PRO-ESG

Final check — CFA Sustainable Investing / ESG Certificate (Exam-Prep)

Answer the 45 questions. You need 80% or more to pass. You can retry as many times as you like.

Question 1In ESG investing, a factor is considered "material" when it:Is reported in the company's marketing brochureReflects the investor's personal ethical preferencesCould reasonably influence the value or risk of a securityAppears in any newspaper article about the company

Question 2"Sustainable investing" is best described as:A regulation issued by the CFA InstituteA synonym for excluding tobacco and weapons onlyThe broad umbrella term, with ESG integration as one approach within itA type of derivatives trading strategy

Question 3Which is one of the three main investor motivations for responsible investment?Value (financial return)LeverageArbitrageLiquidity

Question 4Greenwashing in the ESG market refers to:Painting factories a green colourOverstating or misrepresenting the sustainability of a product or companyInvesting only in agricultureA mandatory disclosure under TCFD

Question 5Physical climate risk is distinguished from transition risk because physical risk arises from:Reputational damage from poor disclosureChanges in climate policy and regulationShifts in consumer technology preferencesAcute events and chronic environmental shifts themselves

Question 6Scope 3 greenhouse-gas emissions are:A company's direct emissions from owned sourcesIndirect value-chain emissions, usually the largest and hardest to measureEmissions from purchased electricity onlyEmissions that are never material

Question 7Which is part of the environmental "natural capital" theme?Biodiversity and water stressBoard independenceExecutive remunerationAudit quality

Question 8A water-stressed utility most directly faces which financial channel?Increased proxy votesLower board diversityHigher operating costsReduced Scope 1 reporting

Question 9Which is a social-pillar "human capital" factor?Dual-class share structuresGreenhouse-gas intensityEmployee health, safety and turnoverThe EU Taxonomy DNSH test

Question 10Norms-based screening evaluates companies against:Only the EU TaxonomyThe company's own marketing claimsShort-term share-price momentumInternational standards such as the UN Global Compact and ILO conventions

Question 11The UN Guiding Principles on Business and Human Rights are most associated with which pillar?GovernanceEnvironmentalSocialLiquidity

Question 12Why is governance often called the "foundation" of ESG?Weak governance amplifies environmental and social risksIt is the only pillar that affects emissionsIt is unrelated to financial performanceIt replaces the need for materiality analysis

Question 13A dual-class share structure is primarily a concern because it can:Reduce a company's carbon footprintWeaken minority-shareholder rights and accountabilityEliminate transition riskGuarantee best-in-class ESG scores

Question 14Long-term, ESG-linked executive pay is intended to:Lower disclosure requirementsIncrease short-term risk-takingRemove the need for an auditAlign management incentives with sustainable value creation

Question 15Which is a classic governance red flag?Strong supplier code of conductHigh employee retentionLow Scope 1 emissionsAggressive accounting and weak internal controls

Question 16ESG integration differs from screening because integration:Is only used in fixed incomeAlways excludes the worst-rated companiesAdjusts financial forecasts and valuations rather than just including/excluding namesRequires no financial analysis

Question 17Impact investing is distinguished by its aim to:Generate intentional, measurable positive outcomes alongside a financial returnAvoid all financial returnExclude every company in an indexFocus only on share-price momentum

Question 18"Best-in-class" screening means:Excluding an entire sectorSelecting the strongest ESG performers within each sectorBuying only the cheapest stocksIgnoring sector context

Question 19Genuine ESG integration in a DCF model would, for example:Change the company's reporting standardAdd a separate qualitative paragraph with no effect on the valuationExclude the company automaticallyAdjust cash-flow forecasts or the discount rate for a material ESG factor

Question 20In listed equity, integration is tightly linked to active ownership because equity holders:Receive fixed couponsHave voting rights they can use to influence companiesCannot sell their sharesAre senior to all creditors

Question 21In fixed income, ESG factors primarily affect:Voting rights at the AGMCredit risk — default probability, recovery and spreadsThe company's board composition directlyDividend policy

Question 22A green bond is best described as a:Derivative on carbon pricesBond whose coupon steps up if ESG targets are missedEquity instrument with voting rightsUse-of-proceeds bond financing specified environmental projects

Question 23A sustainability-linked bond (SLB) differs from a green bond because an SLB:Must fund only renewable-energy projectsTies its financial terms (e.g. coupon) to the issuer's ESG performance targetsPays no interestCannot be issued by corporates

Question 24Stewardship is best defined as:The responsible allocation, management and oversight of capital to create long-term valueBuying and holding an index foreverDay-trading on ESG newsAvoiding all engagement with companies

Question 25Which is an example of escalation in engagement?Sending a thank-you noteVoting against directors or launching a public campaign after private dialogue failsBuying more shares quietlyIgnoring the company entirely

Question 26Stewardship generally favours which sequence?Never voting proxiesImmediate divestment with no dialoguePublic attack before any private contactEngagement before divestment

Question 27How many Principles for Responsible Investment (PRI) are there?ThreeSixTenTwelve

Question 28The PRI Principles are:Voluntary and aspirational commitments, not statutory lawLegally binding EU regulationsMandatory for all listed companiesIssued by the US SEC

Question 29ESG "rating divergence" mainly arises from differences in:The colour of the report coverThe company's share priceThe investor's tax bracketScope, measurement and weighting across providers

Question 30An ESG-risk score primarily measures:A company's exposure to and management of ESG-related financial risksThe company's positive impact on societyShort-term price volatility onlyThe number of employees

Question 31SASB Standards are notable because they identify material topics on a(n):Single global list applied to all companies equallyIndustry-by-industry basisCountry-only basisRandom basis

Question 32"Double materiality" combines:Two different discount ratesFinancial materiality and impact materialityScope 1 and Scope 2 emissionsEquity and debt valuations

Question 33The ISSB and SASB standards focus primarily on:Marketing disclosuresImpact materiality onlyFinancial materiality (impact on enterprise value)Proxy-voting records

Question 34The four pillars of the TCFD framework are:Water, Air, Land, and WasteProfit, Loss, Cash, and EquityGovernance, Strategy, Risk Management, and Metrics & TargetsArticle 6, 8, 9, and 10

Question 35TCFD recommendations have been absorbed primarily into which standard?The ISSB's IFRS S2 climate-disclosure standardThe US tax codeThe Basel III capital rulesThe OECD anti-bribery convention

Question 36The EU SFDR primarily imposes:A ban on fossil-fuel investingA carbon tax on manufacturersSustainability disclosure obligations on financial-market participantsMinimum wage rules

Question 37Under SFDR, an "Article 9" product is one that:Has a sustainable-investment objectiveHas no ESG focus at allIs automatically the highest-returning fundIs exempt from all disclosure

Question 38An SFDR "Article 8" product is best described as one that:Ignores ESG entirelyGuarantees a sustainable objective by lawPromotes environmental or social characteristicsInvests only in green bonds

Question 39To be EU Taxonomy-aligned, an activity must, among other things:Avoid all disclosureGenerate the highest return in its sectorBe located inside the EUSubstantially contribute to an objective while doing no significant harm to the others

Question 40The Taxonomy's "minimum safeguards" mainly relate to:A minimum number of board membersA minimum dividend yieldMeeting basic social and human-rights standardsA minimum market capitalisation

Question 41"DNSH" in the EU Taxonomy stands for:Do No Significant HarmDisclose Net Sustainable HoldingsDirect Net Social HeuristicDefault Negative Screening Heuristic

Question 42Weighted-average carbon intensity (WACI) is a portfolio metric that captures:The number of Article 9 funds heldWhether the portfolio is aligned with net zero by 2050The portfolio's dividend yieldHow carbon-intensive the portfolio's holdings are today

Question 43A low carbon footprint today and net-zero alignment are different because:Footprint measures current exposure; alignment measures the decarbonisation pathwayThey always give identical resultsAlignment ignores emissions entirelyFootprint is only used in fixed income

Question 44ESG objectives are typically translated into an investment product through:The Investment Policy Statement, constraints, tilts and benchmarksA single ESG rating with no further detailThe company's annual marketing budgetA change to the issuer's credit rating

Question 45A common high-yield exam theme rewards candidates who can:Ignore the question stemPredict next quarter's stock pricesRecite every company's emissions figurePrecisely distinguish definitions such as screening vs integration and Article 8 vs 9

Final check — CFA Sustainable Investing / ESG Certificate (Exam-Prep)

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