CFA Institute ESG-Investing Exam Practice Test Instant Access

Question 1

A common characteristic of the EU Paris-Aligned Benchmarks and the EU Climate Transition Benchmarks is that they both:

Apermit only green investments.

Bpermit fossil fuel investments as part of a transition process.

Crequire a reduction in carbon emissions intensity in the starting year.

Answer : C

Both the EU Paris-Aligned Benchmarks and the EU Climate Transition Benchmarks require an initial reduction in carbon emissions intensity in the starting year, to ensure alignment with climate goals and the Paris Agreement. (ESGTextBook[PallasCatFin], Chapter 3, Page 153)

Question 2

Which of the following is a challenge of integrating ESG analysis into investment processes?

ACultural challenges and biases within investment management firms

BIssuer disclosures are standardized across industries without issuer-specific adjustments

CESG analysis is objective by nature, which makes it challenging to find investment opportunities

Answer : A

One of the main challenges in integrating ESG analysis into investment processes is the cultural challenges and biases within investment firms. Some firms may resist adopting ESG practices due to entrenched views or conflicting priorities. (ESGTextBook[PallasCatFin], Chapter 7, Page 319)

Question 3

Tools that evaluate companies, countries, and bonds based on their exposure or involvement-specific factors, sectors, products, or services are referred to as:

AESG data.

BESG ratings.

CESG screening.

Answer : C

ESG screening tools evaluate investments by assessing their exposure to or involvement in specific ESG factors, sectors, products, or services. This screening process is a key element in responsible investing. (ESGTextBook[PallasCatFin], Chapter 7, Page 364)

Question 4

Which of the following is an example of a social factor affecting external stakeholders?

AHuman rights

BAnimal welfare

CWorkers' health and safety

Answer : A

Human rights are a social factor that primarily affects external stakeholders, such as communities or populations impacted by a company's operations. (ESGTextBook[PallasCatFin], Chapter 4, Page 192)

Question 5

For private equity investments, an especially important ESG factor is:

Aenvironmental.

Bsocial.

Cgovernance.

Answer : C

Governance is particularly important in private equity investments, as governance structures directly influence the management and operation of portfolio companies. This helps ensure sustainable practices and mitigate risks. (ESGTextBook[PallasCatFin], Chapter 5, Page 236)

Question 6

In governance analysis, a threshold assessment best describes a minimum:

Acriterion before making an investment.

Blevel of confidence about future earnings.

Clevel of stewardship dialogue with the company.

Answer : A

A threshold assessment refers to setting a minimum criterion for governance practices that must be met before considering an investment in a company. (ESGTextBook[PallasCatFin], Chapter 5, Page 259)

Question 7

Determining which ESG issues are material:

Ainvolves judgment.

Bexcludes impacts on short-term financial performance.

Cis a process that is independent of a company's industry and business model.

Answer : A

Determining material ESG issues involves significant judgment based on the company's industry, business model, and specific risk factors. This process helps to focus on the most relevant ESG considerations. (ESGTextBook[PallasCatFin], Chapter 7, Page 325)

CFA Institute ESG-Investing Certificate in ESG Investing Exam Practice Test