Practice Test Geeks(CEP) Certified Environmental, Social, and Governance (ESG) Planner Practice Test
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Sustainable Finance & ESG Investing Flashcards

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  1. According to ICMA's Social Bond Principles, what do social bonds finance?

    Answer: Projects designed to achieve positive social outcomes, particularly for target populations facing social challenges

    Social bonds finance projects that achieve positive social outcomes for target populations facing challenges, analogous to how green bonds fund environmental projects under ICMA principles.

  2. What is 'stranded asset' risk in the context of ESG and sustainable finance?

    Answer: Assets that may lose economic value before their expected useful life ends due to regulatory, technological, or market changes

    Stranded assets face unanticipated premature write-downs or devaluation due to environmental regulations, technological shifts, or changing preferences — a key risk for fossil fuel investments.

  3. Which metric is most commonly used to measure the carbon footprint of an investment portfolio?

    Answer: Weighted Average Carbon Intensity (WACI)

    Weighted Average Carbon Intensity (WACI) is the primary portfolio carbon metric recommended by TCFD, measuring tons of CO2 equivalent per million dollars of portfolio company revenue.

  4. What is the purpose of the Science Based Targets initiative (SBTi) for financial institutions?

    Answer: To help financial institutions set greenhouse gas emission reduction targets aligned with climate science and the Paris Agreement

    SBTi helps financial institutions set emission reduction targets for their lending and investment activities that align with the Paris Agreement's 1.5°C warming limit.

  5. What is 'double materiality' in ESG reporting and investing?

    Answer: The concept that companies must consider both how ESG issues affect their financial performance AND how their activities impact society and the environment

    Double materiality requires companies to assess both financial materiality (ESG risks to the company) and impact materiality (the company's own environmental and social impacts), a concept central to the EU's CSRD.

  6. Which of the following best describes 'transition finance'?

    Answer: Capital allocated to support high-carbon companies and industries in transitioning toward low-carbon, sustainable business models

    Transition finance provides capital to carbon-intensive industries to help them decarbonize and align with net-zero pathways, recognizing that hard-to-abate sectors need financial support to change.

  7. What is the Net Zero Asset Managers initiative (NZAM)?

    Answer: An international group of asset managers committed to supporting net zero greenhouse gas emissions by 2050 or sooner

    The Net Zero Asset Managers initiative is a voluntary group of international asset managers who commit to supporting net zero emissions by 2050 and setting interim science-based decarbonization targets.