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Which of the following is most likely an example of a negative externality?
Correct Answer: C
Negative externalities refer to the adverse effects or costs that are incurred by third parties due to the actions or activities of a company, without these costs being reflected in the company's financial statements. These are costs borne by society or the environment rather than the company itself. Examples include pollution, health costs due to emissions, and environmental degradation. References: MSCI ESG Ratings Methodology emphasizes understanding externalities, including environmental impacts, as significant ESG risks that can translate into financial risks over time.