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Latest Sustainable Investing Exam Practice Questions

The practice questions for Sustainable Investing exam was last updated on 2025-12-15 .

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Question#1

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

A. Only asset owners can embed ESG into strategic asset allocation

B. The EU's taxonomy for sustainable activities is an example of public policy

C. Shareholder engagement refers to company investor interactions that occur only during the annual general meeting

Explanation:
TheEU’s taxonomy for sustainable activitiesis a prominent example of apublic policy framework―it sets criteria and definitions for sustainable economic activities, guiding investors, companies, and governments in aligning with climate and environmental objectives.
Option A is incorrect becauseboth asset owners and managerscan integrate ESG factors into strategic asset allocation.
Option C is incorrect becauseshareholder engagementextends far beyond the annual general meeting, encompassing ongoing dialogue and stewardship activities.

Question#2

Considering the climate-related impacts on a company's financials and the impacts of a company on the climate best describes:

A. double materiality.

B. financial materiality.

C. dynamic materiality.

Explanation:
Double materiality refers to the concept where both the impact of climate change on a company’s financials and the company’s impact on the environment are considered important for decision-making. (ESGTextBook[PallasCatFin], Chapter 7, Page 325)

Question#3

Which of the following is a challenge in ESG integration?

A. ESG disclosures that lack comparability across companies

B. Excessive company-level ESG reporting that overwhelms investors

C. Standardized disclosures in audited financial statements that hinder differentiated analysis

Explanation:
One of the key challenges in ESG integration is the lack of comparability in ESG disclosures across companies. Without standardized reporting frameworks, it can be difficult for investors to assess and compare ESG performance across different firms, making it harder to integrate ESG into the investment process. ESG
Reference: Chapter 7, Page 368 - ESG Analysis, Valuation & Integration in the ESG textbook.

Question#4

Alignment of an investment manager’s performance against a long-term ESG investor’s objectives is best achieved by which of the following?

A. Benchmarking against the market

B. Engaging in a monitoring dialogue frequently

C. Early reporting of deviations from the expected investment process or style

Explanation:
Alignment of an investment manager’s performance with long-term ESG objectives is best achieved through early reporting of deviations from the expected investment process or style. This allows the investor to address any discrepancies quickly and ensure the portfolio remains aligned with their ESG goals. ESG
Reference: Chapter 9, Page 510 - Investment Mandates, Portfolio Analytics & Client Reporting in the ESG textbook.

Question#5

Exclusionary screening:

A. reduces portfolio tracking error and active share.

B. is the oldest and simplest approach within responsible investment.

C. employs a given ESG rating methodology to identify companies with better ESG performance relative to its industry peers.

Explanation:
Exclusionary screening, also known as negative screening, is a responsible investment strategy where certain companies, sectors, or practices are excluded from an investment portfolio based on specific ethical guidelines or criteria. It is widely regarded as the oldest and simplest approach within the realm of responsible and sustainable investing.

Exam Code: Sustainable InvestingQ & A: 802 Q&AsUpdated: 2025-12-15

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