SASB FSA 1 EXAM STUDY GUIDE
QUESTIONS WITH COMPLETE
SOLUTIONS
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."
B. "The industry is not unionized and strikes are a rare occurrence within the industry.
Workers are generally extremely well paid and labor practices are healthy for the most
part."
C. "There are instances where labor practices is material in a specific set of
circumstances— such as in Gabon in 2013—but it is not material across the industry."
,D. "Surveyed customers and suppliers indicated that cost containment strategies
warranted disclosure except where it concerned what they viewed as a non-issue—
labor practices— even though lab - Answer- B. "The industry is not unionized and
strikes are a rare occurrence within the industry. Workers are generally extremely well
paid and labor practices are healthy for the most part."
C. "There are instances where labor practices is material in a specific set of
circumstances— such as in Gabon in 2013—but it is not material across the industry."
What does the history of the formation of accounting standards-setting organizations -
leading up to the establishment of the global International Accounting Standards Board
(IASB) and the US Financial Accounting Standards Board (FASB) - demonstrate about
the nature of standardized disclosure?
A. There has always been widespread support for standardized accounting practices
and financial disclosure
B. The accepted purpose and methods of accounting and financial disclosure have
evolved over time
C. Accounting standards that enable greater flexibility to reporting companies ultimately
benefit investors
D. Accounting practices must be completely standardized across global jurisdictions to
achieve market efficiency - Answer- B. The accepted purpose and methods of
accounting and financial disclosure have evolved over time
When the accounting profession redefined the purpose of financial statements in the
1960s, what method came into focus for its decision-usefulness?
A. Discounted future cash flows
B. Historical cost accrual
C. Comparable company analysis
D. Positive screening - Answer- A. Discounted future cash flows
A private equity investor is integrating ESG into its investment process with the goal of
improving the risk-return profile of its holdings. How will the investor likely use the SASB
Standards to support this goal?
A. Identify the KPI to use when issuing a new sustainability-linked bond
B. Apply an ESG tilt during portfolio construction favoring low-emitting companies
C. Monitor portfolio companies' adherence to GAAP
D. Inform close engagement with portfolio companies concerning financially material
ESG issues - Answer- D. Inform close engagement with portfolio companies
concerning financially material ESG issues
, An analyst is sourcing ESG data from several companies' annual reports. When viewing
the reports, they notice that five (5) companies have published SASB disclosures using
the same SASB industry standard. Which two (2) of the following attributes can the
analyst expect about this group of five companies? (Choose 2)
A. They generate comparable levels of revenue
B. They have similar ESG ratings
C. They operate in a similar legal environment
D. They face similar growth and innovation opportunities - Answer- C. They operate in
a similar legal environment
D. They face similar growth and innovation opportunities
Which two (2) of the following trends are contributing to investors playing a more active
role in corporate governance? (Choose 2)
A. The rise of sustainability disclosure
B. The growth of proxy voting
C. The growth of index investing
D. The rise of sustainability in investing - Answer- C. The growth of index investing
D. The rise of sustainability in investing
Which three (3) of the following components of a company's external environment are
useful to observe to better understand the sustainability reporting environment when
preparing for disclosure? (Choose 3)
A. Executive compensation
B. Regulatory developments
C. Reporting trends among industry peers
D. Proxy voting trends
E. Non-investor stakeholder pressures - Answer- B. Regulatory developments
C. Reporting trends among industry peers
E. Non-investor stakeholder pressures
Which two (2) of the following steps can companies take to both enhance disclosure
and improve understanding of the ways sustainability issues impact operational and
financial performance? (Choose 2)
A. Hire legal experts with expertise in sustainability issues
B. Collaborate across business functions
C. Expand existing data management processes to include sustainability information
D. Create a sustainability department - Answer- B. Collaborate across business
functions
C. Expand existing data management processes to include sustainability information
QUESTIONS WITH COMPLETE
SOLUTIONS
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."
B. "The industry is not unionized and strikes are a rare occurrence within the industry.
Workers are generally extremely well paid and labor practices are healthy for the most
part."
C. "There are instances where labor practices is material in a specific set of
circumstances— such as in Gabon in 2013—but it is not material across the industry."
,D. "Surveyed customers and suppliers indicated that cost containment strategies
warranted disclosure except where it concerned what they viewed as a non-issue—
labor practices— even though lab - Answer- B. "The industry is not unionized and
strikes are a rare occurrence within the industry. Workers are generally extremely well
paid and labor practices are healthy for the most part."
C. "There are instances where labor practices is material in a specific set of
circumstances— such as in Gabon in 2013—but it is not material across the industry."
What does the history of the formation of accounting standards-setting organizations -
leading up to the establishment of the global International Accounting Standards Board
(IASB) and the US Financial Accounting Standards Board (FASB) - demonstrate about
the nature of standardized disclosure?
A. There has always been widespread support for standardized accounting practices
and financial disclosure
B. The accepted purpose and methods of accounting and financial disclosure have
evolved over time
C. Accounting standards that enable greater flexibility to reporting companies ultimately
benefit investors
D. Accounting practices must be completely standardized across global jurisdictions to
achieve market efficiency - Answer- B. The accepted purpose and methods of
accounting and financial disclosure have evolved over time
When the accounting profession redefined the purpose of financial statements in the
1960s, what method came into focus for its decision-usefulness?
A. Discounted future cash flows
B. Historical cost accrual
C. Comparable company analysis
D. Positive screening - Answer- A. Discounted future cash flows
A private equity investor is integrating ESG into its investment process with the goal of
improving the risk-return profile of its holdings. How will the investor likely use the SASB
Standards to support this goal?
A. Identify the KPI to use when issuing a new sustainability-linked bond
B. Apply an ESG tilt during portfolio construction favoring low-emitting companies
C. Monitor portfolio companies' adherence to GAAP
D. Inform close engagement with portfolio companies concerning financially material
ESG issues - Answer- D. Inform close engagement with portfolio companies
concerning financially material ESG issues
, An analyst is sourcing ESG data from several companies' annual reports. When viewing
the reports, they notice that five (5) companies have published SASB disclosures using
the same SASB industry standard. Which two (2) of the following attributes can the
analyst expect about this group of five companies? (Choose 2)
A. They generate comparable levels of revenue
B. They have similar ESG ratings
C. They operate in a similar legal environment
D. They face similar growth and innovation opportunities - Answer- C. They operate in
a similar legal environment
D. They face similar growth and innovation opportunities
Which two (2) of the following trends are contributing to investors playing a more active
role in corporate governance? (Choose 2)
A. The rise of sustainability disclosure
B. The growth of proxy voting
C. The growth of index investing
D. The rise of sustainability in investing - Answer- C. The growth of index investing
D. The rise of sustainability in investing
Which three (3) of the following components of a company's external environment are
useful to observe to better understand the sustainability reporting environment when
preparing for disclosure? (Choose 3)
A. Executive compensation
B. Regulatory developments
C. Reporting trends among industry peers
D. Proxy voting trends
E. Non-investor stakeholder pressures - Answer- B. Regulatory developments
C. Reporting trends among industry peers
E. Non-investor stakeholder pressures
Which two (2) of the following steps can companies take to both enhance disclosure
and improve understanding of the ways sustainability issues impact operational and
financial performance? (Choose 2)
A. Hire legal experts with expertise in sustainability issues
B. Collaborate across business functions
C. Expand existing data management processes to include sustainability information
D. Create a sustainability department - Answer- B. Collaborate across business
functions
C. Expand existing data management processes to include sustainability information
