ESG-Investing Exam Questions and Answers

QUESTION: 21

The Integrated Biodiversity Assessment Tool (IBAT) is best described as an interactive mapping tool allowing decisionmakers to:

assess companies' preparedness for biodiversity risk
manage biodiversity and social risk in project finance
identify biodiversity risks and opportunities within a project boundary.

Answer(s): C

Explanation:

The Integrated Biodiversity Assessment Tool (IBAT) is an interactive mapping tool designed to help decision-makers identify biodiversity risks and opportunities within a project boundary. Here's a detailed breakdown:

IBAT Functionality:

IBAT provides access to up-to-date information on biodiversity, including key biodiversity areas and legally protected areas. This enables users to assess the potential impacts of their projects on biodiversity and make informed decisions to mitigate risks.

The tool is specifically designed to integrate biodiversity considerations into business and investment decisions by highlighting areas that may pose biodiversity risks .

Other Descriptions:

While IBAT can support broader biodiversity and social risk management, its primary function is to identify risks and opportunities within a specific project boundary. It is not primarily focused on assessing companies' overall preparedness for biodiversity risk or managing project finance risks in a broader sense .

Reference:

The CFA ESG Investing curriculum discusses various tools and frameworks for integrating biodiversity considerations into investment decisions. IBAT is highlighted as a key tool for identifying site-specific biodiversity risks and opportunities .

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QUESTION: 22

The divergence of ratings among ESG providers most likely.

enhances the credibility of empirical research
ensures that ESG performance is reflected in asset prices.
hampers the ambition of companies to improve their ESG performance

Answer(s): C

Explanation:

The divergence of ratings among ESG providers most likely hampers the ambition of companies to improve their ESG performance. Here's why:

Mixed Signals:

Companies receive mixed signals from different ESG rating agencies due to the lack of standardization in ESG ratings. This can create confusion and uncertainty about which actions will be valued by the market, making it challenging for companies to prioritize and implement effective ESG strategies .

The inconsistency in ratings can demotivate companies from pursuing ESG improvements if they are unsure which criteria to meet.

Challenges in Empirical Research:

While divergence in ratings poses challenges for empirical research and can affect the reflection of ESG performance in asset prices, the primary issue for companies is the confusion and lack of clear guidance on how to improve their ESG performance effectively .

Reference:

The CFA Institute's ESG curriculum addresses the challenges posed by the lack of standardization in ESG ratings, emphasizing the need for consistent and clear criteria to guide companies in their ESG efforts and ensure meaningful improvements .

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QUESTION: 23

Regrowing previously logged forests is most likely an example of climate:

resilience
change mitigation
change adaptation

Answer(s): B

Explanation:

Regrowing previously logged forests is an example of climate change mitigation. Climate change mitigation involves actions that reduce the concentration of greenhouse gases in the atmosphere, thereby addressing the root causes of climate change.

Carbon Sequestration: Regrowing forests increases the number of trees, which absorb carbon dioxide from the atmosphere through photosynthesis. This process helps to reduce the overall concentration of greenhouse gases.

Restoration of Ecosystems: By regrowing previously logged forests, ecosystems are restored, enhancing their ability to function as carbon sinks. Healthy forests play a crucial role in maintaining the balance of carbon in the environment.

Long-term Impact: The regrowth of forests has a long-term impact on mitigating climate change by continuously removing carbon dioxide from the atmosphere over extended periods, contributing to global efforts to limit temperature rise.

Reference:

MSCI ESG Ratings Methodology (2022) - Discusses various mitigation strategies, including afforestation and reforestation, as effective measures to combat climate change.

ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the importance of carbon sequestration and ecosystem restoration in climate change mitigation.

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QUESTION: 24

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

investors
corporations.
governments

Answer(s): C

Explanation:

The United Nations Sustainable Development Goals (SDGs) are particularly aimed at governments. The SDGs provide a comprehensive framework for countries to address global challenges and promote sustainable development.

Policy and Regulation: Governments are responsible for creating and implementing policies and regulations that align with the SDGs. They play a central role in setting national priorities and strategies to achieve these goals.

Resource Allocation: Achieving the SDGs requires significant investment in various sectors, such as healthcare, education, infrastructure, and environmental protection. Governments allocate resources and funding to support these initiatives.

International Cooperation: The SDGs encourage governments to collaborate internationally, sharing knowledge, resources, and best practices to address global challenges such as poverty, inequality, and climate change.

Reference:

MSCI ESG Ratings Methodology (2022) - Emphasizes the role of governments in driving sustainable development and aligning national policies with the SDGs. ESG-Ratings-Methodology-Exec-Summary (2022) - Discusses the importance of government action and international cooperation in achieving the SDGs.

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QUESTION: 25

Which of the following is an environmental megatrend that has a severe social impact?

Urbanization
Globalization
Mass migration

Answer(s): C

Explanation:

Mass migration is an environmental megatrend that has a severe social impact. Environmental changes, such as climate change, natural disasters, and resource depletion, can force large populations to migrate, leading to significant social consequences.

Displacement and Refugees: Environmental degradation and climate-related events can displace millions of people, creating large numbers of refugees and internally displaced persons. This leads to humanitarian crises and puts pressure on host communities and countries.

Social and Economic Strain: Mass migration can strain social and economic systems in both the areas people migrate from and to. It can lead to increased competition for jobs, housing, and resources, and can also cause social tensions and conflicts.

Cultural Impact: Migration can impact cultural dynamics, leading to changes in community structures and potential conflicts over cultural integration and identity. The social fabric of both sending and receiving regions can be significantly affected.

Reference:

MSCI ESG Ratings Methodology (2022) - Discusses the social impacts of environmental megatrends, including mass migration, highlighting the challenges and risks associated with large-scale human displacement.

ESG-Ratings-Methodology-Exec-Summary (2022) - Provides insights into the social and economic implications of environmental changes and the resulting migration patterns.

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CFA ESG-Investing Exam (page: 5) CFA Certificate in ESG Investing Updated on: 09-Feb-2026

QUESTION: 21

Explanation:

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QUESTION: 22

Explanation:

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QUESTION: 23

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QUESTION: 24

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QUESTION: 25

Explanation:

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CFA ESG-Investing Exam (page: 5)
CFA Certificate in ESG Investing
Updated on: 09-Feb-2026