Sustainable Investing Certificate (CFA-SIC) Exam (Sustainable-Investing) Free Practice Test

Question 1

With respect to ESG integration, adjusting financial model inputs based on an evaluation of a company's ESG risk factors is an example of a:

A. hybrid approach

B. qualitative approach.

C. quantitative approach

Correct Answer: C

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Question 2

According to the Brunel Asset Management Accord, which of the following is least likely a cause for concern when evaluating an asset manager against an ESG investment mandate?

A. Loss of key personnel in the organization

B. Change in investment style

C. Short-term underperformance compared to benchmark

D. Failure to follow investment restrictions

Correct Answer: C

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Question 3

During the decommissioning phase of a company's mining project, the government tightens regulations on land restoration. Which of the following is most likely impacted?

A. taxes

B. provision

C. revenue

Correct Answer: B

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Question 4

Applying ESG screens to quantitative strategies directs the portfolio on:

A. an asset basis.

B. a top-down basis.

C. an individual issuer basis.

Correct Answer: B

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Question 5

Which of the following statements about stewardship codes is most accurate? Stewardship codes:

A. pursue social policy goals without making a clear link to value.

B. apply only to public equity investments.

C. have similar principles in most parts of the world.

Correct Answer: C

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Question 6

All else equal, a higher discount rate applied to a company's discounted cash flow (DCF) analysis will lead to:

A. a lower estimate of intrinsic value

B. the same estimate of intrinsic value

C. a higher estimate of intrinsic value

Correct Answer: A

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Question 7

Which of the following increases pressure on natural resources?

A. Economic recession

B. Population growth

C. Declining life expectancy

Correct Answer: B

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Question 8

Which of the following statements regarding ESG tools is most accurate?

A. ESG rating providers evolve their rating processes on an ongoing basis

B. Most ESG tools are free to the general public

C. The completeness of coverage is similar across ESG tools

Correct Answer: A

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Question 9

With regards to environmental analysis in fixed income investing, a country-level analysis is relevant to:

A. Both corporate bonds and government bonds

B. Corporate bonds only

C. Government bonds only

Correct Answer: A

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Question 10

From a company investment perspective, which of the following is the most significant social impact from climate change transition risks?

A. The need to restructure the business

B. A lack of skilled workers

C. Stakeholder opposition

Correct Answer: A

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Question 11

Which of the following statements about ESG integration in fixed income is most accurate?

A. Credit rating agencies attempt to capture the risk of contingent liabilities in their sovereign credit ratings

B. Equity investors typically place greater emphasis on ESG factors that affect balance sheet strength compared to fixed-income investors

C. Municipal bonds cannot be considered for ESG integration

Correct Answer: A

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Question 12

An analyst would most likely increase a company's discount rate if the company:

A. Faces significant environmental litigation

B. Is well-positioned to benefit from ESG opportunities

C. Has strong ESG practices

Correct Answer: A

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Question 13

Excluding investment in companies with a history of labor infractions is best categorized as a(n):

A. universal exclusion.

B. conduct-related exclusion

C. idiosyncratic exclusion.

Correct Answer: B

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Question 14

One of the goals of climate change mitigation is to:

A. protect energy and public infrastructure.

B. enable economic development to proceed in a sustainable manner.

C. increase resilience to expected climate events.

Correct Answer: B

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CFA Institute Sustainable Investing Certificate (CFA-SIC) (Sustainable-Investing) Free Practice Test