2024 Certificate in ESG Investing Curriculum
PDF – Official CFA Institute Training Manual
Externalities are costs that a business does not bear itself but instead imposes on
others. Which of the following is not an example of an externalised cost? - Answer
✔✔ - Building on brownfield sites.
Explanation
Externalities are costs that a business does not bear itself (internalise) but instead
imposes on others (externalises). ESG analysis considers these externalised costs
such as climate change, greenhouse gas emissions, pollution, emissions, waste
management, resource depletion, water intensity or scarcity, supply chain impacts
including deforestation, etc. The cost of building on brownfield sites is not
externalised.
What is the first sustainable development goal (SDG 1)? - Answer ✔✔ - To end
poverty in all its forms everywhere.
Explanation
SDG 1 is to end poverty in all its forms everywhere.
There are three key challenges of incorporating ESG in investment processes. Which
of the following is not one of those three key challenges? - Answer ✔✔ - High
sustainability companies significantly outperform their counterparts over the short-
term.
Explanation
The three key time horizons challenges of incorporating ESG in investment
processes are: It is hard to predict the value of future losses (or gains); It is difficult
to forecast when those losses (or gains) might occur - it may well be long into the
future; Fund managers' performance is typically assessed using shorter time
horizons than those over which ESG factors might have a material impact.
,Institutional investors typically reflect ESG considerations in three ways, which of
the following is not one of those ways? - Answer ✔✔ - Acting as a whistleblower in
respective corporate misdemeanours.
Explanation
Institutional investors typically reflect ESG considerations in three ways, namely by
integrating ESG into investment considerations, engaging actively with the boards
and management of investee companies, and by engaging in public policy
consultations on ESG issues.
Which of the following bodies has worked to develop a framework that identifies
material ESG issues by sector? - Answer ✔✔ - SASB.
Explanation
The Sustainability Accounting Standards Board (SASB) is the most focused body
that has worked to develop a framework that identifies material ESG issues by
sector.
There are a number of different ESG investment styles. Which of the following is not
one of these ESG investment styles? - Answer ✔✔ - Momentum investment.
Explanation
ESG investment may be sub-categorized into: Responsible investment; Sustainable
investment; Impact investment; Socially responsible investment (SRI); Ethical
investment; and Thematic investment.
A company has scored well on ESG metrics relative to its competitors, which implies
a number of things. Which of the following is not one of the implications of this
relative ESG score? - Answer ✔✔ - They are more likely to grow rapidly and offer
higher short term returns.
Explanation
Companies that score well on ESG metrics are better able to anticipate ESG risks
and opportunities, enjoy valuation premiums due to changing investor concerns and
preferences, and are more disposed to longer term strategic thinking and planning.
,What is sustainable development goal 13 (SDG 13)? - Answer ✔✔ - To take urgent
action to combat climate change and its impacts.
Explanation
SDG 13 is focused on climate change. SDG 13 underpins a recognition that
economic development and climate change are inextricably linked, especially where
the effects of global warming in particular can have a negative effect on growth and
development.
What is the concept of the triple bottom line (TBL) in the context of corporate
accounting? - Answer ✔✔ - TBL attempts to clearly communicate to investors and
stakeholders the value created by companies when social and environmental issues
were considered systematically in their business operations.
Explanation
TBL attempts to improve reporting practices and communicate more clearly to
investors and stakeholders the value created by companies when social and
environmental issues were considered systematically in their business operations.
Which of the following would not be considered a corporate governance issue? -
Answer ✔✔ - Working conditions.
Explanation
Working conditions is a social issue.
Institutional investors aim to integrate ESG factors into investment decisions. Which
of the following is not a typical method by which this may be achieved? - Answer
✔✔ - By engaging in public policy consultations on ESG issues.
Explanation
Engaging in public policy consultations on ESG issues does not incorporate the
factors into the investment decision process.
The management of pollution and greenhouse gas emissions will be most material
to which of the following industries? - Answer ✔✔ - Electricity generation.
Explanation
, One of the most active challenges within ESG investment is identifying those issues
which are genuinely material to a sector and company. The issues of pollution and
greenhouse gas emissions are most relevant in the electricity generation, transport
and industrial production.
In understanding the range of ESG issues, which of the following is a social issue? -
Answer ✔✔ - Working conditions
Explanation
Supply chain impacts and water intensity are environmental issues. Board diversity
is a governance issue. Working conditions is a social issue.
ESG investing is based on economic, social and environmental trends and makes
which of the following assumptions? - Answer ✔✔ - That by managing the risks and
opportunities associated with long-term economic, social and environmental trends
companies will have the best chance to prosper, taking decisions well and
incorporating the full range of material risk factors into their decision-making.
Explanation
That by managing the risks and opportunities associated with long-term economic,
social and environmental trends companies will have the best chance to prosper,
taking decisions well and incorporating the full range of material risk factors into
their decision-making.
The integration of ESG is least likely to lead to: - Answer ✔✔ - Increased
externalities
Explanation
ESG integration is thought to reduce (not increase) externalities.
Which of the following is not a form of ESG investment? - Answer ✔✔ - Valuation
investment
Explanation
Valuation investment is not a form of ESG investment.
PDF – Official CFA Institute Training Manual
Externalities are costs that a business does not bear itself but instead imposes on
others. Which of the following is not an example of an externalised cost? - Answer
✔✔ - Building on brownfield sites.
Explanation
Externalities are costs that a business does not bear itself (internalise) but instead
imposes on others (externalises). ESG analysis considers these externalised costs
such as climate change, greenhouse gas emissions, pollution, emissions, waste
management, resource depletion, water intensity or scarcity, supply chain impacts
including deforestation, etc. The cost of building on brownfield sites is not
externalised.
What is the first sustainable development goal (SDG 1)? - Answer ✔✔ - To end
poverty in all its forms everywhere.
Explanation
SDG 1 is to end poverty in all its forms everywhere.
There are three key challenges of incorporating ESG in investment processes. Which
of the following is not one of those three key challenges? - Answer ✔✔ - High
sustainability companies significantly outperform their counterparts over the short-
term.
Explanation
The three key time horizons challenges of incorporating ESG in investment
processes are: It is hard to predict the value of future losses (or gains); It is difficult
to forecast when those losses (or gains) might occur - it may well be long into the
future; Fund managers' performance is typically assessed using shorter time
horizons than those over which ESG factors might have a material impact.
,Institutional investors typically reflect ESG considerations in three ways, which of
the following is not one of those ways? - Answer ✔✔ - Acting as a whistleblower in
respective corporate misdemeanours.
Explanation
Institutional investors typically reflect ESG considerations in three ways, namely by
integrating ESG into investment considerations, engaging actively with the boards
and management of investee companies, and by engaging in public policy
consultations on ESG issues.
Which of the following bodies has worked to develop a framework that identifies
material ESG issues by sector? - Answer ✔✔ - SASB.
Explanation
The Sustainability Accounting Standards Board (SASB) is the most focused body
that has worked to develop a framework that identifies material ESG issues by
sector.
There are a number of different ESG investment styles. Which of the following is not
one of these ESG investment styles? - Answer ✔✔ - Momentum investment.
Explanation
ESG investment may be sub-categorized into: Responsible investment; Sustainable
investment; Impact investment; Socially responsible investment (SRI); Ethical
investment; and Thematic investment.
A company has scored well on ESG metrics relative to its competitors, which implies
a number of things. Which of the following is not one of the implications of this
relative ESG score? - Answer ✔✔ - They are more likely to grow rapidly and offer
higher short term returns.
Explanation
Companies that score well on ESG metrics are better able to anticipate ESG risks
and opportunities, enjoy valuation premiums due to changing investor concerns and
preferences, and are more disposed to longer term strategic thinking and planning.
,What is sustainable development goal 13 (SDG 13)? - Answer ✔✔ - To take urgent
action to combat climate change and its impacts.
Explanation
SDG 13 is focused on climate change. SDG 13 underpins a recognition that
economic development and climate change are inextricably linked, especially where
the effects of global warming in particular can have a negative effect on growth and
development.
What is the concept of the triple bottom line (TBL) in the context of corporate
accounting? - Answer ✔✔ - TBL attempts to clearly communicate to investors and
stakeholders the value created by companies when social and environmental issues
were considered systematically in their business operations.
Explanation
TBL attempts to improve reporting practices and communicate more clearly to
investors and stakeholders the value created by companies when social and
environmental issues were considered systematically in their business operations.
Which of the following would not be considered a corporate governance issue? -
Answer ✔✔ - Working conditions.
Explanation
Working conditions is a social issue.
Institutional investors aim to integrate ESG factors into investment decisions. Which
of the following is not a typical method by which this may be achieved? - Answer
✔✔ - By engaging in public policy consultations on ESG issues.
Explanation
Engaging in public policy consultations on ESG issues does not incorporate the
factors into the investment decision process.
The management of pollution and greenhouse gas emissions will be most material
to which of the following industries? - Answer ✔✔ - Electricity generation.
Explanation
, One of the most active challenges within ESG investment is identifying those issues
which are genuinely material to a sector and company. The issues of pollution and
greenhouse gas emissions are most relevant in the electricity generation, transport
and industrial production.
In understanding the range of ESG issues, which of the following is a social issue? -
Answer ✔✔ - Working conditions
Explanation
Supply chain impacts and water intensity are environmental issues. Board diversity
is a governance issue. Working conditions is a social issue.
ESG investing is based on economic, social and environmental trends and makes
which of the following assumptions? - Answer ✔✔ - That by managing the risks and
opportunities associated with long-term economic, social and environmental trends
companies will have the best chance to prosper, taking decisions well and
incorporating the full range of material risk factors into their decision-making.
Explanation
That by managing the risks and opportunities associated with long-term economic,
social and environmental trends companies will have the best chance to prosper,
taking decisions well and incorporating the full range of material risk factors into
their decision-making.
The integration of ESG is least likely to lead to: - Answer ✔✔ - Increased
externalities
Explanation
ESG integration is thought to reduce (not increase) externalities.
Which of the following is not a form of ESG investment? - Answer ✔✔ - Valuation
investment
Explanation
Valuation investment is not a form of ESG investment.
