CFA Sustainable Investing Certificate (Formerly ESG Certificate) Practice Exam

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• Which of the following is an active quantitative approach to embed ESG within a portfolio?
• Which of the following best describes impact investing?
• Which is likely to be a primary ESG driver for a European defined benefit pension scheme?
• What is the focus of sustainable agriculture?
• Which of the following is NOT a requirement for a bond or a loan to be considered 'green' under frameworks such as the Green Bond Principles (GBP) or Green Loan Principles (GLP)?
• Which of the following by itself is the LEAST naturally-suited investment strategy to accommodate the United Nations' Sustainable Development Goals (SDGs)?
• What does governance entail in the context of ESG?
• Which of the following is NOT a reason for an asset owner to implement an exclusionary screening approach?
• Which of the following is NOT among the seven areas typically covered by the top-level principles of a stewardship code?
• What is considered a primary benefit of integrating ESG factors into investment decisions?
• How do environmental regulations influence corporate behavior?
• What is one of the primary goals of sustainable investing?
• Which of the following statements is false?
• Qualitative analysts integrate their opinions primarily by:
• Which of the following is not a typical method by which ESG is reflected in investment approaches?
• In which ways can ESG matters become financially material for a company, and contribute to reduced risk and enhanced return?
• When might escalation NOT be the right step in an engagement that has made no progress?
• What distinguishes exclusionary screening from inclusivity in investment?
• Which of these forms of asset owner is most likely to apply an exclusionary policy barring investment in all assets exposed to a particular business area?
• Which of these is NOT a way for investors to make their voting activity more effective and influential?
• What is the purpose of the Platform Living Wage Financials?
• What is not one of the three P's in the triple bottom line concept?
• Which of the following roles is often separated from the CEO in modern corporate governance practices?
• What is ESG investing?
• Which of the following is a benefit of ESG integration for investment firms?
• Which of the following is NOT likely to be considered a G factor by a sovereign debt investor?
• What is a common motivation for investors to incorporate ESG factors into their investment decisions?
• What role does transparency play in sustainability reporting?
• What is the advantage of using a benchmarking approach in ESG evaluation?
• What is the definition of 'offshoring'?
• Which area of ethical corporate behavior is most likely to be subject to extraterritorial legislation?
• What is a primary reason why companies disclose ESG performance metrics?
• Which social megatrends are considered important in investment analysis?
• Amongst 1) Black-Litterman model, 2) Brinson attribution model, and 3) risk factor attribution, which is/are metric(s) to measure the effectiveness of ESG integration?
• What does the term "sustainable finance" primarily focus on?
• Materiality assessments are primarily measured by what criteria?
• Which of the following best represents factors least considered by credit ratings agencies (CRAs)?
• In ESG analysis, what is the purpose of engaging in stewardship activities?
• How can shareholders influence corporate sustainability?
• Which component of the EU taxonomy pertains to social objectives?
• Which document typically outlines the responsibilities of a company's board of directors?
• What is "natural capital"?
• How can investors evaluate environmental performance?
• Which of the following aspects does NOT typically fall under ESG factors?
• In what sense are ESG considerations non-financial?
• What is the role of ESG ratings?
• What is the purpose of the Global Reporting Initiative (GRI)?
• Which group is primarily focused on fiduciary responsibilities in relation to ESG?
• What is the major constraint on collective engagement approaches?
• What area is not typically associated with the rise of automation and AI?
• Which of the following is NOT a challenge surrounding ESG?
• Why is a social materiality assessment considered important?
• Which of the following statements is true about best-in-class investments?
• What is meant by 'ethical sourcing'?
• Why might a client concentrate their attention on ESG outliers in fund manager performance assessment?
• Which of the following is a new area of focus in the UK Stewardship Code 2020?
• What is one primary benefit of sustainable investing for investors?
• What does the term 'environmental justice' refer to?
• What does ESG stand for?
• Which type of investor is likely to have the lowest risk tolerance?
• What metrics are typically used to assess corporate governance?
• How do ESG metrics differ from traditional financial metrics?
• What are the 'two A's' that lie at the heart of corporate governance?
• How do NGO partnerships impact ESG initiatives?
• Which principle, more typical in regulatory codes, is frequently neglected in codes developed by investor groups?
• How do thematic investments differ from other investment approaches?
• Which of the following is NOT among the challenges limiting the development of ESG investing?
• What are the origins of the term 'stewardship'?
• What is the purpose of climate-related financial disclosures?
• What matters does the EU Taxonomy address?
• What is positive screening?
• What does it mean for an investment strategy to be 'thematic' in relation to ESG?
• Which of the following statements about shadow carbon pricing is incorrect?
• How are pension fund members most likely to influence responsible investment?
• Which of the following is not a form of ESG investment?
• What is impact investing?
• Which is the only major country that does NOT, as of 2020, have a corporate governance code?
• Which of the following are expected to be reported by the Pensions and Lifetime Savings Association (PLSA) disclosure guide for public equities?
• Qualitative ESG analysis is particularly relevant in which type of investment processes?
• Name a common sustainable investing strategy.
• How might a fund manager demonstrate to clients that it is addressing the challenge of resourcing of stewardship activities?
• Which of the following best describes a green bond?
• What is the highest risk to the industry regarding greenwashing?
• According to the IPCC, when should global emissions of CO2 reach 'net zero' to potentially limit temperature rise to 1.5C?
• Which of the following is not a core element of the Task Force on Climate-related Financial Disclosures (TCFD)?
• An active investor concerned about the financial viability of the business is most likely to reflect that concern in their voting on:
• What were the two major scandals in Europe in 2003 that led to a reassessment of the continent's approach to governance?
• Which of the following is NOT a typical way in which asset managers integrate ESG?
• Which of the following is considered an element of ESG integration?
• The efficiency of shareholder engagement does NOT depend on...
• How is 'sustainable development' most accurately defined?
• Which aspect is often included in sustainability assessments of companies?
• Why is it important for companies to align with ESG criteria?
• Which of the following is NOT among the main barriers to effective engagement?
• According to Oxfam, which megatrend is highlighted by the statement "the richest 1% in the world have more than double the wealth of 6.9 billion people"?
• What post-financial crisis report led to the creation of the first stewardship code?
• For which of the following sectors will the management of greenhouse gas emissions be most material?
• Which of the following best describes the principles of a circular economy?
• Which of the following is NOT among the identified key mechanisms for the escalation of engagement?
• Why are social metrics essential in ESG evaluations?
• A portfolio manager would optimize their portfolio for ESG considerations for the purpose of:
• Which is the correct order for developing an ESG scorecard?
• Why is stakeholder engagement important in ESG investing?
• What principle must be upheld regarding board director conflict of interest?
• In what way can sustainable investments affect portfolio diversification?
• What is the long-term goal of the Paris Agreement regarding global average temperature increase?
• What is the primary purpose of a company’s Environmental, Social, and Governance (ESG) report?
• Which of the following scandals did NOT help set the context for the creation of the first corporate governance code?
• Which of the following would be considered a climate change adaptation strategy?
• Which of the following methodologies is a common approach for assessing ESG performance?
• Which of the following is not an example of a social factor?
• Which of these topics are not generally expected to be addressed by the portfolio management-related section of an ESG policy?
• What do the OECD Guidelines for Multinational Enterprises emphasize regarding business conduct?
• Which factor is crucial for successful ESG integration in investment strategy?
• In what ways can an investment consultant be a barrier to the growth of the ESG investing market?
• How can we differentiate between necessary and sufficient ESG data?
• An analyst assesses a company as below average on ESG metrics. All other matters being equal, she is most likely to:
• What does stakeholder capitalism emphasize?
• Which of the following does NOT represent the function(s) of ESG indices?
• Which type of shareholders are usually regarded as having more influence over corporate governance?
• What is an example of an internal and an external social factor?
• What does the United Nations Principles for Responsible Investment (UN PRI) promote?
• What does 'divestment' refer to in sustainable investing?
• What US legislation led to the creation of the Public Company Accounting Oversight Board (PCAOB)?
• What is meant by corporate social responsibility (CSR) in the context of ESG?
• Why are investment mandates important for ESG investing?
• Disclosures and data-related challenges for ESG integration do NOT include which of the following?
• Which principle in the Principles of Responsible Investment (PRI) is the 'engagement principle'?
• What is the largest sustainable investment strategy globally?
• Which of the following statements about ESG integration is NOT true?
• What is the primary objective of the EU Taxonomy?
• Which of the following is NOT a board committee expected to be established at all companies?
• Scope 3 of the GHG Protocol standards covers which of the following emission sources?
• What benefits arise from assessing supply chains in relation to ESG performance?
• Which scenarios necessitate Free Prior Informed Consent (FPIC)?
• What is the clearest risk from an asset owner leaving voting decision-making in the hands of its fund managers?
• What does the concept of a just transition entail?
• What role does regulatory compliance play in ESG investing?
• Which statement outlines the distinction between the auditor's role in relation to the financial statements and to the rest of the annual report and accounts?
• How do sustainable development goals (SDGs) relate to investing?
• What is the main purpose of ESG engagement by investors?
• Which of the following is NOT a reason why the role of the chair of a company board is so important?
• Why might a fund manager disagree with an external researcher's ESG analysis of a particular asset in its portfolio?
• How long can an audit firm remain in the role at an EU public company?
• What ESG feature is often overlooked in screening approaches for collective investment funds?
• What term describes the practice of excluding certain sectors or companies from an investment portfolio for ethical reasons?
• Which of the following is NOT typically used by fixed income practitioners when assessing ESG aspects?
• What does the 'S' in ESG stand for?
• In what way do technological innovations affect sustainable investing?
• What characterizes socially responsible investing (SRI)?
• What are the three pillars of sustainability?
• What is the most significant difference between monitoring dialogues and engagement?
• How can climate risk assessments assist investors?
• Which of the following is a common challenge in sustainable investing?
• In what way can stock exchanges support the advancement of ESG investing?
• Which two ESG specific areas of disclosure are requested by the ICGN Model Mandate?
• Which element of executive pay is most likely to include some metric based on ESG performance?
• Which of the following is NOT typically seen as a driver of concern regarding an individual director's independence?
• Which of the following statements is true?
• What does 'greenwashing' refer to?
• Which of these does NOT describe an approach within ESG portfolio integration?
• From the perspective of environmental factors, which option is considered material in the beverages industry?
• Why is ESG important in investing?
• Which of these is NOT an ESG integrated valuation technique?
• What behavioral step needs to be taken to reinforce the length of the client mandate in order for fund manager time horizons to lengthen to those sought by their clients?
• What is the most probable reason why an investor would engage with policy makers on ESG?
• What is a key goal of sustainable investing?
• What is the most common method of waste management globally?
• Which of the following factors are considered under environmental aspects of ESG?
• Which of the following is NOT one of the prioritization decisions that an investor must take in relation to stewardship?
• What was the model created by the Cadbury Code for adherence to its principles, still followed in the UK code?
• Which of the following is NOT a macro-economic climate consideration?
• Which of the following is NOT an example of a proposed planetary boundary?
• What is the 'ESG integration approach'?
• Which regions manage the highest proportion of sustainable and responsible investing assets?
• Which rights are typically recognized under labor rights?
• How can demographic trends affect sustainable investing?
• Classes of ESG-oriented fixed income debt issuance include:
• What is one key outcome of conducting a materiality assessment?
• Why have passive ESG indices been criticized as being more active than they are presented?
• In what way can clean technology influence sustainable investing?
• What financial risks do investors face due to climate change?
• Which stakeholders are primarily involved in shareholder engagement regarding ESG issues?
• Which of the following is NOT a typical form of collective engagement?
• What is meant by 'impact measurement' in sustainable investing?
• What does the term 'blue economy' refer to?
• What trend has been observed regarding income inequality over recent years?
• Which of the following is NOT one of the three key elements of disclosure in the new enhanced auditor's reports?
• What does the corporate human rights benchmark evaluate?
• Which of the following is NOT a driver for clients to seek ESG investment?
• Which of the following, according to the Brunel Asset Management Accord, is NOT in itself a likely cause for concern?
• What is sustainable investing?
• What kinds of situations does the term 'negative externality' best describe?
• How does shareholder activism relate to ESG?
• What is the focus of the Access to Medicine index?
• What factor is primarily considered in a company's ESG rating?
• What is the main challenge with policies that are 'comply or explain' regarding ESG?
• What is the least likely reason why a pension fund trustee may consider ESG investing?
• What role does transparency play in ESG investing?
• Why is ESG investing a concern for investors who are cautious of high tracking error?
• Why is stakeholder engagement important in sustainable investing?
• Which of the following is NOT an outcome of short-termism?
• Which of the following factors is generally considered the most important when evaluating ESG considerations around sovereign debt?
• What does the "double materiality" concept in ESG indicate?
• Why was the US Department of Labor's clarification of fiduciary duty in 2015 welcomed by the ESG investing industry?
• What are the primary social factors considered in ESG analysis?
• Which of the following represents a transition risk?
• Which practice is commonly used to assess ESG criteria in an investment portfolio?
• Which of the following is NOT a way to assess effective ESG integration by a fund manager, according to PLSA?
• What is one advantage of integrating ESG factors into investment analysis?
• Which of the following is NOT one of McKinsey's proposed dimensions of investing for the purposes of applying sustainable investing practices?
• What is the purpose of stakeholder engagement in ESG investing?
• How is a carbon footprint defined?
• What is the purpose of a materiality assessment in ESG?
• Which of the following statements best describes a green bond?
• Which of the following is not an explicit UN Sustainable Development Goal (SDG)?
• What is a primary aim for integrating ESG into an investment process?
• Which of the following sectors is NOT typically excluded by ethical and faith-based investors?
• What is one benefit of qualitative ESG approaches in investment processes?
• What are the four broad groupings of issues covered by the UN Global Compact?
• The largest and second largest asset classes, which implement responsible investment, are respectively...