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CFA Certificate in ESG Investing Exam Questions with Complete Correct Answers | Grade A+

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Externalities are costs that a business does not bear itself but instead imposes on others. Which of the following is not an example of an externalised cost? Ans: Building on brownfield sites. Explanation Externalities are costs that a business does not bear itself (internalise) but instead im...

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  • 9 de julio de 2024
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CFA Certificate in ESG Investing
Exam Questions with Complete
Correct Answers | Grade A+

Externalities are costs that a business does not bear itself but instead imposes on others.

Which of the following is not an example of an externalised cost?

Ans: Building on brownfield sites.

Explanation

Externalities are costs that a business does not bear itself (internalise) but instead imposes on

others (externalises). ESG analysis considers these externalised costs such as climate change,

greenhouse gas emissions, pollution, emissions, waste management, resource depletion, water

intensity or scarcity, supply chain impacts including deforestation, etc. The cost of building

on brownfield sites is not externalised.




What is the first sustainable development goal (SDG 1)?

Ans: To end poverty in all its forms everywhere.

Explanation

SDG 1 is to end poverty in all its forms everywhere.




There are three key challenges of incorporating ESG in investment processes. Which of the

following is not one of those three key challenges?

,Ans: High sustainability companies significantly outperform their counterparts over the

short-term.

Explanation

The three key time horizons challenges of incorporating ESG in investment processes are: It

is hard to predict the value of future losses (or gains); It is difficult to forecast when those

losses (or gains) might occur - it may well be long into the future; Fund managers'

performance is typically assessed using shorter time horizons than those over which ESG

factors might have a material impact.




Institutional investors typically reflect ESG considerations in three ways, which of the

following is not one of those ways?

Ans: Acting as a whistleblower in respective corporate misdemeanours.

Explanation

Institutional investors typically reflect ESG considerations in three ways, namely by

integrating ESG into investment considerations, engaging actively with the boards and

management of investee companies, and by engaging in public policy consultations on ESG

issues.




Which of the following bodies has worked to develop a framework that identifies material

ESG issues by sector?

Ans: SASB.

Explanation

,The Sustainability Accounting Standards Board (SASB) is the most focused body that has

worked to develop a framework that identifies material ESG issues by sector.




There are a number of different ESG investment styles. Which of the following is not one of

these ESG investment styles?

Ans: Momentum investment.

Explanation

ESG investment may be sub-categorized into: Responsible investment; Sustainable

investment; Impact investment; Socially responsible investment (SRI); Ethical investment;

and Thematic investment.




A company has scored well on ESG metrics relative to its competitors, which implies a

number of things. Which of the following is not one of the implications of this relative ESG

score?

Ans: They are more likely to grow rapidly and offer higher short term returns.

Explanation

Companies that score well on ESG metrics are better able to anticipate ESG risks and

opportunities, enjoy valuation premiums due to changing investor concerns and preferences,

and are more disposed to longer term strategic thinking and planning.




What is sustainable development goal 13 (SDG 13)?

Ans: To take urgent action to combat climate change and its impacts.

, Explanation

SDG 13 is focused on climate change. SDG 13 underpins a recognition that economic

development and climate change are inextricably linked, especially where the effects of

global warming in particular can have a negative effect on growth and development.




What is the concept of the triple bottom line (TBL) in the context of corporate accounting?

Ans: TBL attempts to clearly communicate to investors and stakeholders the value created

by companies when social and environmental issues were considered systematically in their

business operations.

Explanation

TBL attempts to improve reporting practices and communicate more clearly to investors and

stakeholders the value created by companies when social and environmental issues were

considered systematically in their business operations.




Which of the following would not be considered a corporate governance issue?

Ans: Working conditions.

Explanation

Working conditions is a social issue.




Institutional investors aim to integrate ESG factors into investment decisions. Which of the

following is not a typical method by which this may be achieved?

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