CFA ESG CERTIFICATE QUESTIONS AND ANSWERS
What is ESG investing?
a) an approach to managing companies that explicitly acknowledges the relevance of
environmental, social, and governance factors in corporate decision making
b) an approach to managing companies that explicitly acknowledges the relevance of
environmental, social, and economic factors in investment decision making
c) an approach to managing assets where investors explicitly acknowledge the
relevance of environmental, social, and governance factors in their investment decisions
d) an approach to managing assets where investors explicitly acknowledge the
relevance of environmental, social, and economic factors in corporate engagement -
Answers- c
Which of the following is not an example of a social factor?
a) Labor rights
b) Local communities
c) Product safety
d) Biodiversity - Answers- d
of issues covered by the UN Global Compact?
a) Environmental, social, governance, and impact
b) Human rights, labor, environment, and anti corruption
c) Poverty, diversity, sustainability, and transparency
d) Education, development, fairness, independence - Answers- b
What is not one of the three P's in the triple bottom line concept?
a) People
b) Planet
c) Profit
d) Principle - Answers- d
Which of the following statements is true about best-in-class investments?
a) It involves selecting only the companies that overcome a defined ranking hurdle
b) It cannot be used to maintain key characteristics, such as regional and sectoral
diversification of an index
c) It refers to selecting companies that fall under a sustainability-related theme
d) It refers to allocating capital to assets that best mitigate climate change - Answers- a
Which of the following sectors is NOT typically excluded by ethical and faith-based
investors?
a) Tobacco
b) Alcohol
c) Controversial weapons
d) Technology - Answers- d
,The efficiency of shareholder engagement does NOT depend on...
a) the scale of ownership of the individual investor or the collective initiative
b) the quality of the engagement dialogue and method used
c) whether divestment is known to be a possible sanction
d) the amount of security in free float - Answers- d
In which ways can ESG matters become financially material for a company, and
contribute to reduced risk and enhanced return?
a) Increased cost and reduced efficiency
b) Increased externality
c) Increased risk of fines
d) Increased adaptability to sustainable megatrends - Answers- d
What kinds of situations does the term 'negative externality' best describe?
a) Situations where the production of goods induces costs to others that are not
reflected in the prices charged for them
b) Situations where the consumption of services induces benefits to others that are not
reflected in the prices charged for them
c) Situations where the production or consumption of a product or service's private price
equilibrium cannot reflect the true costs of that product or service for society as a whole
d) Situations where the production or consumption of a product or service's private price
equilibrium cannot reflect the true benefits of that product or service for society as a
whole - Answers- c
According to Oxfam, "reports show that the richest 1% in the world have more than
double the wealth of 6.9 billion people." Which megatrend does this refer to?
a) Emerging and urban
b) Technological disruption
c) Demographic changes and wealth inequality
d) Climate change and resource scarcity - Answers- c
What is the most probable reason why an investor would engage with policy makers on
ESG?
a) The consideration of ESG related matters can contribute to the proper functioning of
the financial markets
b) Asset owners need regulators to level the playing field in order to be able to increase
their percentage of ESG investments
c) Policy consultations on ESG investing are mandatory in order to ensure that all
perspectives are taken into consideration
d) ESG investors require a sound and stable financial system in order to make alpha
from ESG megatrends - Answers- a
Which regions manage the highest proportion of sustainable and responsible investing
assets?
a) Asia and North America
b) Australia and USA
, c) USA and Europe
d) Asia and Europe - Answers- c
What is the largest sustainable investment strategy globally?
a) Impact investing
b) Best in class
c) ESG integration
d) Negative screening - Answers- d
The largest and second largest asset classes, which implement responsible investment,
are respectively...
a) public equities and fixed income
b) passive equities and active equities
c) fixed income and infrastructure
d) hedge funds and commodities - Answers- a
Why are investment mandates important for ESG investing?
a) They define the expectations of asset owners who are signatories of the PRI
b) They are contracts which define the requirements of the asset manager with regards
to ESG
c) They require asset managers to report on the ESG rating of their funds
d) They have limited implementation of stewardship - Answers- b
Which of the following is NOT an outcome of short-termism?
a) Disproportionate focus on quarterly returns
b) Companies are more willing to take on projects, such as research and development
c) 'Patient capital' is less likely to develop
d) Less investment in long term assets, such as infrastructure - Answers- b
How are pension fund members most likely to influence responsible investment?
a) Their formal investment advice to pension fund executives must be implemented
b) They monitor company controversy through social media and inform asset managers
c) They act in the interest of sustainable companies
d) Their ethical preferences may be taken into account - Answers- d
Which of the following is NOT among the challenges limiting the development of ESG
investing?
a) Lack of regulation and voluntary initiatives
b) The availability of expertise and skilled individuals
c) The quality of data, research, and analysis
d) Limited tools to assist with portfolio construction and management - Answers- a
In what ways can an investment consultant be a barrier to the growth of the ESG
investing market?
a) By not considering ESG characteristics of the funds in their screening
b) By setting poor standards for ESG fund labels
What is ESG investing?
a) an approach to managing companies that explicitly acknowledges the relevance of
environmental, social, and governance factors in corporate decision making
b) an approach to managing companies that explicitly acknowledges the relevance of
environmental, social, and economic factors in investment decision making
c) an approach to managing assets where investors explicitly acknowledge the
relevance of environmental, social, and governance factors in their investment decisions
d) an approach to managing assets where investors explicitly acknowledge the
relevance of environmental, social, and economic factors in corporate engagement -
Answers- c
Which of the following is not an example of a social factor?
a) Labor rights
b) Local communities
c) Product safety
d) Biodiversity - Answers- d
of issues covered by the UN Global Compact?
a) Environmental, social, governance, and impact
b) Human rights, labor, environment, and anti corruption
c) Poverty, diversity, sustainability, and transparency
d) Education, development, fairness, independence - Answers- b
What is not one of the three P's in the triple bottom line concept?
a) People
b) Planet
c) Profit
d) Principle - Answers- d
Which of the following statements is true about best-in-class investments?
a) It involves selecting only the companies that overcome a defined ranking hurdle
b) It cannot be used to maintain key characteristics, such as regional and sectoral
diversification of an index
c) It refers to selecting companies that fall under a sustainability-related theme
d) It refers to allocating capital to assets that best mitigate climate change - Answers- a
Which of the following sectors is NOT typically excluded by ethical and faith-based
investors?
a) Tobacco
b) Alcohol
c) Controversial weapons
d) Technology - Answers- d
,The efficiency of shareholder engagement does NOT depend on...
a) the scale of ownership of the individual investor or the collective initiative
b) the quality of the engagement dialogue and method used
c) whether divestment is known to be a possible sanction
d) the amount of security in free float - Answers- d
In which ways can ESG matters become financially material for a company, and
contribute to reduced risk and enhanced return?
a) Increased cost and reduced efficiency
b) Increased externality
c) Increased risk of fines
d) Increased adaptability to sustainable megatrends - Answers- d
What kinds of situations does the term 'negative externality' best describe?
a) Situations where the production of goods induces costs to others that are not
reflected in the prices charged for them
b) Situations where the consumption of services induces benefits to others that are not
reflected in the prices charged for them
c) Situations where the production or consumption of a product or service's private price
equilibrium cannot reflect the true costs of that product or service for society as a whole
d) Situations where the production or consumption of a product or service's private price
equilibrium cannot reflect the true benefits of that product or service for society as a
whole - Answers- c
According to Oxfam, "reports show that the richest 1% in the world have more than
double the wealth of 6.9 billion people." Which megatrend does this refer to?
a) Emerging and urban
b) Technological disruption
c) Demographic changes and wealth inequality
d) Climate change and resource scarcity - Answers- c
What is the most probable reason why an investor would engage with policy makers on
ESG?
a) The consideration of ESG related matters can contribute to the proper functioning of
the financial markets
b) Asset owners need regulators to level the playing field in order to be able to increase
their percentage of ESG investments
c) Policy consultations on ESG investing are mandatory in order to ensure that all
perspectives are taken into consideration
d) ESG investors require a sound and stable financial system in order to make alpha
from ESG megatrends - Answers- a
Which regions manage the highest proportion of sustainable and responsible investing
assets?
a) Asia and North America
b) Australia and USA
, c) USA and Europe
d) Asia and Europe - Answers- c
What is the largest sustainable investment strategy globally?
a) Impact investing
b) Best in class
c) ESG integration
d) Negative screening - Answers- d
The largest and second largest asset classes, which implement responsible investment,
are respectively...
a) public equities and fixed income
b) passive equities and active equities
c) fixed income and infrastructure
d) hedge funds and commodities - Answers- a
Why are investment mandates important for ESG investing?
a) They define the expectations of asset owners who are signatories of the PRI
b) They are contracts which define the requirements of the asset manager with regards
to ESG
c) They require asset managers to report on the ESG rating of their funds
d) They have limited implementation of stewardship - Answers- b
Which of the following is NOT an outcome of short-termism?
a) Disproportionate focus on quarterly returns
b) Companies are more willing to take on projects, such as research and development
c) 'Patient capital' is less likely to develop
d) Less investment in long term assets, such as infrastructure - Answers- b
How are pension fund members most likely to influence responsible investment?
a) Their formal investment advice to pension fund executives must be implemented
b) They monitor company controversy through social media and inform asset managers
c) They act in the interest of sustainable companies
d) Their ethical preferences may be taken into account - Answers- d
Which of the following is NOT among the challenges limiting the development of ESG
investing?
a) Lack of regulation and voluntary initiatives
b) The availability of expertise and skilled individuals
c) The quality of data, research, and analysis
d) Limited tools to assist with portfolio construction and management - Answers- a
In what ways can an investment consultant be a barrier to the growth of the ESG
investing market?
a) By not considering ESG characteristics of the funds in their screening
b) By setting poor standards for ESG fund labels
