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 %) 3 9 4 10 14 3 6
Social Risk Score 4 7 20 7 2 7 6

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 %)	3	9	4	10	14	3	6
Social Risk Score	4	7	20	7	2	7	6

BlackTom AI · Accepted Answer

Weighted average risk = sum(weight_i × score_i). Treat the given weights as percentages (they sum to 49%), so the remaining 51% is cash with risk 0 and must be included implicitly.

1) Relevant concepts
- A portfolio risk score is computed as a weighted average of each holding’s risk score, using portfolio weights as fractions (percent/100).
- If weights do not sum to 100%, the leftover weight is held in cash (risk = 0), which contributes nothing to the weighted sum.

2) Step-by-step calculation
Convert each percentage weight to its contribution by multiplying the percent weight by the asset score (this produces "score-points" per 100):
- Tesla: 3% × 4 = 12
- Ford: 9% × 7 = 63
- Chevron: 4% × 20 = 80
- Home Depot: 10% × 7 = 70
- JP Morgan: 14% × 2 = 28
- Starbucks: 3% × 7 = 21
- Microsoft: 6% × 6 = 36

3) Intermediate sums
Add all contributions: 12 + 63 + 80 + 70 + 28 + 21 + 36 = 310 score-points.

Since weights are percentages out of 100, the portfolio score = total score-points / 100 = 310 / 100 = 3.10.

4) Why this is correct
This follows directly from the weighted-average formula: sum((weight_i/100) × score_i). The 51% cash holding has score 0, so it adds 0 to the numerator but is represented in the denominator via using 100% as the base for the average. Using percentage contributions above is equivalent and simpler.

5) Common mistakes (since this is not multiple choice)
- Forgetting to account for the cash remainder (treating weights as if they should sum to 1 without handling leftover).
- Using a simple (unweighted) average of scores.
- Failing to convert percent weights properly.

Conclusion
The portfolio Environmental Risk Score is 3.1, which matches the provided answer.

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