FSA LEVEL 1 EXAM SET QUESTIONS
WITH CORRECT ANSWERS
What is the primary challenge that the disclosure of company policies (such as ESG
policies or whistleblower policies) can pose to investment analysis?
A. The presence of a company policy is represented through binary data, which does
not provide useful insight into actual company performance
B. Company policies always increase the labor burden of analysis, where large
narrative documents must be manually processed
C. Company policies may be written in response to poor performance and often provide
fraudulent data, reducing the reliability of the information
D. It is not always clear who at the company is accountable for implementing the policy,
inhibiting investor-investee engagement - Answer- A
How do trends in index investing influence corporate-investor engagement on
sustainability?
A. The decline of index investing can encourage investment stewardship through proxy
voting
B. The growth of index investing can encourage use of the "Wall Street rule" and
decrease dialogue-based engagement
C. The decline of index investing can encourage shareholders to file resolutions and
increase withdrawal rates
D. The growth of index investing can encourage investment stewardship based on the
way buy-sell decisions are made - Answer- D
Corporate disclosures of sustainability information serve which two of the following
purposes in capital markets? (Choose two)
A. Aid in valuation for financial analysts
B. Demand additional regulation for corporations
C. Allow investors to assess risks and opportunities related to their investments
D. Prevent non-governmental organizations from "naming and shaming" poor ESG
performers - Answer- A, C
The chart below presents examples of business initiatives designed to reflect the
different
stages of sustainability-based value creation, as identified by multiple thought leaders in
the field. Select the arrangement of initiatives that progress from early-stage to late
stage:
1. Incorporate inventory management and procurement processes to supplement
product delivery service
2. Adapting product delivery service to enhance delivery options
3. Upgrading product ordering processes to reduce costs, time, and/or errors
4. Refining new and old business lines to establish brand leadership
A. 1, 2, 3, 4
, B. 3, 1, 2, 4
C. 2, 3, 1, 4
D. 3, 2, 1, 4 - Answer- D
Which of the following is suitable to be included as an "activity metric" in the SASB
Standards?
A. CAPEX
B. History of product recalls
C. Number of media publications
D. A description of the company's strategy to protect customer data - Answer- C
Why is SASB's objective of cost-effectiveness for reporting companies ultimately in the
best interest of providers of capital?
A. If companies limit the amount of information they report, they are more likely to report
information
that is material, reducing the level of immaterial data in the market
B. If companies spend more than the value disclosure generates, there is potential for
sustainability disclosure as a business function to negatively impact enterprise value
C. If companies increase spending on reporting processes, they will be better equipped
to gather and disclose new data, increasing the availability of sustainability data
available
D. If companies focus on internal reporting to inform performance management
decisions, they will naturally produce decision-useful information that meets the needs
of external users - Answer- B
Which of the following provides an example of line-item sustainability disclosure
guidance issued by a regulator?
1. The US Securities and Exchange Commission (US SEC) 2010 Guidance lists four
climate change issues
that companies should consider for disclosure under existing applications of materiality
to SEC filings.
2. The European Union Taxonomy for Sustainable Economic Activities (The EU
Taxonomy) expects companies
to report capital and operating expenditures associated with activities classified as
environmentally
sustainable.
3. The Australian Securities and Investments Commission (ASIC) 2019 Regulatory
Guide states that that
companies should present information about an entity's operations and financial position
in a concise
manner.
4. The Canadian Securities Administration (CSA) 2010 Environmental Reporting
Guidance requires the
disclosure of matters related to climate in order to comply with previously-estab -
Answer- B
WITH CORRECT ANSWERS
What is the primary challenge that the disclosure of company policies (such as ESG
policies or whistleblower policies) can pose to investment analysis?
A. The presence of a company policy is represented through binary data, which does
not provide useful insight into actual company performance
B. Company policies always increase the labor burden of analysis, where large
narrative documents must be manually processed
C. Company policies may be written in response to poor performance and often provide
fraudulent data, reducing the reliability of the information
D. It is not always clear who at the company is accountable for implementing the policy,
inhibiting investor-investee engagement - Answer- A
How do trends in index investing influence corporate-investor engagement on
sustainability?
A. The decline of index investing can encourage investment stewardship through proxy
voting
B. The growth of index investing can encourage use of the "Wall Street rule" and
decrease dialogue-based engagement
C. The decline of index investing can encourage shareholders to file resolutions and
increase withdrawal rates
D. The growth of index investing can encourage investment stewardship based on the
way buy-sell decisions are made - Answer- D
Corporate disclosures of sustainability information serve which two of the following
purposes in capital markets? (Choose two)
A. Aid in valuation for financial analysts
B. Demand additional regulation for corporations
C. Allow investors to assess risks and opportunities related to their investments
D. Prevent non-governmental organizations from "naming and shaming" poor ESG
performers - Answer- A, C
The chart below presents examples of business initiatives designed to reflect the
different
stages of sustainability-based value creation, as identified by multiple thought leaders in
the field. Select the arrangement of initiatives that progress from early-stage to late
stage:
1. Incorporate inventory management and procurement processes to supplement
product delivery service
2. Adapting product delivery service to enhance delivery options
3. Upgrading product ordering processes to reduce costs, time, and/or errors
4. Refining new and old business lines to establish brand leadership
A. 1, 2, 3, 4
, B. 3, 1, 2, 4
C. 2, 3, 1, 4
D. 3, 2, 1, 4 - Answer- D
Which of the following is suitable to be included as an "activity metric" in the SASB
Standards?
A. CAPEX
B. History of product recalls
C. Number of media publications
D. A description of the company's strategy to protect customer data - Answer- C
Why is SASB's objective of cost-effectiveness for reporting companies ultimately in the
best interest of providers of capital?
A. If companies limit the amount of information they report, they are more likely to report
information
that is material, reducing the level of immaterial data in the market
B. If companies spend more than the value disclosure generates, there is potential for
sustainability disclosure as a business function to negatively impact enterprise value
C. If companies increase spending on reporting processes, they will be better equipped
to gather and disclose new data, increasing the availability of sustainability data
available
D. If companies focus on internal reporting to inform performance management
decisions, they will naturally produce decision-useful information that meets the needs
of external users - Answer- B
Which of the following provides an example of line-item sustainability disclosure
guidance issued by a regulator?
1. The US Securities and Exchange Commission (US SEC) 2010 Guidance lists four
climate change issues
that companies should consider for disclosure under existing applications of materiality
to SEC filings.
2. The European Union Taxonomy for Sustainable Economic Activities (The EU
Taxonomy) expects companies
to report capital and operating expenditures associated with activities classified as
environmentally
sustainable.
3. The Australian Securities and Investments Commission (ASIC) 2019 Regulatory
Guide states that that
companies should present information about an entity's operations and financial position
in a concise
manner.
4. The Canadian Securities Administration (CSA) 2010 Environmental Reporting
Guidance requires the
disclosure of matters related to climate in order to comply with previously-estab -
Answer- B
