Sustainable-Investing Exam Dumps - Sustainable Investing Certificate (CFA-SIC) Exam

Active ownership refers to investors using their rights (voting, engagement, resolutions) to influence corporate behavior.

Why C (Proxy voting with an agenda) is correct:

Active owners use proxy voting to push ESG policies (e.g., climate risk disclosures, executive compensation reforms).

Example: BlackRock and Vanguard vote on shareholder resolutions to demand climate risk reporting.

Why not A or B?

A (Negative screening) is a passive strategy, not active ownership.

B (Disinvestment) is sometimes used but is not the main strategy of active ownership.

The OTM discusses the phenomenon of “competence greenwashing,” defining it as:

“Situations where organizations claim to have the capacity or structures to manage ESG issues, such as appointing sustainability officers or teams, but demonstrate no substantive policy, strategy, or outcomes to justify those claims.”

This description matches the scenario exactly—a firm setting up a sustainability office without implementing or reporting genuine ESG actions. The manual contrasts this with “greenhushing,” where companies downplay sustainability activities, and “scopewashing,” where emissions or ESG boundaries are misrepresented.

Thus, competence greenwashing refers to overstating institutional readiness or capability without execution, makingoption Cthe correct and verified answer.

📘Reference:2021-Final-Book.pdf, Chapter 1 — Introduction to ESG; Section on ESG Misrepresentation and Greenwashing Types.

The Inflation Reduction Act (IRA) of 2022 is the largest U.S. investment in climate action, focusing on clean energy incentives, tax credits, and subsidies.

Why A (Clean energies) is correct:

The IRA allocates $369 billion toward energy security and climate change initiatives, with the majority going to clean energy technologies such as:

Renewable energy (solar, wind, geothermal)

Energy storage systems

Hydrogen energy and biofuels

Why not B or C?

B (Clean transport) receives significant investment (EV tax credits, charging infrastructure) but is not the largest category.

C (Clean electricity) benefits indirectly, but the IRA prioritizes energy sources rather than distribution.

The OTM defines engagement as a cornerstone of active ownership, describing it as:

“A structured process by which investorscommunicate expectations to investee companieson ESG practices and long-term value creation.”

It further notes:

“Engagement helps companiesbetter understand investor expectations and prioritieswhile giving investors insight into corporate governance and risk management practices.”

This explanation precisely reflectsoption A. Conversely, the manual emphasizes that engagement is least effective when a company shows resistance or lacks openness (contradicting option C) and that successful engagement islong-term and relationship-driven, not reactive to short-term price movements (contradicting option B).

Thus, engagement’s primary value lies in facilitating two-way understanding between investors and companies, confirming optionAas correct.

📘Reference:2021-Final-Book.pdf, Chapter 6 — Engagement and Stewardship (Purpose and Benefits of Engagement section).

In theGovernance Factorschapter, the Official Training Manual (OTM) explicitly explains:

“Pre-emption rightsprotect existing shareholders by giving them the right to maintain their proportional ownership when new shares are issued.”

This ensures minority shareholders can avoid dilution of their holdings when the company raises capital. The OTM further notes that such rights are a “cornerstone of good governancein most developed markets, ensuring equitable treatment of all shareholders.”

In contrast,dual-class share structuresconcentrate power among a select group of owners, whilegeneral mandate resolutionsallow management broad discretion to issue new shares without pre-emption—both increasing governance risk for minority shareholders.

Hence,option Cis the correct and verified choice, as it is directly supported by the governance standards section.

📘Reference:2021-Final-Book.pdf, Chapter 5 — Governance Factors (Shareholder Rights and Minority Shareholder Protection section).

The manual explains the trade-off explicitly: “Reducing (or outright divesting) portfolio concentration to highly carbon-intensive investments in the energy sector will decrease exposure to long-term transition risk. However this decision may in turn reduce the portfolio income yieldas the energy sector is generally associated with an above market cashflow profile and dividend income stream….”

In the ESG market and policy drivers section, the OTM cites McKinsey & Company’s research, which assessed sectoral vulnerability to government intervention in sustainability transitions. It reports:

“Thepharmaceutical industry exhibits the lowest proportion of profits at riskfrom state intervention due to its regulated nature and alignment with health and wellbeing outcomes.”

In contrast, “automotive” and “banking” sectors face higher exposure due to stricter emissions rules, consumer protection laws, and financial regulation. The extract further explains that industries with social or environmental externalities are more exposed to political pressure, while those already delivering positive social outcomes (e.g., healthcare) face less intervention risk.

Therefore, the verified correct choice isoption C — Pharmaceuticals.

📘Reference:2021-Final-Book.pdf, Chapter 2 — The ESG Market (Market Drivers and Regulatory Trends section, citing McKinsey 2020 analysis).

TheESG Data and Analytical Toolssection of the Official Training Manual (OTM) discusses the evolving landscape of ESG assessment systems. It emphasizes:

“Completeness of coverage varies substantially across ESG tools, with differences in geographic scope, sector coverage, and data frequency. Some tools prioritize disclosure-based indicators, while others integrate estimated data or controversies.”

This statement captures the complexity and fragmentation of ESG analytics—no single platform offers comprehensive global coverage. The manual warns that “investors should evaluate tools based on coverage, data timeliness, and methodological transparency.”

Option A is incorrect since most ESG tools (e.g., MSCI ESG Manager, Refinitiv, Bloomberg ESG) aresubscription-based. Option C is also wrong because methodologies evolve continually to incorporate new standards such as SASB, TCFD, and SFDR.

Thus, the verified correct answer isB.

📘Reference:2021-Final-Book.pdf, Chapter 7 — ESG Data Quality and Integration (Analytical Tools and Methodologies section).