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

Double materialitymeans a company must reportnot only how ESG risks impact financial performancebut alsohow the company’s activities impact society and the environment.

For example, under theEU Corporate Sustainability Reporting Directive (CSRD), companies must disclose:

Financial materiality(how ESG issues affect financial performance)

Impact materiality(how the company affects the environment and society)

Income inequality oftenreduces access to education, particularly for lower-income individuals who may struggle withtuition costs, lack of resources, and unequal schooling quality. This, in turn, canreduce upward social mobilityand widen wealth disparities over time.

Option C (tax optimization strategies) is a separate corporate governance issue and not adirectresult of income inequality. Option A (increase in social mobility) is incorrect ashigher inequality often reduces social mobility.

Pre-emption rightsgiveexisting shareholders priority when new shares are issued, preventingdilutionof their ownership stakes. This isa key protection for minority shareholders.

Dual-class shares (A) and double voting rights (C) favor controlling shareholders, reducing minority shareholder influence.

ESGscorecardsare widely used insovereign debt analysisto assess the sustainability risks of different countries. These scorecards aggregate multiple ESG indicators, such as political stability, regulatory quality, and carbon emissions, to generate a comprehensive ESG assessment for sovereign bonds.

While ESG ratings from third-party providers are often used in corporate finance (C), sovereign ESG assessments requirecustomized frameworksthat consider unique national-level risks such as social inequality and environmental policies.

Exclusionary ESG indices oftenomit entire sectors(e.g., fossil fuels, tobacco, weapons), which leads tohigher tracking errorrelative to traditional benchmarks like theS&P 500 or MSCI World Index.

Tracking error measures how much a portfolio’s returnsdeviatefrom its benchmark. Because ESG indices havesector biases, they tend to experiencegreater performance divergencethan conventional index funds.

Offshoringis directly linked toglobalization, as it involves shifting production or services tolower-cost countries. This trend has been driven bytechnological advancements, supply chain optimization, and cost reductions.

Urbanization (A) relates more tocity expansion, and changes to work and education (C) focus onjob flexibility and learning trends, rather than corporate relocation strategies.

Tipping elementsareEarth system components (e.g., ice sheets, rainforests, ocean currents) that can undergo irreversible changeswhen pushed past a critical threshold.

Planetary boundaries (B)set safe limits for human environmental impacts.

Environmental externalities (C)are economic costs imposed on society.

Carbon footprinting allows emissions data to be aggregated across geographies, supply chains, and business units,providing a holistic view of carbon impact.

It is typically backward-looking rather than forward-looking (A).

There are multiple carbon accounting methodologies (B), but they are not always standardized.