CFA ESG Exam 2025 LATEST UPDATE!!!
Which of the following investment approaches is most likely to be at risk of short-
termism?
A.) ESG Investing
B.) Impact Investing
C. Conventional Investing - ANSWER Conventional Investing
Which of the following types of responsible investments is focused on the bottom of the
pyramid (BOP)?
A.) Green bonds
B.) Microfinance bonds
C.) Funds investing in smart grid technology - ANSWER Microfinance bonds
According to the Stockholm Resilience Centre, the two core boundaries of the nine
planetary boundaries are:
A.) Biosphere integrity and climate change
B.) Climate change and land-system change
C.) Biosphere integrity and land system change - ANSWER biosphere integrity and
climate change
ESG integration can have a material financial impact on a company leading to:
A.) Reduced risk of fines
B.) Increased negative externalities
C.) Increased risk of state intervention - ANSWER Reduced risk of fines
Which of the following statements regarding externalities is most accurate?
A.) Externalities occur due to environmental or social factors.
B.) When externalities are positive, private costs are lower than societal costs.
C.) Internalization of externalities improves companies' financial performance -
ANSWER Externalities occur due to environmental or social factors
In addition to the payment of dues and reporting annually on their responsible
investment practices, which of the following is a minimum requirement for signatories to
the Principles of Responsible Investment (PRI)? Members must:
A.) be active owners in the companies in which they are invested
B.) seek appropriate disclosure on ESG issues by the investee companies.
C.) have senior-level commitment for responsible investment implementation. -
ANSWER have senior level commitment for responsible investment implementation
Which of the following organizations developed the Model Mandate Initiative?
A.) Principles for Responsible Investment (PRI)
B.) International Corporate Governance Network (IGN)
C.) University of Cambridge Institute for Sustainability Leadership - ANSWER IGN
,Which of the following statements is most accurate? The majority of studies suggest
that:
A.) a company with high ESG standards increases its cost of capital.
B.) ESG performance and investment fund performance are positively correlated
C.) ESG performance and corporate financial performance are positively
correlated. - ANSWER ESG performance and corporate financial performance are
positively correlated
Greenwashing most likely refers to:
A.) countries exporting hazardous waste to other countries.
B.) companies making misleading claims about their environmental practices.
C.) companies introducing substances into the environment that are harmful. -
ANSWER Companies making misleading claims about their environmental practices
The standard for the UN Global Compact is overseen by the:
A.) Global Reporting Initiative (GRI).
B.) Value Reporting Foundation (VRF).
C.) International Business Council (IBC). - ANSWER GRI
Which of the following requires investors to act with a more long-term focus?
A.) Stockholm Resilience Centre
B.) Financial Stability Board (FSB).
C.) UN Shareholder Rights Directive (SRD) - ANSWER UN Shareholder Rights
Directive (SRD)
Which of the following types of responsible investing is not related to portfolio
construction.
A.) Thematic investing
B.) Shareholder engagement
C.) Socially responsible investing (SRI) - ANSWER Shareholder engagement
Which of the following responsible investment approaches most likely incorporates
positive screening?
A.) Faith-based investment
B.) Values-driven investment
C.) Best-in-class investment - ANSWER Best-in-class investment
Double materiality is best described as:
A.) an extension of financial materiality that considers the impacts of a company on the
climate or any other ESG factor.
B.) an accounting framework with three parts: social, environmental or ecolog-ical), and
financial (people, planet, and profit).
C.) investments made with the specific intent of generating positive, measurable social
and environmental impact alongside a financial return. - ANSWER double materiality is
,an extension of financial materiality that considers the impacts of a company on the
climate or any other ESG factor
Universal owners are best described as:
A.) large institutional investors that have diversified holdings
B.) retail investors that diversify through index funds or ETFs.
C.) stakeholders impacted by externalized environmental and social costs. - ANSWER
universal owners are large institutional investors that have diversified holdings
Which of the following statements about the internalization of externalities is most
accurate?
A.) Internalization of negative externalities can be achieved only by regulatory means.
B.) Internalization through taxation is an innovative, new idea to address exter-nalized
pollution
C.) Internalization refers to all measures to ensure externalities are reflected in the
prices of commercial goods and services. - ANSWER Internalization refers to all
measures to ensure externalities are reflected in the prices of commercial goods and
services.
The Shareholder Rights Directive (SRD) is a regulatory initiative to:
A.) counter short-termism
B.) reduce the use of proxies by managers
C.) protect minority shareholders interests - ANSWER counter short-termism
The Freshfields report was seminal in understanding that:
A.) corporate profits are materially at risk from state intervention.
B.) ESG issues are relevant for financial valuation and fiduciary duty.
c. humanity's ability to thrive is contingent on respecting planetary boundaries. -
ANSWER ESG issues are relevant for financial valuation and fiduciary duty
The proportion of Fortune Global 500 companies headquartered in emerging markets is
expected to:
A.) Decrease
B.) Remain Approximately the Same
C.) Increase - ANSWER Increase
Which of the following statements about population is most accurate?
A.) China's labor force has already peaked
B.) The global population is getting younger.
C.) The world's population is expected to shrink by 2030. - ANSWER China's labor force
already peaked
Investors demonstrate short-termism by:
A.) Engaging with investee companies to maximize long term value
B.) Encouraging the development of a long-term ESG implementation plan
, C.) Trading based on short-term price movements rather than long-term value -
ANSWER trading based on short-term price movements rather than long-term value
Which of the following is not an example of a social factor?
A.) Biodiversity
B.) Labor standards
C.) Health and Safety - ANSWER biodiversity
ESG considerations are difficult to value precisely and difficult to time because ESG
data:
A.) are not always available.
B.) can only be measured quantitatively.
C.) have no impact on financial statements. - ANSWER ESG data are not always
available
What are the four broad groupings of issues covered by the UN Global Compact?
A.) Environmental, social, governance, and impact
B.) Poverty, diversity, sustainability, and transparency
C.) Human rights, labor, environment, and anti-corruption - ANSWER Human rights,
labor, environment, and anti-corruption
Institutional investors generate sustainable returns from their investments by:
A.) not engaging actively with companies on ESG matters.
B.) disclosing their corporate social responsibility activities.
C.) integrating ESG factors into their portfolio construction decisions. - ANSWER
integrating ESG factors into their portfolio construction decisions.
Which of the following is not one of the three Ps in the triple bottom line concept?
A.) People
B.) Planet
C.) Principles - ANSWER Principles
Best-in-class investment:
A.) uses negative screening to exclude companies
B.) refers to selecting companies that fall under a sustainability-related theme.
C.) involves selecting only the companies that overcome a defined ranking hurdle -
ANSWER involves selecting only the companies that overcome a defined ranking
hurdle
Which of the following sectors is least likely to be excluded by ethical and faith-based
investments?
A.) Alcohol
B.) Weapons
C.) Technology - ANSWER Technology
The efficiency of shareholder engagement depends on:
Which of the following investment approaches is most likely to be at risk of short-
termism?
A.) ESG Investing
B.) Impact Investing
C. Conventional Investing - ANSWER Conventional Investing
Which of the following types of responsible investments is focused on the bottom of the
pyramid (BOP)?
A.) Green bonds
B.) Microfinance bonds
C.) Funds investing in smart grid technology - ANSWER Microfinance bonds
According to the Stockholm Resilience Centre, the two core boundaries of the nine
planetary boundaries are:
A.) Biosphere integrity and climate change
B.) Climate change and land-system change
C.) Biosphere integrity and land system change - ANSWER biosphere integrity and
climate change
ESG integration can have a material financial impact on a company leading to:
A.) Reduced risk of fines
B.) Increased negative externalities
C.) Increased risk of state intervention - ANSWER Reduced risk of fines
Which of the following statements regarding externalities is most accurate?
A.) Externalities occur due to environmental or social factors.
B.) When externalities are positive, private costs are lower than societal costs.
C.) Internalization of externalities improves companies' financial performance -
ANSWER Externalities occur due to environmental or social factors
In addition to the payment of dues and reporting annually on their responsible
investment practices, which of the following is a minimum requirement for signatories to
the Principles of Responsible Investment (PRI)? Members must:
A.) be active owners in the companies in which they are invested
B.) seek appropriate disclosure on ESG issues by the investee companies.
C.) have senior-level commitment for responsible investment implementation. -
ANSWER have senior level commitment for responsible investment implementation
Which of the following organizations developed the Model Mandate Initiative?
A.) Principles for Responsible Investment (PRI)
B.) International Corporate Governance Network (IGN)
C.) University of Cambridge Institute for Sustainability Leadership - ANSWER IGN
,Which of the following statements is most accurate? The majority of studies suggest
that:
A.) a company with high ESG standards increases its cost of capital.
B.) ESG performance and investment fund performance are positively correlated
C.) ESG performance and corporate financial performance are positively
correlated. - ANSWER ESG performance and corporate financial performance are
positively correlated
Greenwashing most likely refers to:
A.) countries exporting hazardous waste to other countries.
B.) companies making misleading claims about their environmental practices.
C.) companies introducing substances into the environment that are harmful. -
ANSWER Companies making misleading claims about their environmental practices
The standard for the UN Global Compact is overseen by the:
A.) Global Reporting Initiative (GRI).
B.) Value Reporting Foundation (VRF).
C.) International Business Council (IBC). - ANSWER GRI
Which of the following requires investors to act with a more long-term focus?
A.) Stockholm Resilience Centre
B.) Financial Stability Board (FSB).
C.) UN Shareholder Rights Directive (SRD) - ANSWER UN Shareholder Rights
Directive (SRD)
Which of the following types of responsible investing is not related to portfolio
construction.
A.) Thematic investing
B.) Shareholder engagement
C.) Socially responsible investing (SRI) - ANSWER Shareholder engagement
Which of the following responsible investment approaches most likely incorporates
positive screening?
A.) Faith-based investment
B.) Values-driven investment
C.) Best-in-class investment - ANSWER Best-in-class investment
Double materiality is best described as:
A.) an extension of financial materiality that considers the impacts of a company on the
climate or any other ESG factor.
B.) an accounting framework with three parts: social, environmental or ecolog-ical), and
financial (people, planet, and profit).
C.) investments made with the specific intent of generating positive, measurable social
and environmental impact alongside a financial return. - ANSWER double materiality is
,an extension of financial materiality that considers the impacts of a company on the
climate or any other ESG factor
Universal owners are best described as:
A.) large institutional investors that have diversified holdings
B.) retail investors that diversify through index funds or ETFs.
C.) stakeholders impacted by externalized environmental and social costs. - ANSWER
universal owners are large institutional investors that have diversified holdings
Which of the following statements about the internalization of externalities is most
accurate?
A.) Internalization of negative externalities can be achieved only by regulatory means.
B.) Internalization through taxation is an innovative, new idea to address exter-nalized
pollution
C.) Internalization refers to all measures to ensure externalities are reflected in the
prices of commercial goods and services. - ANSWER Internalization refers to all
measures to ensure externalities are reflected in the prices of commercial goods and
services.
The Shareholder Rights Directive (SRD) is a regulatory initiative to:
A.) counter short-termism
B.) reduce the use of proxies by managers
C.) protect minority shareholders interests - ANSWER counter short-termism
The Freshfields report was seminal in understanding that:
A.) corporate profits are materially at risk from state intervention.
B.) ESG issues are relevant for financial valuation and fiduciary duty.
c. humanity's ability to thrive is contingent on respecting planetary boundaries. -
ANSWER ESG issues are relevant for financial valuation and fiduciary duty
The proportion of Fortune Global 500 companies headquartered in emerging markets is
expected to:
A.) Decrease
B.) Remain Approximately the Same
C.) Increase - ANSWER Increase
Which of the following statements about population is most accurate?
A.) China's labor force has already peaked
B.) The global population is getting younger.
C.) The world's population is expected to shrink by 2030. - ANSWER China's labor force
already peaked
Investors demonstrate short-termism by:
A.) Engaging with investee companies to maximize long term value
B.) Encouraging the development of a long-term ESG implementation plan
, C.) Trading based on short-term price movements rather than long-term value -
ANSWER trading based on short-term price movements rather than long-term value
Which of the following is not an example of a social factor?
A.) Biodiversity
B.) Labor standards
C.) Health and Safety - ANSWER biodiversity
ESG considerations are difficult to value precisely and difficult to time because ESG
data:
A.) are not always available.
B.) can only be measured quantitatively.
C.) have no impact on financial statements. - ANSWER ESG data are not always
available
What are the four broad groupings of issues covered by the UN Global Compact?
A.) Environmental, social, governance, and impact
B.) Poverty, diversity, sustainability, and transparency
C.) Human rights, labor, environment, and anti-corruption - ANSWER Human rights,
labor, environment, and anti-corruption
Institutional investors generate sustainable returns from their investments by:
A.) not engaging actively with companies on ESG matters.
B.) disclosing their corporate social responsibility activities.
C.) integrating ESG factors into their portfolio construction decisions. - ANSWER
integrating ESG factors into their portfolio construction decisions.
Which of the following is not one of the three Ps in the triple bottom line concept?
A.) People
B.) Planet
C.) Principles - ANSWER Principles
Best-in-class investment:
A.) uses negative screening to exclude companies
B.) refers to selecting companies that fall under a sustainability-related theme.
C.) involves selecting only the companies that overcome a defined ranking hurdle -
ANSWER involves selecting only the companies that overcome a defined ranking
hurdle
Which of the following sectors is least likely to be excluded by ethical and faith-based
investments?
A.) Alcohol
B.) Weapons
C.) Technology - ANSWER Technology
The efficiency of shareholder engagement depends on:
