CFA Certificate in ESG Investing ESG-Investing Exam Questions in PDF

Free CFA ESG-Investing Dumps Questions (page: 67)

Which of the following climate risks are systemic risks to the financial system?

  1. Policy and legal risks
  2. Technology and stability risks
  3. Physical and transitional risks

Answer(s): C

Explanation:

Systemic risks to the financial system from climate change include both physical and transitional risks. Physical risks refer to the direct impact of climate change, such as extreme weather events and gradual changes in climate. Transitional risks are associated with the shift to a lower-carbon economy, including policy changes, technological advancements, and changing consumer preferences. These risks are interconnected and can significantly affect economic and financial stability.



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

  1. Green bonds
  2. Sustainability bonds
  3. Sustainability-linked bonds

Answer(s): C

Explanation:

Sustainability-linked bonds (SLBs) provide financing to issuers who commit to specific improvements in sustainability outcomes. Unlike green or sustainability bonds that fund specific projects, SLBs are tied to the issuer's overall sustainability performance and commitments to achieving predefined sustainability targets. These bonds incentivize issuers to enhance their ESG performance across various aspects, making them a flexible tool for promoting broader sustainability goals.

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

  1. which broad market index the asset manager tracks
  2. detailed questions on specific portfolio holdings of the asset manager
  3. if the asset manager aims for positive, measurable ESG outcomes beyond financial returns

Answer(s): C

Explanation:

When searching for an asset manager with an ESG approach, it is essential for an institutional asset owner to understand whether the asset manager's strategy aligns with their sustainability objectives. The most appropriate question to ask in the RFP is whether the asset manager aims for positive, measurable ESG outcomes beyond financial returns. This question assesses the commitment to achieving concrete ESG results, which is a critical factor in evaluating the manager's integration of ESG factors into their investment process. Detailed questions about portfolio holdings or which broad market index the manager tracks are less relevant to assessing the ESG integration.



Companies may be excluded from the UK Modern Slavery Act on the basis of:

  1. size only
  2. sector only.
  3. both size and sector

Answer(s): A

Explanation:

Under the UK Modern Slavery Act, companies are required to publish a statement on the steps they have taken to ensure that slavery and human trafficking are not taking place in their business or supply chains. The Act applies to businesses with a turnover of £36 million or more, making size the primary basis for exclusion. There are no sector-specific exclusions mentioned in the Act.



Which of the following is most likely a reason for concern regarding the quality of a company's ESG disclosures?

  1. The inclusion of audited ESG data
  2. Competitors have stronger disclosure standards
  3. There is written commitment to improve future ESG disclosure

Answer(s): B

Explanation:

A reason for concern regarding the quality of a company's ESG disclosures would be if competitors have stronger disclosure standards. This indicates that the company may be lagging in transparency and accountability compared to its peers, potentially hiding risks or missing opportunities to improve ESG performance.
While audited data and commitments to future improvements are positive signs, lagging behind competitors is a significant red flag.



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