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Free CFA Institute ESG-Investing Practice Exam with Questions & Answers

Questions 1

A bond that funds offshore wind projects is most likely a:

Options:
A.

Blue bond

B.

Green bond

C.

Transition bond

CFA Institute ESG-Investing Premium Access
Questions 2

ESG engagement is a two-way dialogue to share perspectives between:

Options:
A.

investors and investees

B.

asset owners and fund managers

C.

senior executives and board of directors

Questions 3

A company’s exposure to social trends and factors:

Options:
A.

Tends to be similar across companies in the same sector

B.

Tends to be similar across companies in the same country

C.

Depends on its culture, systems, operations, and governance

Questions 4

Considering ESG integration, an advantage relevant to private real estate markets but not equities and fixed income is most likely:

Options:
A.

majority ownership

B.

coverage of assets by ESG rating agencies

C.

adherence to the Global Real Estate Sustainability Benchmark (GRESB) rather than the Sustainability Accounting Standards Board (SASB) framework

Questions 5

The Cadbury Committee was created because of perceived problems in:

Options:
A.

Employment rights

B.

Climate change and transition risks

C.

Accounting and corporate governance

Questions 6

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

Options:
A.

Climate change only

B.

Loss of biosphere integrity only

C.

Both climate change and loss of biosphere integrity

Questions 7

Which of the following is most likely a direct impact of the tighter regulation of pollution on a company’s financial performance?

Options:
A.

Higher provisions only

B.

Lower financing costs only

C.

Both higher provisions and lower financing costs

Questions 8

Which of the following ESG screening methodologies is most likely to result in a well-diversified portfolio? Screening on:

Options:
A.

a relative basis only

B.

an absolute basis only

C.

both a relative basis and an absolute basis

Questions 9

Which of the following statements about proxy voting is most accurate? The majority of asset owners:

Options:
A.

retain direct control of voting

B.

delegate voting rights to fund managers so long as those managers reflect the asset owner's voting policies

C.

leave voting decisions to their fund managers after having assessed the alignment between the fund manager’s voting policies and their own

Questions 10

Scope 3 carbon emissions are accounted for under:

Options:
A.

The UK Task Force on Climate-related Financial Disclosures (TCFD) only

B.

The European Union's (EU) Sustainable Finance Disclosure Regulation (SFDR) only

C.

Both the UK Task Force on Climate-related Financial Disclosures (TCFD) and the European Union's (EU) Sustainable Finance Disclosure Regulation (SFDR)

Questions 11

A discount retailer facing a consumer boycott due to its poor working conditions will most likely face:

Options:
A.

significant liabilities

B.

greater operating costs

C.

an adverse impact on revenues

Questions 12

Best-in-class funds most likely:

Options:
A.

target a higher ESG rating than that of a corresponding index

B.

include only companies that are considered responsible investments

C.

score companies using a common set of ESG criteria and weightings across sectors

Questions 13

Fund labelers are most likely classified as:

Options:
A.

regulators

B.

fund promoters.

C.

financial advisers

Questions 14

A discount retailer facing high employee turnover due to poor working conditions will most likely experience:

Options:
A.

significant liabilities

B.

greater operating costs.

C.

an adverse impact on revenues

Questions 15

According to the framework of the Task Force on Climate-Related Financial Disclosures (TCFD): the formula for carbon intensity at the portfolio level weighs emissions based upon an issuer's:

Options:
A.

profit.

B.

revenue.

C.

net assets