FSA SASB LEVEL I TEST
- Correct Answers -
What is the historical evolution of disclosure? Why is that relevant today? - Correct
Answers -x
How and why has sustainability accounting and disclosure evolved to supplement
financial A&D? - Correct Answers -
Characteristics of SASB D&A - Correct Answers -D&A metrics contextualize
understanding of a firm's operations and strategic initiatives
What is SICS? - Correct Answers -Sustainable Industry Classification System create
and outline SASB Sectors and Industries
Strategic Planning - Correct Answers -The process of developing and documenting a
roadmap for achieving firm wide goals and defining future direction. Strategic plans
inform resource allocation decisions, management and business unit priorities,
operational decisions, and may extend to controls for strategy implementation.
Systematic or market risk - Correct Answers -The type of risk inherent to the overall
market that cannot be diversified away. For examples, declines in value caused by
global recession.
Tracking Error - Correct Answers -The difference between the return an investment or
portfolio generates and the benchmark t was trying to imitate
Classification system to meet the needs of users of financially material sustainability
information to classify and categorize industries. Falls in between granular classification
and repetition, focusing on risks and opportunities and value creation
How do companies use SASB Standards to disclose? - Correct Answers -
How does investor demand for sustainability information shapes corporate disclosure? -
Correct Answers -
How does sustainability encourage cross-functionality? - Correct Answers -
What are the stages of sustainability disclosure? - Correct Answers -
,What is the influence of board governance on the reliability of sustainability information?
- Correct Answers -
What is the influence of internal controls on the reliability of sustainability information? -
Correct Answers -
What is the influence of third-party assurance on the reliability of sustainability
information? - Correct Answers -
What is the role of sustainability management in corporate strategy and risk
management? - Correct Answers -
How is sustainability information used in public equities? - Correct Answers -
How is sustainability information used in corporate fixed income? - Correct Answers -
How is sustainability information used in private markets? - Correct Answers -
What challenges do investors face using sustainability information? - Correct Answers -
How do investor challenges using sustainability information impact the market? -
Correct Answers -
Why are investors demanding quality sustainability information? - Correct Answers -
Financial and sustainability performance are linked. It gives a better understanding of
risk and long term success. Investment goals vary but include: Achieving above market
returns, assessing risk and protecting against losses, an evaluating the predictability of
investment outcomes.
What factors drive demand for quality sustainability information? - Correct Answers -SI,
both qualitative and quantitative, provides insight into financial performance, contributes
to short/med/long-term success by improving management of sustainability-related risks
and opportunities.
Companies may be better equipped to identify and mitigate risks, reduce costs, optimize
efficiencies, and even increase market share and revenue growth through new products
and services. Can improve cost of capital. Demand for SI usually is to drive bottom-line
performance.
Besides companies and investors, what other institutions influence demand for SI? -
Correct Answers -Regulation (state, national, international policy) for recommendations
or requirements of disclosure, non-policy initiatives such as ones by securities
exchanges and other industry organizations
Why was disclosure the basis of regulator reform in the wake of the 1930s stock market
crash? - Correct Answers -Lack of transparency in the market had disastrous
, implications (economic decline, great depression, bankruptcy, harming socioeconomic
wellbeing). Disclosure promotes transparency and fosters sound and efficient capital
markets. Disclosure effectively protects investors, positively influences corporate
behavior, and enables informed investor decisions.
What is the relevance of materiality in the context of disclosure? - Correct Answers -
Materiality is what is financially relevant enough to impact investor decisions and
therefore, needs to be disclosed. It was adopted to provide guidance to reporting
companies, as lack of guidance would place undue burden on reporting companies.
How has materiality historically been interpreted? - Correct Answers -Historically,
materiality is information that impacts financial performance and decision making.
How has the purpose of accounting changed since 1930s and why did financial
reporting move towards standardization? - Correct Answers -Early on, accounting was
specifically accurate record keeping and historical cost accounting (foundation of
accounting). However, companies began to do this on their own way so comparability
was lacking. This pushed a standard definition of accounting-- provides information for
the purpose of making economic decisions, using both historic and forward looking info.
IFRS and GAAP standardize disclosure to make it more consistent, comparable, and
reliable so investors can access and compare companies.
What does the rise of intangible assets mean for corporate disclosure? - Correct
Answers -Increasing proportion of intangible assets (as a % of total S&P market value)
means traditional financial statements do not capture all the truth of performance and
value drivers. Tangible assets alone do not constitute a complete set of info so a gap in
info exists where these assets are not being identified, measures, or managed
What factors contribute to increasing investor interest in non-financial information? -
Correct Answers -Key organizations endorsed financial and non financial reporting in
businesses, more was evidently not captured in financial documents (evidenced by
scandals like Enron). Non-financial reporting discloses relevant information about
financial condition and long term value, as short termism is rejected and long term value
creation is decided in the fiduciary duties of care
What challenges exist in sustainability disclosure that do not necessarily exist in
financial disclosure? - Correct Answers -Young, many audiences are interested (people,
investors, communities) so balancing many needs, many experts and professionals
required, many methods and methodologies that are highly variable are needed and
exist. High variability in scale and scope of data can skew analysis and limit
comparability.
What does "climate-first" disclosure guidance tell us about regulators' approach to
sustainability disclosure? - Correct Answers -Often focusing on climate info (rather than
comprehensive ESG). This can encourage sustainability disclosure while also focusing
and easing companies into it. This is internationally common.
- Correct Answers -
What is the historical evolution of disclosure? Why is that relevant today? - Correct
Answers -x
How and why has sustainability accounting and disclosure evolved to supplement
financial A&D? - Correct Answers -
Characteristics of SASB D&A - Correct Answers -D&A metrics contextualize
understanding of a firm's operations and strategic initiatives
What is SICS? - Correct Answers -Sustainable Industry Classification System create
and outline SASB Sectors and Industries
Strategic Planning - Correct Answers -The process of developing and documenting a
roadmap for achieving firm wide goals and defining future direction. Strategic plans
inform resource allocation decisions, management and business unit priorities,
operational decisions, and may extend to controls for strategy implementation.
Systematic or market risk - Correct Answers -The type of risk inherent to the overall
market that cannot be diversified away. For examples, declines in value caused by
global recession.
Tracking Error - Correct Answers -The difference between the return an investment or
portfolio generates and the benchmark t was trying to imitate
Classification system to meet the needs of users of financially material sustainability
information to classify and categorize industries. Falls in between granular classification
and repetition, focusing on risks and opportunities and value creation
How do companies use SASB Standards to disclose? - Correct Answers -
How does investor demand for sustainability information shapes corporate disclosure? -
Correct Answers -
How does sustainability encourage cross-functionality? - Correct Answers -
What are the stages of sustainability disclosure? - Correct Answers -
,What is the influence of board governance on the reliability of sustainability information?
- Correct Answers -
What is the influence of internal controls on the reliability of sustainability information? -
Correct Answers -
What is the influence of third-party assurance on the reliability of sustainability
information? - Correct Answers -
What is the role of sustainability management in corporate strategy and risk
management? - Correct Answers -
How is sustainability information used in public equities? - Correct Answers -
How is sustainability information used in corporate fixed income? - Correct Answers -
How is sustainability information used in private markets? - Correct Answers -
What challenges do investors face using sustainability information? - Correct Answers -
How do investor challenges using sustainability information impact the market? -
Correct Answers -
Why are investors demanding quality sustainability information? - Correct Answers -
Financial and sustainability performance are linked. It gives a better understanding of
risk and long term success. Investment goals vary but include: Achieving above market
returns, assessing risk and protecting against losses, an evaluating the predictability of
investment outcomes.
What factors drive demand for quality sustainability information? - Correct Answers -SI,
both qualitative and quantitative, provides insight into financial performance, contributes
to short/med/long-term success by improving management of sustainability-related risks
and opportunities.
Companies may be better equipped to identify and mitigate risks, reduce costs, optimize
efficiencies, and even increase market share and revenue growth through new products
and services. Can improve cost of capital. Demand for SI usually is to drive bottom-line
performance.
Besides companies and investors, what other institutions influence demand for SI? -
Correct Answers -Regulation (state, national, international policy) for recommendations
or requirements of disclosure, non-policy initiatives such as ones by securities
exchanges and other industry organizations
Why was disclosure the basis of regulator reform in the wake of the 1930s stock market
crash? - Correct Answers -Lack of transparency in the market had disastrous
, implications (economic decline, great depression, bankruptcy, harming socioeconomic
wellbeing). Disclosure promotes transparency and fosters sound and efficient capital
markets. Disclosure effectively protects investors, positively influences corporate
behavior, and enables informed investor decisions.
What is the relevance of materiality in the context of disclosure? - Correct Answers -
Materiality is what is financially relevant enough to impact investor decisions and
therefore, needs to be disclosed. It was adopted to provide guidance to reporting
companies, as lack of guidance would place undue burden on reporting companies.
How has materiality historically been interpreted? - Correct Answers -Historically,
materiality is information that impacts financial performance and decision making.
How has the purpose of accounting changed since 1930s and why did financial
reporting move towards standardization? - Correct Answers -Early on, accounting was
specifically accurate record keeping and historical cost accounting (foundation of
accounting). However, companies began to do this on their own way so comparability
was lacking. This pushed a standard definition of accounting-- provides information for
the purpose of making economic decisions, using both historic and forward looking info.
IFRS and GAAP standardize disclosure to make it more consistent, comparable, and
reliable so investors can access and compare companies.
What does the rise of intangible assets mean for corporate disclosure? - Correct
Answers -Increasing proportion of intangible assets (as a % of total S&P market value)
means traditional financial statements do not capture all the truth of performance and
value drivers. Tangible assets alone do not constitute a complete set of info so a gap in
info exists where these assets are not being identified, measures, or managed
What factors contribute to increasing investor interest in non-financial information? -
Correct Answers -Key organizations endorsed financial and non financial reporting in
businesses, more was evidently not captured in financial documents (evidenced by
scandals like Enron). Non-financial reporting discloses relevant information about
financial condition and long term value, as short termism is rejected and long term value
creation is decided in the fiduciary duties of care
What challenges exist in sustainability disclosure that do not necessarily exist in
financial disclosure? - Correct Answers -Young, many audiences are interested (people,
investors, communities) so balancing many needs, many experts and professionals
required, many methods and methodologies that are highly variable are needed and
exist. High variability in scale and scope of data can skew analysis and limit
comparability.
What does "climate-first" disclosure guidance tell us about regulators' approach to
sustainability disclosure? - Correct Answers -Often focusing on climate info (rather than
comprehensive ESG). This can encourage sustainability disclosure while also focusing
and easing companies into it. This is internationally common.
