CFA Institute Certificate in ESG Investing ESG-Investing Exam Questions

A company's exposure to social trends and factors:

When searching for an asset manager with an ESG approach, in the request for proposal (RFP) an institutional asset owner would most appropriately ask:

As part of executive pay structures, annual key performance indicators are most likely to be a determinant of:

Which of the following is a challenge of integrating ESG analysis into investment processes?

Norms-based screening is the largest investment strategy in

When employing an ESG integration strategy, asset managers are most likely to:

Among asset owners, which of the following is most likely a challenge to ESG integration?

The United Nations Sustainable Development Goals (SDGs) are particularly aimed at

Which of the following ESG factors has the clearest link to corporate financial performance?

A materiality assessment to identify ESG issues impacting a company's financial performance is most likely measured in terms of:

A potential challenge for an asset owner implementing responsible investment is:

With respect to ESG integration in private equity, which of the following is most likely a challenge an investor may face?

Which of the following is most likely a success factor characteristic of the engagement approach? Investors pursuing the engagement should have:

The correlation between country ESG scores and credit ratings is:

Is the following statement accurate? "Engagement is meant to preserve and enhance long-term value on behalf of the asset owner by focusing on factors such as capital structure and lobbying."

When screening individual companies, a practice of avoiding the worst ESG performers best defines:

Scorecards to assess ESG factors:

The Kyoto Protocol established emissions targets that are:

In which of the following circumstances is Free, Prior, and Informed Consent (FPIC) most applicable?

Which of the following statements about voting is most accurate?

ESG integration should be considered as part of:

As a result of an aging population, which of the following sectors is most likely to experience slower growth?

Which of the following describes a key goal of the EU Green Taxonomy?

An asset manager considering environmental risks would most likely use:

With regards to the climate, financial materiality:

Which of the following countries is most likely to use a two-tier board structure?

A company's emission reduction commitments are best evaluated using:

Which of the following statements about ESG integration in fixed income is most accurate?

When assessing the investment risk of a coal mining company, the concept of double materiality refers to the company reporting on matters of:

Which of the following are social megatrends?

When integrating ESG analysis into the investment process, deriving correlations on how ESG factors might impact financial performance over time is an example of a:

A company's exposure to social trends and factors:

Under the disclosure guide for public equities published by the Pension and Lifetime Savings Association (PLSA). fund managers are expected to report on:

A benefit of carbon footprinting is that:

Compared to other ESG strategies, fully integrated ESG strategies tend to feature:

According to the Stockholm Resilience Centre, how many of the nine planetary boundaries have already been crossed as a result of human activity?

What order should investors follow when implementing social factors in their investment decisions?

Process 1: Assess the critical social factors in the supply chain

Process 2: Assess how exposed companies are to sector-specific social factors

Process 3: Assess which social factors are most financially material in a particular industry

From a company investment perspective, which of the following is the most significant social impact from climate change transition risks?

Which of the following statements about green bonds and sustainability-linked bonds (SLBs) is most accurate?

Performance materiality:

ESG factors impacting balance sheet strength rather than growth opportunities are most material to:

The World Bank's World Governance Indicators dataset includes rankings on:

Bonds that fund projects that provide access to essential services, infrastructure, and social programs to underserved people and communities are best described as:

What did Semite, Bhagwat, and Yankee's 2018 study conclude about board diversity and governance?

Which of the following would most likely be the initial step when drafting a client's investment mandate?

Which of the following principles of the UK Stewardship Code could be considered controversial?

Which of the following frameworks created requirements to disclose the extent to which investment products consider or promote environmental and social factors?

An ESG-contingent asset for a healthcare company may result from:

Collective engagements:

In the European Union, publicly listed firms are obliged to change auditors at least every:

In the revised 2020 version of the UK Stewardship Code, a significant change is that signatories are now required to:

Which of the following ESG risks is most likely to impact sovereign debt?

Which of the following statements best describes the greenium?

Pension fund trustees are most likely to face fiduciary legal risks related to:

Which of the following is most likely categorized as an external social factor?

Which of the following is responsible for ensuring the composition of a company's board is balanced and effective?

An investor positively screening for bonds that commit to specific improvements in ESG outcomes is most likely to tilt her portfolio towards:

Which of the following statements is least accurate? Compared to social and environmental factors, governance has a:

A social media company faces criticism from a consumer action group for selling user data to advertising clients. A potential lawsuit will have the greatest direct effect on the company's:

Externalities for an infrastructure asset are issues:

The term 'management gap' most likely refers to:

Which of the following statements regarding engagement and stewardship is most accurate?

Credit-rating agencies are most likely classified as:

Which of the following is most likely associated with positive screening?

Which of the following statements about externalities is most accurate?

If a company faces significant environmental regulations, investors would most likely decrease the company's:

In ESG integration, which of the following best describes a data-mformed analytical opinion designed to support investment decision-making?

Compared to those of other countries, the UK corporate governance code has a more in-depth focus on:

Which of the following types of ESG bonds provide financing to issuers who commit to future improvements in sustainability outcomes?

As policies on ESG issues and financial regulation across countries reach maturity, which of the following is least likely to occur?

Asset owners can reflect ESG considerations through corporate engagement by:

In comparison to institutional investors, the pace of adoption of ESG by retail investors has been:

When portfolio managers upload their portfolios onto third-party ESG data provider online platforms, most of these platforms are capable of:

Which of the following principles of the UK Stewardship Code could be considered controversial?

A company has an audit contract with one Big Four firm and non-audit contracts with two other Big Four firms. Which scenario is most likely to materialize when the company rotates its auditors?

When assessing credit and ESG ratings, which of the following statements is most accurate?

Applying constraints in ESG portfolio optimization:

A credit investor uses fundamental credit measures and sector-specific ESG indicators to evaluate a beverage company. Water is a key input for the ingredients used in the company's products. For the investor, the company's efforts to ensure a steady supply of water would most likely be considered:

Single-tier boards are typical in:

If a Japanese company's board does not have committees, it most likely:

Using surface water in a business activity is best characterized as a:

The European Union (EU)'s Carbon Border Adjustment Mechanism is best described as a(n):

Among ESG data and research providers, traditional providers tend to:

An ESG scorecard for sovereign debt issuers has the following information:

Country 1No carbon policy and high corruption risk

Country 2High-level carbon policy and low corruption risk

Country 3Detailed carbon policy and low corruption risk

Based only on this information, the country with the lowest ESG risk is:

Firms using an engagement style focusing first on individual companies, starting with the chair, and working through the board and down to management most likely have a(n):

Under the UK listing regime, Class 1 transactions:

Which of the following social factor scenarios is most likely to affect revenue forecasting?

Which of the following social factors are most likely to impact external stakeholders?

Which of the following is most likely an example of a negative externality?

Exclusionary screening:

Excluding tobacco from the investment universe is an example of which of the following ESG screening approaches?

Determining which ESG issues are material:

Which of the following ESG risks is most likely to impact sovereign debt?

The challenge of ESG integration for an investor is most likely attributable to:

Which of the following factors is most relevant to the performance outlook of a military equipment manufacturer?

Which of the following projects are most likely to be financed in the green bond market?

Corporate engagement and shareholder action is the predominant investment strategy in:

Which of the following asset classes is most sensitive to climate-related transition risk?

An advantage of the carbon footprinting approach to environmental risk analysis is that it allows for:

An ESG-contingent asset for a healthcare company may result from:

The key objective of the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises is:

Which of the following is most likely categorized as an external social factor?

Exclusion-based screening approaches:

As policies on ESG issues and financial regulation across countries reach maturity, which of the following is least likely to occur?

Which of the following statements about the ESG integration process is most accurate?

According to a study by Berg, Koelbel, and Rigobon, the correlation of ESG ratings is:

In the European Union, publicly listed firms are obliged to change auditors at least every:

Which of the following emphasizes that short-term investment performance will be of limited significance in evaluating the manager?

The potential impacts of climate risk on asset allocation strategies are:

Firms using an engagement style focusing first on individual companies, starting with the chair, and working through the board and down to management most likely have a(n):

Which of the following is best described as a risk management framework for assessing environmental and social risk in project finance?

Which of the following social trends is more relevant to developed markets than emerging markets?

Compared to those of other countries, the UK corporate governance code has a more in-depth focus on:

Regime-switching models for strategic asset allocation:

Which of the following is an example of a stranded asset?

In the transition to a low-carbon economy, a coal-powered utility without a mitigation strategy will most likely pose the highest risk to its:

Which of the following sectors receives the highest investment from the Inflation Reduction Act of 2022 (IRA)?

The manager of a sovereign fund publishes a list of excluded companies with reasons for the divestments. This is most likely a form of:

Which of the following initiatives is most closely associated with the increased prevalence of antimicrobial resistance?

Material ESG risks that could be managed by a company but which are not yet managed best describe:

To reflect weak governance of a private equity holding, an analyst's model should most likely include a reduction in the holding's:

The investor initiative FAIRR focuses on screening out companies

Which of the following factors is most relevant to the performance outlook of a military equipment manufacturer?

According to the Principles for Responsible Investment (PRI), which of the following ESG engagement dynamics most likely create value?

The primarily used ESG indices:

Suppose the average price-to-earnings (P/E) ratio for the financial industry is 10x. A financial institution with high ESG risk compared to its industry, is most likely assigned a fair value P/E ratio:

Excluding tobacco from the investment universe is an example of which of the following ESG screening approaches?

Which of the following is most likely to cast doubt on a director's independence?

Which of the following sectors receives the highest investment from the Inflation Reduction Act of 2022 (IRA)?

The Sustainability Accounting Standards Board's (SASB) Materiality Map:

Excluding investment in companies with a history of labor infractions is best categorized as a(n):

In contrast to engagement dialogues, monitoring dialogues most likely involve:

Which of the following is an example of the internalization of negative externalities?

In order to safeguard the independence of the external auditor, European Union (EU) regulation:

According to the Principles of Responsible Investment (PRI), which of the following is an example of a social issue?

Non-recyclable waste is eliminated in the:

Negative screening of tobacco-related companies is best grouped into which of the following basic categories?

The size of the discount rate adjustment to account for ESG risks most likely depends on:

Which of the following events typically increases the discount rate in an investor's discounted cash flow (DCF) model? The investee company:

ESG disclosure among listed companies can be required by:

Which of the following most likely protects minority shareholders?

Which of the following steps in the ESG rating process is most likely the earliest source of the dispersal of opinions between different ESG rating agencies?

The social factor most widely incorporated by institutional investors in their analysis is:

The consulting firm McKinsey & Company includes transparency as part of which of the following dimensions of an asset manager's investment approach?

When assessing credit and ESG ratings, which of the following statements is most accurate?

The COVID-19 pandemic led to increased:

Integrating the impact of material ESG factors into traditional financial analysis for a company with strong ESG practices most likely.

A company's reporting and transparency are initially led by its:

Brown divestment:

In an emissions trading system:

As part of executive pay structures, annual key performance indicators are most likely to be a determinant of:

Which of the following challenges do asset managers face in integrating ESG issues?

Which of the following sectors has the highest percentage of corporate profits at risk from state intervention?

Which of the following is the main driver of stewardship efforts?

With respect to ESG integration in private equity, which of the following is most likely a challenge an investor may face?

Which of the following is most likely categorized as an external social factor?

Which of the following transition risks is most likely associated with increased environmental standards?

Which of the following social trends is more relevant to developed markets than emerging markets?

Research on ESG integration in strategic asset allocation has tended to focus most on:

Excluding investment in companies with a history of labor infractions is best categorized as a(n):

According to an OECD Centre for Opportunity and Equality (COPE) 2015 report, the average income of the richest 10% of the population is about:

Which of the following investor types most likely prefers exclusions as an ESG approach?

With respect to the current state of ESG disclosure globally, issuer reporting frameworks for ESG information are:

ESG datasets are best characterized by:

Which of the following statements regarding ESG screening is most accurate?

ESG factors that relate to future growth opportunities are most relevant to:

According to the Brunel Asset Management Accord, which of the following is least likely a cause for concern when conducting an annual performance evaluation of a manager against a long-term ESG investment mandate?

When considering strategic asset allocation, would stranded asset risk most likely be a similar concern for fixed income and equity investors?

According to a study of the Hermes UK Focus Fund: which of the following engagement objectives was most likely to be achieved through shareholder activism?

The perpetual compound annual rate that a company's cash flow is assumed to change by after the discrete forecasting period is referred to as the:

Which of the following increases pressure on natural resources?

Information for use in ESG tools can be collected directly via:

Which of the following emphasizes that short-term investment performance will be of limited significance in evaluating the manager?

Shocks around pay levels at newly privatized utilities led to the:

Which of the following is a challenge of integrating ESG analysis into investment processes?

Which of the following data are most likely the easiest to optimize in a portfolio?

The key objective of the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises is:

The Jevons paradox refers to:

Which of the following statements regarding the UK Stewardship Code is accurate? The Code:

The World Bank's World Governance Indicators dataset includes rankings on:

Which of the following challenges is most likely related to the attribution of returns to ESG factors?

What order should investors follow when implementing social factors in their investment decisions?

Process 1: Assess the critical social factors in the supply chain

Process 2: Assess how exposed companies are to sector-specific social factors

Process 3: Assess which social factors are most financially material in a particular industry

One of the mam principles of stewardship codes calls for institutional investors to:

An unfavorable corporate governance assessment would most likely be incorporated in valuation through reduced:

An ESG-contingent asset for a healthcare company may result from:

A pension fund concerned about climate change will most likely:

According to the Taskforce on Nature-related Financial Disclosures (TNFD), the four realms of nature include

Third-party assessments that highlight events, behaviors, and practices that may lead to reputational and business risks and opportunities are best classified as:

Brown divestment:

Which of the following is an example of secondary data?

Leased assets of a company contribute to:

Which of the following statements regarding the availability of ESG data is most accurate? According to the Principles for Responsible Investment (PRI):

For which of the following asset classes are investment managers most likely to use voting to exert influence on a company?

If a company's terminal growth rate assumption is adjusted lower due to material ESG factors, the valuation from the discounted cash flow model will be:

All else equal, a higher discount rate applied to a company's discounted cash flow (DCF) analysis will lead to:

Which of the following represents the majority of the largest asset owners?

Alignment of an investment manager's performance against a long-term ESG investor's objectives is best achieved by which of the following?

Using the ''shades of green" methodology developed by the Center for International Climate Research (CICERO), a project that does not explicitly contribute to the transition to a low carbon and climate resilient future is given the shading of:

A small company based in Sweden operates in an industry that has good sustainability ratings. The company has a low ESG rating that an analyst believes to be biased. The bias would most likely result from the company's:

The Cadbury Commission proposed that:

Credit-rating agencies are most likely classified as:

The first step in the effective design of an investment mandate is determining the:

A challenge to ESG integration at the asset allocation level when using mean-variance optimization is that it: