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CFA Institute ESG-Investing Exam Questions
- Topic 1: Overview of ESG Investing and the ESG Market: This section tests ESG Investment Managers and delves into responsible investment strategies, examining how environmental, social, and governance (ESG) elements shape the investment ecosystem.
- Topic 2: Environmental Factors: This section examines environmental elements, covering systemic links, material impacts, and major trends for ESG Consultants. This section also reviews techniques for evaluating environmental impacts at the national, sectoral, and organizational levels.
- Topic 3: Social Factors: This section focuses on analyzing social factors, including their systemic effects and material impacts. This section also provides methodologies for assessing social risks and opportunities at country, sector, and organizational levels.
- Topic 4: Understanding Governance Factors: This section includes governance elements for ESG Investment Consultants, including core characteristics, governance models, and material impacts. It discusses how governance factors influence investment choices.
- Topic 5: Engagement and Stewardship: This section explores the foundations of investor engagement and stewardship, emphasizing their importance and practical application.
- Topic 6: ESG Analysis, Valuation, and Integration: Targetted for ESG Consultants, this domain covers methods for embedding ESG factors into the investment process, the obstacles that may arise, and the impact of ESG considerations on valuations across various asset classes.
- Topic 7: ESG Integrated Portfolio: This section discusses the application of ESG analysis across multiple asset classes, exploring strategies for incorporating ESG criteria into portfolio management.
- Topic 8: Investment Mandates and Portfolio Analytics: This domain explains to ESG Analysts the importance of constructing mandates to support effective ESG investment results. This section highlights key aspects, such as transparency and accountability, which are essential for asset owners and intermediaries to align portfolios with ESG priorities.
Free CFA Institute ESG-Investing Exam Actual Questions
Note: Premium Questions for ESG-Investing were last updated On Apr. 08, 2025 (see below)
Which of the following is one of the four phases of activities contained by the LEAP assessment framework developed by the Taskforce on Nature-related Financial Disclosures (TNFD)?
The LEAP assessment framework developed by the Taskforce on Nature-related Financial Disclosures (TNFD) consists of four phases: Locate, Evaluate, Assess, and Prepare. This framework is designed to help organizations understand and address nature-related risks and opportunities.
Locate: This phase involves identifying and mapping the interface of the organization with nature. It includes understanding the dependencies and impacts of the organization's activities on nature.
Evaluate: In this phase, organizations evaluate the material risks and opportunities that arise from their interactions with nature. This includes assessing how these risks and opportunities could affect their operations, value chains, and financial performance.
Assess: Organizations conduct detailed assessments of the material risks and opportunities identified in the Evaluate phase. This involves deeper analysis to quantify and prioritize the risks and opportunities.
Prepare: The final phase involves preparing strategic responses to mitigate risks and capitalize on opportunities. Organizations develop plans and actions to manage nature-related risks and enhance resilience.
Option C, 'Evaluate material risks and opportunities for their operations,' aligns with the Evaluate phase of the LEAP framework, making it the correct answer.
Compared to other ESG strategies, fully integrated ESG strategies tend to feature:
Fully integrated ESG strategies tend to have more concentrated positions as they focus on companies with strong ESG practices, often limiting the investment universe to a smaller selection of high-performing companies. (ESGTextBook[PallasCatFin], Chapter 8, Page 451)
According to the framework of the Task Force on Climate-Related Financial Disclosures (TCFD): the formula for carbon intensity at the portfolio level weighs emissions based upon an issuer's:
The Task Force on Climate-Related Financial Disclosures (TCFD) framework uses the weighted average carbon intensity metric, which calculates carbon intensity based on an issuer's revenue. The formula is as follows: \text{Weighted Average Carbon Intensity} \sum \left( \frac{\text{Current Value of Investment}}{\text{Current Portfolio Value}} \times \frac{\text{Issuer's Scope 1 and 2 Emissions}}{\text{Issuer's Revenue in US$m}} \right) This approach helps investors understand their portfolio's exposure to carbon-intensive companies based on financial performance metrics such as revenue.
Compared to equities, bonds most likely:
Bonds are typically considered inferior in the capital structure compared to equities, meaning bondholders are paid after senior debt but before equity holders in the event of a liquidation. (ESGTextBook[PallasCatFin], Chapter 8, Page 451)
Which of the following countries have a joint audit requirement that all public interest entities must engage at least two independent accounting firms to perform an annual audit?
France has a joint audit requirement where public interest entities must engage at least two independent auditors, increasing transparency and reducing audit risk. (ESGTextBook[PallasCatFin], Chapter 5, Page 252)
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