Free GARP SCR Practice Exam with Questions & Answers | Set: 2

An insurance firm announces it will adopt sustainable practices. To inform sustainable strategy, a company risk analyst researches climate risk. The analyst reviews how climate risk manifests as financial risk through effects on microeconomic company-level risks on various types of companies and institutions. The analyst also identifies possible opportunities resulting from climate risk. Risks and opportunities are presented to senior management.

Which of the following does the analyst cite as an example of how climate risk affects liquidity risk?

Leaders of an energy company meet to address physical and transition risks to company operations. At the meeting, the CRO recommends a strategy to mitigate physical climate risk to the company. Which of the following strategies will the CRO most likely recommend?

An international agrochemical company performs climate scenario analysis to include in TCFD disclosures. The risk department hires an analyst with experience in physical risk scenario analysis.

What scenario analysis action will the analyst most likely recommend to evaluate physical climate risk?

The CRO at a commercial bank in China examines the negative impact of climate-related physical risk on clothing manufacturer cash flows that subsequently lead to higher credit risk.

The CRO observes which event leading to increased credit risk from climate physical risk?

A senior sustainability consultant at an African think tank explains the complexities of different Earth science systems to a group of ESG practitioners as part of the think tank’s continuing education program.

Which of the following statements by the sustainability consultant accurately describes the Earth’s greenhouse effect?

To achieve emissions reduction goals, a South American government considers policies other than carbon pricing to target carbon-intensive industries more effectively. The government intends to promote renewable power generation by implementing subsidies.

Which action should the government take to support this subsidy policy?

A senior advisor from a government agency in Southeast Asia proposes a national framework to classify sustainable economic activities, aligned with the EU Taxonomy. The new framework will limit environmental harm and promote sustainable growth. Which EU Taxonomy requirement will the advisor most likely incorporate into the proposed framework?

Leaders of a small island nation implement a sector-specific carbon reduction policy to address climate change. The policy includes a commitment to reduce country emissions through NDCs under the Paris Agreement. Which of the following emission reduction policies is the nation most likely implementing?

A company reduces water usage and increases usage of more expensive resources after regulations become more stringent. This most likely impacts:

A large real estate investment firm increases resources to understand transition and physical risks as it expands into markets with climate regulations and increasing flooding events. Senior leadership requires the risk team train all business units in understanding how both climate risks can impact operations.

During this process, how should the risk team define commonalities between both risks?