Certificate in ESG Investing (ESG-Investing) Free Practice Test

Question 1

Which of the following is most likely the easiest to demonstrate in attributing returns to ESG-related actions?

A. The performance drag or enhancement from excluding an industrial sector

B. The value added by an engagement program

C. The contribution of a particular ESG driver to the overall investment decision

Correct Answer: A

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Question 2

Which of the following board committees aims to ensure that the board is balanced and effective?

A. Audit committee

B. Corporate governance committee

C. Compensation committee

Correct Answer: B

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Question 3

When constructing net zero portfolios, investors:

A. Will tend to have overweight equity allocations in the technology sector if they exclude Scope 3 emissions

B. Can follow a clearly accepted standard for netting exposures to carbon risk

C. Typically agree on how to best account for the role that derivatives and shorts play

Correct Answer: A

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Question 4

According to an OECD Centre for Opportunity and Equality (COPE) 2015 report, the average income of the richest 10% of the population is about:

A. 9 times that of the poorest 10% across the OECD

B. 14 times that of the poorest 10% across the OECD

C. 4 times that of the poorest 10% across the OECD

Correct Answer: A

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Question 5

A challenge to ESG integration for investment managers is the:

A. Narrow range of possible ESG data.

B. High correlation among third-party ESG ratings.

C. Inherently subjective nature of ESG analysis.

Correct Answer: C

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Question 6

What did Semite, Bhagwat, and Yankee's 2018 study conclude about board diversity and governance?

A. Greater homogeneity among directors leads to higher profitability.

B. Diversity in the board of directors reduces stock return volatility.

C. Diverse boards invest less in research and development.

Correct Answer: B

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Question 7

The rules that can be used to construct ESG exchange-traded funds (ETFs) include:

A. Tilting weightings based on ESG scores, only

B. Thematic investing, only

C. Both thematic investing and tilting weightings based on ESG scores

Correct Answer: C

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Question 8

According to the United Nations Principles for Responsible Investment (PRI), modern fiduciary duty would require investment managers to:

A. Support the stability and resilience of the financial system

B. Incorporate their own sustainability preferences into decision-making

C. Encourage high standards of ESG performance across the entire investment universe

Correct Answer: C

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Question 9

According to the Taskforce on Nature-Related Financial Disclosures (TNFD), which of the following drivers of nature change can directly translate into a positive impact on circular economy principles?

A. Climate change

B. Resource use

C. Pollution

Correct Answer: B

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CFA Institute Certificate in ESG Investing (ESG-Investing) Free Practice Test