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ESG-Investing Exam Introduction, ESG-Investing Test Review

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CFA Institute ESG-Investing Exam Syllabus Topics:

Topic
Details

Topic 1

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 2

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 3

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 4

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 5

Engagement and Stewardship: This section explores the foundations of investor engagement and stewardship, emphasizing their importance and practical application.

>> ESG-Investing Exam Introduction <<

CFA Institute ESG-Investing PDF Questions [2025] - Make Your Aspirations Profitable

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CFA Institute Certificate in ESG Investing Sample Questions (Q323-Q328):

NEW QUESTION # 323
A social media company faces criticism from a consumer action group for selling user data to advertising clients. A potential lawsuit will have the greatest direct effect on the company's:

A. creditors turnover ratio.
B. return on equity ratio.
C. liabilities-to-assets ratio.

Answer: C

Explanation:
Direct Effect of a Potential Lawsuit:
When a company faces potential legal action, the primary financial impact is often reflected in its liabilities, as the company may need to account for potential legal costs, settlements, or fines.
1. Liabilities-to-Assets Ratio: A potential lawsuit will have the greatest direct effect on the company's liabilities-to-assets ratio. This ratio measures the proportion of a company's assets that are financed by liabilities. When a company anticipates or incurs legal liabilities, its total liabilities increase, which directly impacts this ratio.
2. Return on Equity Ratio (Option A): The return on equity (ROE) ratio measures a company's profitability relative to shareholders' equity. While a lawsuit can indirectly affect ROE through legal expenses and potential losses, the most immediate impact is on liabilities rather than profitability.
3. Creditors Turnover Ratio (Option B): The creditors turnover ratio measures how quickly a company pays off its creditors. This ratio is less directly impacted by a lawsuit compared to the liabilities-to-assets ratio, which reflects the increase in liabilities due to potential legal obligations.
Reference from CFA ESG Investing:
Financial Impact of Legal Issues: The CFA Institute discusses how legal risks and potential liabilities can affect a company's financial statements, particularly by increasing liabilities, which in turn affects ratios that measure financial leverage and stability.

NEW QUESTION # 324
Compared to equities, bonds most likely:

A. are inferior in the capital structure.
B. have a wider range of issuers.
C. have an infinite maturity.

Answer: A

Explanation:
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)

NEW QUESTION # 325
A mature company has launched a product that reduces customers' electricity usage. This should be incorporated into the company's discounted cash flow (DCF) analysis by increasing its:

A. cost of capital.
B. required rate of return.
C. revenue projections.

Answer: C

Explanation:
The product's ability to reduce electricity usage can lead to increased sales and market share, which would improve revenue projections in the company's DCF analysis. (ESGTextBook[PallasCatFin], Chapter 7, Page
362)

NEW QUESTION # 326
Which of the following is best referred to as secondary ESG data?

A. Survey results on employee satisfaction provided by Glassdoor.
B. A transcript of an interview with a company's chief financial officer (CFO).
C. Bloomberg ESG Disclosure Score.

Answer: A

Explanation:
Secondary ESG data refers to information collected from sources other than official company disclosures, often from external third-party sources.
Primary ESG data: Directly provided by companies in sustainability reports, regulatory filings, or financial statements.
Secondary ESG data: Derived from third-party sources such as news articles, employee reviews, external surveys, or social media analysis.
Why is B correct?
Glassdoor employee satisfaction surveys provide insights into workplace culture, labor rights, and social issues-all key ESG aspects.
This is not direct company disclosure but rather third-party, externally collected data.
Why not A or C?
A (Bloomberg ESG Score) is primary data because Bloomberg compiles ESG disclosures directly from companies.
C (Interview transcript with CFO) is primary data because it comes directly from company leadership.
References:
PRI: Guide to ESG Data and Ratings Providers
Bloomberg ESG Data Whitepaper

NEW QUESTION # 327
Which of the following best describes a mature ESG regulatory framework? A government putting forward:

A. ESG implementation and reporting guidelines.
B. voluntary ESG corporate disclosures.
C. a "comply or explain" ESG regulation.

Answer: C

Explanation:
A mature ESG regulatory framework often includes a "comply or explain" regulation, which requires companies to either comply with ESG standards or explain why they are not following them, promoting greater transparency and accountability. (ESGTextBook[PallasCatFin], Chapter 9, Page 522)

NEW QUESTION # 328
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