SASB FSA CREDENTIAL LEVEL I EXAM
QUESTIONS WITH COMPLETE
ANSWERS
What are some large-scale issues that have profound effects on business outcomes? -
Answer- population growth, resource constraints, urbanization, technological innovation,
and climate change
What kinds of information do SASB standards ask for? - Answer- financially material,
decision-useful, and cost-effective sustainability information for investors
What do investors use sustainability information for? - Answer- To improve their ability
to achieve above-market returns, reduce risk and volatility, protect against diminished
returns, and improve environmental and social investment outcomes (with financial
returns as an equivalent or secondary consideration).
What have some studies shown as positive benefits of ESG and sustainability
integration for investors and companies? - Answer- - Companies committed to
sustainability outperform in stock market performance.
- Companies focused on sustainability achieve "reduced costs, improved worker
productivity, mitigated risk potential, and created revenue-generating opportunities."
- Companies with higher sustainability or ESG ratings have lower volatility of price and
earnings per share (EPS)
- Sustainability standards lower the cost of capital for companies
How is sustainability information useful to equity and fixed-income investors? - Answer-
They use sustainability information to:
- support risk analysis
- identify signals of future volatility and value declines
- protect portfolio value
How is sustainability information useful to private equity investors? - Answer- private
equity investors recognize ESG investing as a means to:
- improve portfolio performance
- mitigate risk
- generate alpha
How do 40% of surveyed CEOs see sustainability as contributing to business growth
and value? - Answer- They see revenue growth and creation of "genuine value"
through:
- risk mitigation
- cost reduction
, - competitive advantage gained through "new markets, products and services, resource
productivity and efficiency"
***Chapter 1 Explanation Question: Why are investors demanding quality sustainability
information? - Answer- Investors source quality sustainability information to meet their
investment goals (i.e. generally to achieve a profit), but also use sustainability
information to:
- achieve above-market returns
- assess risk to protect against diminished returns and major losses
- evaluate the predictability of investment outcomes
***Chapter 1 Explanation Question: What factors drive demand for quality sustainability
information within companies? - Answer- Sustainability information can contribute to
near, medium, and long-term company success by improving the management of
sustainability-related risks and opportunities through measuring and managing KPIs.
***Chapter 1 Explanation Question: Besides companies and their investors, what other
institutions influence demand for sustainability information across capital markets? -
Answer- - International, national, and local policy-based initiatives (they stimulate
sustainability disclosure by passing recommendations and guidance)
- Regulatory requirements (for the disclosure of sustainability information from publicly-
listed companies)
What were some effects of the Great Depression? - Answer- - bank failures
- record unemployment rates
- declining income
What were some of the findings of the investigation to what caused the Great
Depression? - Answer- Bankers and companies failed to fully disclose information
about the companies whose securities were being offered for sale, creating widespread
securities sales using false or misleading information.
What are the two purposes for the U.S. SEC's existence? - Answer- 1. to protect
investors
2. to influence corporate behavior
What is the "total-mix" concept? - Answer- A concept determined by a U.S. Supreme
Court ruling that notes information is deemed to be material if the information is
significantly likely to be considered by a reasonable investor in investment decisions.
This is a higher threshold than if it "might" be considered.
How can materiality be assessed? - Answer- materiality can be assessed by using a
probability and magnitude test, that determines the probability that an event may take
place and the magnitude of impact of the event on the company
QUESTIONS WITH COMPLETE
ANSWERS
What are some large-scale issues that have profound effects on business outcomes? -
Answer- population growth, resource constraints, urbanization, technological innovation,
and climate change
What kinds of information do SASB standards ask for? - Answer- financially material,
decision-useful, and cost-effective sustainability information for investors
What do investors use sustainability information for? - Answer- To improve their ability
to achieve above-market returns, reduce risk and volatility, protect against diminished
returns, and improve environmental and social investment outcomes (with financial
returns as an equivalent or secondary consideration).
What have some studies shown as positive benefits of ESG and sustainability
integration for investors and companies? - Answer- - Companies committed to
sustainability outperform in stock market performance.
- Companies focused on sustainability achieve "reduced costs, improved worker
productivity, mitigated risk potential, and created revenue-generating opportunities."
- Companies with higher sustainability or ESG ratings have lower volatility of price and
earnings per share (EPS)
- Sustainability standards lower the cost of capital for companies
How is sustainability information useful to equity and fixed-income investors? - Answer-
They use sustainability information to:
- support risk analysis
- identify signals of future volatility and value declines
- protect portfolio value
How is sustainability information useful to private equity investors? - Answer- private
equity investors recognize ESG investing as a means to:
- improve portfolio performance
- mitigate risk
- generate alpha
How do 40% of surveyed CEOs see sustainability as contributing to business growth
and value? - Answer- They see revenue growth and creation of "genuine value"
through:
- risk mitigation
- cost reduction
, - competitive advantage gained through "new markets, products and services, resource
productivity and efficiency"
***Chapter 1 Explanation Question: Why are investors demanding quality sustainability
information? - Answer- Investors source quality sustainability information to meet their
investment goals (i.e. generally to achieve a profit), but also use sustainability
information to:
- achieve above-market returns
- assess risk to protect against diminished returns and major losses
- evaluate the predictability of investment outcomes
***Chapter 1 Explanation Question: What factors drive demand for quality sustainability
information within companies? - Answer- Sustainability information can contribute to
near, medium, and long-term company success by improving the management of
sustainability-related risks and opportunities through measuring and managing KPIs.
***Chapter 1 Explanation Question: Besides companies and their investors, what other
institutions influence demand for sustainability information across capital markets? -
Answer- - International, national, and local policy-based initiatives (they stimulate
sustainability disclosure by passing recommendations and guidance)
- Regulatory requirements (for the disclosure of sustainability information from publicly-
listed companies)
What were some effects of the Great Depression? - Answer- - bank failures
- record unemployment rates
- declining income
What were some of the findings of the investigation to what caused the Great
Depression? - Answer- Bankers and companies failed to fully disclose information
about the companies whose securities were being offered for sale, creating widespread
securities sales using false or misleading information.
What are the two purposes for the U.S. SEC's existence? - Answer- 1. to protect
investors
2. to influence corporate behavior
What is the "total-mix" concept? - Answer- A concept determined by a U.S. Supreme
Court ruling that notes information is deemed to be material if the information is
significantly likely to be considered by a reasonable investor in investment decisions.
This is a higher threshold than if it "might" be considered.
How can materiality be assessed? - Answer- materiality can be assessed by using a
probability and magnitude test, that determines the probability that an event may take
place and the magnitude of impact of the event on the company
