FSA 1 SASB EXAM QUESTIONS WITH
CORRECT ANSWERS
Sustainability Accounting Standards Board (SASB) - Answer- founded in 2011, industry
specific standards that help companies disclose financially material, decision-useful,
and cost-effective sustainability information to investors. The standards facilitate the
collection, management, and reporting of sustainability information that is relevant,
reliable, and comparable
sustainable development (Brundtland Report 1987) - Answer- within the natural limits of
earth and the economic limits of society. "Meets the need of the present without
compromising the ability of future generations to meet their own needs"
3 ways investors use sustainability information - Answer- 1. improve their ability to
achieve above market returns
2. reduce risk and volatility, and protect against diminished returns
3. improve environmental and social investment outcomes, with financial returns as an
equivalent or a secondary consideration
ESG impact on price volatility - Answer- companies with higher sustainability or ESG
ratings have lower price and earnings per share (EPS) volatility than those with low
sustainability performance
ESG performance can influence a company's - Answer- cost of capital, risk exposure,
financial performance, competitive advantage, costs (reduction), strategic decisions,
and long-term success
European Commission's Action Plan for Financial Sustainable Growth - Answer- multi-
faceted policy directive that sets forth a comprehensive strategy and action plan to
"further connect finance with sustainability". 10 key initiatives in 3 core categories:
1. reorienting capital flows towards a more sustainable economy
2. mainstreaming sustainability to risk management
3. fostering transparency and long-termism
Sustainable Stock Exchanges (SSE) - Answer- a 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 investment including the financing of the UN's SDGs
why are investors demanding quality sustainability information? - Answer- investors
need quality sustainability info to meet their investment goals. info can be used to
achieve above market returns, assess risk to protect against diminishing returns and
major losses, evaluate the predictability of investment outcomes.
, investors are able to use financially material sustainability information to achieve
enhanced outcomes
why do companies demand quality sustainability information internally? - Answer-
sustainability info can contribute to a company's short, medium, and long-term success
by managing ESG risks and opportunities. Companies can be better equipped to
identify and mitigate risks, reduce costs, optimize efficiencies, and increase market
share and revenue growth with new products and services. improve cost of capital and
improve bottom-line performance
what institutions (other than companies and investors) influence demand for
sustainability information across capital markets? - Answer- Public and private
institutions. International, national, and local policy-based initiatives stimulate
sustainability disclosure by establishing regulations.
non-policy efforts include securities exchanges and industry associations
major insight from the 1929 stock market crash - Answer- how a lack in transparency
can lead to disastrous consequences and erode investor confidence
US Supreme Court Justice Louis Brandeis - Answer- said that public exposure and
transparency are key to monitoring companies and investors that collectively shape
capital markets
The US SEC demonstrates two equally important purposes for the US SEC's existence
- Answer- 1. to protect investors
2. to influence corporate behavior
the 1930s regulatory reforms catalyzed - Answer- seminal values of transparency,
corporate governance, and informed decision-making at the service of market efficiency
and price discovery
2 functions of the "concept of materiality" - Answer- 1. provides a framework through
which companies can differentiate information that should be disclosed from that which
is not necessary to disclose
2. helps regulators determine whether enforcement action is appropriate for false,
misleading, or incomplete disclosures and helps courts make final decisions in cases of
disclosure based litigation
US Supreme court definition of materiality - Answer- information is material if its
exclusion would have altered the "total mix" of information considered by a reasonable
investor. information if it is significantly likely to be considered by a reasonable investor
in investment decisions.
materiality can also be assessed by the probability that an event may take place and the
magnitude of impact of the event on the company
CORRECT ANSWERS
Sustainability Accounting Standards Board (SASB) - Answer- founded in 2011, industry
specific standards that help companies disclose financially material, decision-useful,
and cost-effective sustainability information to investors. The standards facilitate the
collection, management, and reporting of sustainability information that is relevant,
reliable, and comparable
sustainable development (Brundtland Report 1987) - Answer- within the natural limits of
earth and the economic limits of society. "Meets the need of the present without
compromising the ability of future generations to meet their own needs"
3 ways investors use sustainability information - Answer- 1. improve their ability to
achieve above market returns
2. reduce risk and volatility, and protect against diminished returns
3. improve environmental and social investment outcomes, with financial returns as an
equivalent or a secondary consideration
ESG impact on price volatility - Answer- companies with higher sustainability or ESG
ratings have lower price and earnings per share (EPS) volatility than those with low
sustainability performance
ESG performance can influence a company's - Answer- cost of capital, risk exposure,
financial performance, competitive advantage, costs (reduction), strategic decisions,
and long-term success
European Commission's Action Plan for Financial Sustainable Growth - Answer- multi-
faceted policy directive that sets forth a comprehensive strategy and action plan to
"further connect finance with sustainability". 10 key initiatives in 3 core categories:
1. reorienting capital flows towards a more sustainable economy
2. mainstreaming sustainability to risk management
3. fostering transparency and long-termism
Sustainable Stock Exchanges (SSE) - Answer- a 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 investment including the financing of the UN's SDGs
why are investors demanding quality sustainability information? - Answer- investors
need quality sustainability info to meet their investment goals. info can be used to
achieve above market returns, assess risk to protect against diminishing returns and
major losses, evaluate the predictability of investment outcomes.
, investors are able to use financially material sustainability information to achieve
enhanced outcomes
why do companies demand quality sustainability information internally? - Answer-
sustainability info can contribute to a company's short, medium, and long-term success
by managing ESG risks and opportunities. Companies can be better equipped to
identify and mitigate risks, reduce costs, optimize efficiencies, and increase market
share and revenue growth with new products and services. improve cost of capital and
improve bottom-line performance
what institutions (other than companies and investors) influence demand for
sustainability information across capital markets? - Answer- Public and private
institutions. International, national, and local policy-based initiatives stimulate
sustainability disclosure by establishing regulations.
non-policy efforts include securities exchanges and industry associations
major insight from the 1929 stock market crash - Answer- how a lack in transparency
can lead to disastrous consequences and erode investor confidence
US Supreme Court Justice Louis Brandeis - Answer- said that public exposure and
transparency are key to monitoring companies and investors that collectively shape
capital markets
The US SEC demonstrates two equally important purposes for the US SEC's existence
- Answer- 1. to protect investors
2. to influence corporate behavior
the 1930s regulatory reforms catalyzed - Answer- seminal values of transparency,
corporate governance, and informed decision-making at the service of market efficiency
and price discovery
2 functions of the "concept of materiality" - Answer- 1. provides a framework through
which companies can differentiate information that should be disclosed from that which
is not necessary to disclose
2. helps regulators determine whether enforcement action is appropriate for false,
misleading, or incomplete disclosures and helps courts make final decisions in cases of
disclosure based litigation
US Supreme court definition of materiality - Answer- information is material if its
exclusion would have altered the "total mix" of information considered by a reasonable
investor. information if it is significantly likely to be considered by a reasonable investor
in investment decisions.
materiality can also be assessed by the probability that an event may take place and the
magnitude of impact of the event on the company
