SASB LEVEL 1 BASIC STUFF UPDATED ACTUAL
QUESTIONS WITH CORRECT ANSWERS
Question 1.
What is Thematic investing?
ANSWER
A practice whereby investors optimize capital allocation to a specific ESG issue. For example, a
clean water fund might invest in global water securities ranging from water conditioning and
desalinization to water bottling and distribution and wastewater treatment. Thematic investors
often see a high tracking error.
Question 2.
What is the difference between industry-agnostic and industry-specific data for investors?
ANSWER
Industry-agnostic performance data is generated through disclosure guidance that can be
universally applied to any company, regardless of the industry in which it operates. Industry-
specific disclosure resources yield data that is relevant to companies in a specific industry,
which is to say companies with similar business models and operating environments. The
decisions of investors are shaped in large part by their assessments of industry-specific value
drivers, risks, and opportunities. Likewise, when evaluating the financial materiality of
environmental and social issues, industry-specificity is critical because such issues often
manifest in unique ways in the context of specific business models.
Question 3.
What is the role of internal controls in reliable data collection? What are some examples?
ANSWER
"internal controls" are narrowly defined as activities that help companies achieve their
objectives by mitigating risks of incorrect data and disclosures
Examples:
- calibration testing of measurement equipment (e.g., electricity meters);
- establishing automated tolerance limits that trigger warnings when anomalies occur;
,Question 4.
What are the major types of company information relevant to sustainability standards?
ANSWER
1. Environmental Information (air, water, energy, and biodiversity)
2. Social Information (relates to social and human capital issues)
3. Operational governance information (corruption and bribery or supply chain management)
4. Economic information (monetary losses as a result of legal proceedings associated with
labor law violations, etc.)
5. Physical assets (vehicle fleets, real estate, or equipment)
6. Intellectual assets (subject-matter expertise, research and development divisions)
Question 5.
Define data assurance:
ANSWER
"Assurance" is defined as a review by external, independent professional(s) on the credibility of
the data
Question 6.
What are some thematic bonds, and what do they do?
ANSWER
Green bonds, climate bonds, social bonds, and sustainability-linked bonds. Thematic bonds
were created to fund projects that generate positive impacts.
Question 7.
What are stewardship codes?
ANSWER
first introduced in 2010 in the UK, formalizing an enhanced expectation of investors' role in
corporate governance. Such codes are based on the logic of fiduciary duty. They offer a
framework of principles that investors can apply to their corporate stewardship activities.
Stewardship codes generally require institutional investors to be transparent about their
investment process, engage with investee companies, and vote in shareholder meetings
,Question 8.
How are SASB standards used in the response phase of the risk management process?
ANSWER
Based on these assessments and peer bench-marking of performance data, a company can
better understand whether to accept, avoid, reduce, or transfer a risk (or ignore, embrace,
enhance, or share an opportunity)
Question 9.
What is the role of a gap analysis in data reporting?
ANSWER
A practical initial step in determining what data is already reported externally, what data is
being collected but not reported externally, and what information still needs to be collected
Question 10.
What are the four main characteristics of the definitions of traditional materiality?
ANSWER
(1) who uses reported information and for what purpose the information is used, (2) the scope
of information disclosed, (3) how the definition is determined based on omissions and/or
misstatements, and (4) the location of disclosed information.
Question 11.
How did the Supreme Court use a probability and magnitude test to assess materiality?
ANSWER
According to this test, the determination of materiality should also consider the probability that
an event will happen and the magnitude of the occurrence of the event. For example, a
relatively small transaction for the company, or one that involves a small price premium, will
not likely meet the probability and magnitude test for materiality.
, Question 12.
What are the levels of assurance rigor?
ANSWER
The most rigorous assurance engagements, on par with audits, examine the reported
information, the source data, and the organization's internal controls for protecting the
integrity of the source data. Internal controls are reviewed to gauge how effectively they
mitigate the risk of misstated data. This level of rigor is called reasonable assurance. A less
rigorous assurance engagement—limited assurance, or a review—will be more limited in scope
Question 13.
What institutions (not internal or investors) demand sustainability information?
ANSWER
1. Policy-based initiatives (such as the Action Plan for Financial Sustainable Growth)
2. Nations
3. Non-policy efforts (such as guidance from stock exchanges)
4. Industry Groups: (Accountancy Europe, Global Asset
Owner Forum, Global Financial
Markets Association)
Question 14.
What is impact investing? What are the three characteristics of an impact investment?
ANSWER
Considering sustainability information in investment products and strategies with the goal of
creating positive impacts alongside financial returns
'
1. Intention: an impact investor acts with the explicit goal of achieving social or environmental
impact
2. Impact measurement: the impact generated by the investment is nearly always measured
and reported to assess whether the investment achieved the desired impact.
3. Impact management: data informs decision-making with the goal of mitigating negative
impacts and maximizing positive outcomes
QUESTIONS WITH CORRECT ANSWERS
Question 1.
What is Thematic investing?
ANSWER
A practice whereby investors optimize capital allocation to a specific ESG issue. For example, a
clean water fund might invest in global water securities ranging from water conditioning and
desalinization to water bottling and distribution and wastewater treatment. Thematic investors
often see a high tracking error.
Question 2.
What is the difference between industry-agnostic and industry-specific data for investors?
ANSWER
Industry-agnostic performance data is generated through disclosure guidance that can be
universally applied to any company, regardless of the industry in which it operates. Industry-
specific disclosure resources yield data that is relevant to companies in a specific industry,
which is to say companies with similar business models and operating environments. The
decisions of investors are shaped in large part by their assessments of industry-specific value
drivers, risks, and opportunities. Likewise, when evaluating the financial materiality of
environmental and social issues, industry-specificity is critical because such issues often
manifest in unique ways in the context of specific business models.
Question 3.
What is the role of internal controls in reliable data collection? What are some examples?
ANSWER
"internal controls" are narrowly defined as activities that help companies achieve their
objectives by mitigating risks of incorrect data and disclosures
Examples:
- calibration testing of measurement equipment (e.g., electricity meters);
- establishing automated tolerance limits that trigger warnings when anomalies occur;
,Question 4.
What are the major types of company information relevant to sustainability standards?
ANSWER
1. Environmental Information (air, water, energy, and biodiversity)
2. Social Information (relates to social and human capital issues)
3. Operational governance information (corruption and bribery or supply chain management)
4. Economic information (monetary losses as a result of legal proceedings associated with
labor law violations, etc.)
5. Physical assets (vehicle fleets, real estate, or equipment)
6. Intellectual assets (subject-matter expertise, research and development divisions)
Question 5.
Define data assurance:
ANSWER
"Assurance" is defined as a review by external, independent professional(s) on the credibility of
the data
Question 6.
What are some thematic bonds, and what do they do?
ANSWER
Green bonds, climate bonds, social bonds, and sustainability-linked bonds. Thematic bonds
were created to fund projects that generate positive impacts.
Question 7.
What are stewardship codes?
ANSWER
first introduced in 2010 in the UK, formalizing an enhanced expectation of investors' role in
corporate governance. Such codes are based on the logic of fiduciary duty. They offer a
framework of principles that investors can apply to their corporate stewardship activities.
Stewardship codes generally require institutional investors to be transparent about their
investment process, engage with investee companies, and vote in shareholder meetings
,Question 8.
How are SASB standards used in the response phase of the risk management process?
ANSWER
Based on these assessments and peer bench-marking of performance data, a company can
better understand whether to accept, avoid, reduce, or transfer a risk (or ignore, embrace,
enhance, or share an opportunity)
Question 9.
What is the role of a gap analysis in data reporting?
ANSWER
A practical initial step in determining what data is already reported externally, what data is
being collected but not reported externally, and what information still needs to be collected
Question 10.
What are the four main characteristics of the definitions of traditional materiality?
ANSWER
(1) who uses reported information and for what purpose the information is used, (2) the scope
of information disclosed, (3) how the definition is determined based on omissions and/or
misstatements, and (4) the location of disclosed information.
Question 11.
How did the Supreme Court use a probability and magnitude test to assess materiality?
ANSWER
According to this test, the determination of materiality should also consider the probability that
an event will happen and the magnitude of the occurrence of the event. For example, a
relatively small transaction for the company, or one that involves a small price premium, will
not likely meet the probability and magnitude test for materiality.
, Question 12.
What are the levels of assurance rigor?
ANSWER
The most rigorous assurance engagements, on par with audits, examine the reported
information, the source data, and the organization's internal controls for protecting the
integrity of the source data. Internal controls are reviewed to gauge how effectively they
mitigate the risk of misstated data. This level of rigor is called reasonable assurance. A less
rigorous assurance engagement—limited assurance, or a review—will be more limited in scope
Question 13.
What institutions (not internal or investors) demand sustainability information?
ANSWER
1. Policy-based initiatives (such as the Action Plan for Financial Sustainable Growth)
2. Nations
3. Non-policy efforts (such as guidance from stock exchanges)
4. Industry Groups: (Accountancy Europe, Global Asset
Owner Forum, Global Financial
Markets Association)
Question 14.
What is impact investing? What are the three characteristics of an impact investment?
ANSWER
Considering sustainability information in investment products and strategies with the goal of
creating positive impacts alongside financial returns
'
1. Intention: an impact investor acts with the explicit goal of achieving social or environmental
impact
2. Impact measurement: the impact generated by the investment is nearly always measured
and reported to assess whether the investment achieved the desired impact.
3. Impact management: data informs decision-making with the goal of mitigating negative
impacts and maximizing positive outcomes
