SASB EXAM QUESTIONS AND
ANSWERS
How does sustainability information support investor's goals? - Answer- Improve ability
to achieve above market returns - companies committed to sustainability tend to
outperform
Reduce risk and volatility/protect against diminished returns - sustainability info can be
strong signal for Price Volatility (higher ESG ratine = lower EPS volatility)
ESG performance linked to improved profitability (reduced costs, higher worker
productivity, mitigated risk, increased revenue generating opportunities)
Poor ESG performers have higher likelihood of negative credit events
What internal benefits do companies see for sustainability information? - Answer- Helps
provide insight into financial performance and contributes to success in near, medium
and long term
Sound sustainability standards can lower the cost of capital
Data can be used to inform strategic decisions, drive financial performance, and foster
long term success
Sustainability can drive competitive advantage through new markets, products, services
and resources productivity/efficiency
Besides companies and their investors, what other institutions influence demand for
sustainability information? - Answer- Policy making institutions such as the European
commission
Individual nations
Non-policy efforts like the Sustainable Stock Exchange (SSE) offering global platform
for exploring how exchanges, in collaboration with investors, companies, regulators, and
policymakers and relevant international organizations can enhance performance on
ESG issues and encourage sustainable investing
Why was disclosure the basis of regulatory reform in wake of the 1930's stock market
crash? - Answer- Thought that public exposure and transparency were the key to
monitoring the companies and investors that shape capital markets
built on seminal values of transparency, corporate governance, and informed decision
making at the service of market efficiency and price discovery
, What is the relevance of "materiality" in the context of disclosure, and how has the
concept historically been interpreted? - Answer- Materiality guides companies on what
info is important to disclose, helps regulators determine whether enforcement action is
appropriate, and helps courts make final decision in cases of disclosure based litigation
Historically information was thought to be material if its exclusion was significantly likely
to be considered by reasonable investor in their decision process (Total Mix Concept)
Materiality can also be assessed by the probability that an event may take place and the
magnitude of the event on the company (Probability and Magnitude Test)
How has the purpose of accounting changed since the 1930's, and why did financial
reporting move from flexible implementation to standardization? - Answer- Purpose of
accounting has shifted from strict historical asset valuation towards decision usefulness
of reported information to user of disclosed information
Accounting measurements are to serve a specific purpose (inform decisions) rather
than perform singular function (provide accurate measurement data)
Purpose of accounting has shifted to assist in making economic decisions
Standardization results in reliable, comparable, decision useful info across markets
allowing investors to see info presented on comparable basis
What does the rise of intangible assets mean for corporate disclosure? - Answer- Value
of non-financial information has increased
Traditional financial statements tell an increasingly smaller part of the story
What factors contribute to increasing investor interest in non-financial information? -
Answer- Endorsement by several key organizations in the financial reporting
community
Increasing percentage of market value attributed to intangibles
What challenges exist in sustainability disclosure that do not necessarily exist in
financial disclosure? - Answer- Different audiences have different needs - you are not
just presenting info to investors but many other stakeholders such as community
There are a broad range of data types and ESG issues require different modes and
methods of measurement making users of data need to be able to understand many
different data sets
Sustainability info tends to be future oriented
ANSWERS
How does sustainability information support investor's goals? - Answer- Improve ability
to achieve above market returns - companies committed to sustainability tend to
outperform
Reduce risk and volatility/protect against diminished returns - sustainability info can be
strong signal for Price Volatility (higher ESG ratine = lower EPS volatility)
ESG performance linked to improved profitability (reduced costs, higher worker
productivity, mitigated risk, increased revenue generating opportunities)
Poor ESG performers have higher likelihood of negative credit events
What internal benefits do companies see for sustainability information? - Answer- Helps
provide insight into financial performance and contributes to success in near, medium
and long term
Sound sustainability standards can lower the cost of capital
Data can be used to inform strategic decisions, drive financial performance, and foster
long term success
Sustainability can drive competitive advantage through new markets, products, services
and resources productivity/efficiency
Besides companies and their investors, what other institutions influence demand for
sustainability information? - Answer- Policy making institutions such as the European
commission
Individual nations
Non-policy efforts like the Sustainable Stock Exchange (SSE) offering global platform
for exploring how exchanges, in collaboration with investors, companies, regulators, and
policymakers and relevant international organizations can enhance performance on
ESG issues and encourage sustainable investing
Why was disclosure the basis of regulatory reform in wake of the 1930's stock market
crash? - Answer- Thought that public exposure and transparency were the key to
monitoring the companies and investors that shape capital markets
built on seminal values of transparency, corporate governance, and informed decision
making at the service of market efficiency and price discovery
, What is the relevance of "materiality" in the context of disclosure, and how has the
concept historically been interpreted? - Answer- Materiality guides companies on what
info is important to disclose, helps regulators determine whether enforcement action is
appropriate, and helps courts make final decision in cases of disclosure based litigation
Historically information was thought to be material if its exclusion was significantly likely
to be considered by reasonable investor in their decision process (Total Mix Concept)
Materiality can also be assessed by the probability that an event may take place and the
magnitude of the event on the company (Probability and Magnitude Test)
How has the purpose of accounting changed since the 1930's, and why did financial
reporting move from flexible implementation to standardization? - Answer- Purpose of
accounting has shifted from strict historical asset valuation towards decision usefulness
of reported information to user of disclosed information
Accounting measurements are to serve a specific purpose (inform decisions) rather
than perform singular function (provide accurate measurement data)
Purpose of accounting has shifted to assist in making economic decisions
Standardization results in reliable, comparable, decision useful info across markets
allowing investors to see info presented on comparable basis
What does the rise of intangible assets mean for corporate disclosure? - Answer- Value
of non-financial information has increased
Traditional financial statements tell an increasingly smaller part of the story
What factors contribute to increasing investor interest in non-financial information? -
Answer- Endorsement by several key organizations in the financial reporting
community
Increasing percentage of market value attributed to intangibles
What challenges exist in sustainability disclosure that do not necessarily exist in
financial disclosure? - Answer- Different audiences have different needs - you are not
just presenting info to investors but many other stakeholders such as community
There are a broad range of data types and ESG issues require different modes and
methods of measurement making users of data need to be able to understand many
different data sets
Sustainability info tends to be future oriented
