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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 Nov. 20, 2024 (see below)
Are the following statements relating to investor engagement accurate?
Statement 1: Investors need to frame the engagement topic into a broader discussion around strategy and long-term financial performance with the management team.
Statement 2: Active investment houses are working to ensure that their portfolio managers can deliver stewardship alongside their regular monitoring of investee companies.
Both statements are accurate. Effective engagement with companies often requires framing the discussion around strategy and long-term performance. Active investment houses are also focusing on integrating stewardship activities with ongoing portfolio management. (ESGTextBook[PallasCatFin], Chapter 6, Page 285)
An emissions trading system (ETS) permits a high allocation of free allowances to energy-intensive companies. The most likely objective of this practice is to:
Free allowances in an ETS are often allocated to energy-intensive companies to prevent the offshoring of emissions, also known as 'carbon leakage,' where companies relocate to jurisdictions with laxer environmental regulations. (ESGTextBook[PallasCatFin], Chapter 3, Page 153)
With respect to ESG reporting by investment managers, the 2020 version of the UK Stewardship Code calls for more reporting on the:
The 2020 version of the UK Stewardship Code emphasizes reporting on the outcomes from ESG activity, highlighting the practical impact of stewardship efforts rather than just focusing on policies or intentions. (ESGTextBook[PallasCatFin], Chapter 6, Page 276)
Which of the following statements is most accurate? Faith-based Islamic investors:
Faith-based Islamic investors follow Shariah principles, which prohibit investments in industries such as gambling, alcohol, and those earning interest (riba). (ESGTextBook[PallasCatFin], Chapter 1, Page 31)
Under which perspective did the Freshfields Report argue that integrating ESG considerations was necessary in all jurisdictions?
The Freshfields Report argued that integrating ESG considerations is necessary from a fiduciary duty perspective, as failure to consider material ESG risks can undermine long-term financial performance. (ESGTextBook[PallasCatFin], Chapter 5, Page 236)
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