SASB FSA 1 EXAM STUDY GUIDE 211
QUESTIONS WITH COMPLETE 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 - The presence of a
company policy is represented through binary data, which does not provide
useful insight into actual company performance
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 how buy-sell decisions are made Answer - D.The growth of index investing
can encourage investment stewardship based on how buy-sell decisions are
made
Corporate disclosures of sustainability information serve which two (2) of the
following purposes in capital markets? (Choose 2)
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.Aid in valuation for financial analysts
C.Allow investors to assess risks and opportunities related to their investments
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.If companies spend more than the
value disclosure generates, there is potential for sustainability disclosure as a
business function to negatively impact enterprise value
Which two (2) features explain how SASB's standards-development process is
designed to improve the decision-usefulness of sustainability information for
investors? (Choose 2)
A. A topic is only included in a standard if it includes evidence of financial
impacts
B. Investors' feedback during the standards development process is prioritized
over other stakeholders
C. The accounting metrics are quantitative to make it easier to integrate into
conventional financial analysis tools
D. The technical protocols are intended to improve the reliability of the
information by forming the basis for suitable criteria Answer - A. A topic is only
included in a standard if it includes evidence of financial impacts
D. The technical protocols are intended to improve the reliability of the
information by forming the basis for suitable criteria
An analyst wants to understand the connection between a company's
sustainability data and one of four financial drivers (revenue, cost, assets and
liabilities, and cost of capital) that are relevant to a discounted cash flow (DCF)
analysis. Choose the pairing that correctly matches a data type with its
relevance to a DCF analysis.
, A. Data about factors that drive brand value : impacts on valuation methods for
assets and liabilities
B. Data about regulatory compliance : operational performance and cost
structure
C. Data about product features required by law : cost structure for profitability
ratios (e.g. ROI)
D. Data about the number of safety incidents : revenue growth in the context
of price-based ratios (e.g. PE or PEG ratios) Answer - B. Data about regulatory
compliance : operational performance and cost structure
On the spectrum of "values-" to "value"-focused investing, which investment
strategy that uses sustainability information is farthest on the "value" end?
A. Impact Investing
B. Negative Screening
C. ESG Integration
D. Positive Screening Answer - C. ESG Integration
Which two (2) statements, if true, provide evidence that the potential
disclosure topic of Labor Practices fails to meet the criteria for inclusion in the
Oil & Gas - Services Standard? (Choose 2)
A. "Labor Practices is a frequent topic in media coverage of the industry and
shareholder resolutions in the industry but it is not important to our customers
or our board of directors."
QUESTIONS WITH COMPLETE 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 - The presence of a
company policy is represented through binary data, which does not provide
useful insight into actual company performance
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 how buy-sell decisions are made Answer - D.The growth of index investing
can encourage investment stewardship based on how buy-sell decisions are
made
Corporate disclosures of sustainability information serve which two (2) of the
following purposes in capital markets? (Choose 2)
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.Aid in valuation for financial analysts
C.Allow investors to assess risks and opportunities related to their investments
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.If companies spend more than the
value disclosure generates, there is potential for sustainability disclosure as a
business function to negatively impact enterprise value
Which two (2) features explain how SASB's standards-development process is
designed to improve the decision-usefulness of sustainability information for
investors? (Choose 2)
A. A topic is only included in a standard if it includes evidence of financial
impacts
B. Investors' feedback during the standards development process is prioritized
over other stakeholders
C. The accounting metrics are quantitative to make it easier to integrate into
conventional financial analysis tools
D. The technical protocols are intended to improve the reliability of the
information by forming the basis for suitable criteria Answer - A. A topic is only
included in a standard if it includes evidence of financial impacts
D. The technical protocols are intended to improve the reliability of the
information by forming the basis for suitable criteria
An analyst wants to understand the connection between a company's
sustainability data and one of four financial drivers (revenue, cost, assets and
liabilities, and cost of capital) that are relevant to a discounted cash flow (DCF)
analysis. Choose the pairing that correctly matches a data type with its
relevance to a DCF analysis.
, A. Data about factors that drive brand value : impacts on valuation methods for
assets and liabilities
B. Data about regulatory compliance : operational performance and cost
structure
C. Data about product features required by law : cost structure for profitability
ratios (e.g. ROI)
D. Data about the number of safety incidents : revenue growth in the context
of price-based ratios (e.g. PE or PEG ratios) Answer - B. Data about regulatory
compliance : operational performance and cost structure
On the spectrum of "values-" to "value"-focused investing, which investment
strategy that uses sustainability information is farthest on the "value" end?
A. Impact Investing
B. Negative Screening
C. ESG Integration
D. Positive Screening Answer - C. ESG Integration
Which two (2) statements, if true, provide evidence that the potential
disclosure topic of Labor Practices fails to meet the criteria for inclusion in the
Oil & Gas - Services Standard? (Choose 2)
A. "Labor Practices is a frequent topic in media coverage of the industry and
shareholder resolutions in the industry but it is not important to our customers
or our board of directors."
