Practice Test Geeks(CFM) Certified Fund Manager Practice Test
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ESG & Sustainable Investing Flashcards

7 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 ESG & Sustainable Investing flashcards as text

  1. Which of the following best describes the concept of 'double materiality' in ESG reporting?

    Answer: Considering both how ESG issues affect the company AND how the company affects society/environment

    Double materiality requires companies to disclose both the financial impact of ESG risks on the business (financial materiality) and the company's impact on the environment and society (impact materiality).

  2. Which statement about ESG integration vs. socially responsible investing (SRI) is most accurate?

    Answer: ESG integration incorporates ESG factors into financial analysis; SRI typically uses values-based exclusions

    ESG integration embeds ESG factors into standard financial analysis to improve risk-return outcomes, while SRI traditionally screens out sectors on ethical grounds.

  3. Under the Global Reporting Initiative (GRI) framework, materiality for ESG disclosures is primarily determined by:

    Answer: Topics significant to both the organization's impacts and stakeholder concerns

    GRI's stakeholder-centric materiality requires companies to identify and report on topics that reflect their significant economic, environmental, and social impacts as well as stakeholder priorities.

  4. A fund manager notices that two ESG rating agencies assign dramatically different scores to the same company. This divergence is BEST explained by:

    Answer: Different methodologies, data sources, and weighting of ESG pillars

    Research shows ESG rating correlations between major providers are as low as 0.3-0.6, largely due to differing scope definitions, indicator weights, and measurement approaches.

  5. Impact investing differs from traditional ESG integration in that impact investing requires:

    Answer: Measurable, intentional positive social or environmental outcomes in addition to financial returns

    Impact investing demands intentionality (deliberate targeting of positive outcomes) and measurability, going beyond ESG risk management to require demonstration of real-world positive change.

  6. Which Sustainable Development Goal (SDG) is most directly linked to climate action investment strategies?

    Answer: SDG 13 – Climate Action

    SDG 13 specifically addresses urgent action to combat climate change and its impacts, making it the primary SDG target for climate-focused investment strategies.

  7. When evaluating the 'G' (governance) component of ESG, a fund manager would most likely scrutinize:

    Answer: Board composition, executive compensation structure, and shareholder rights

    Governance analysis focuses on how a company is directed and controlled, including board independence, executive pay alignment, audit quality, and protection of minority shareholder rights.