consensuson how to treat derivatives or short positions (ruling out option B). However, if investorsexclude Scope 3 emissions(which are significant for heavy industry and energy sectors), portfolios oftentilt heavily toward lower-carbon, technology-heavy sectors. Thus, technology sector allocations are typicallyoverweightas a result of this exclusion, making option C correct.
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