ESG ESG Climate Change & Carbon Management 3

Question 1

What is a 'low-carbon transition risk' for a utility company with coal-fired power plants?

Accepted Answer

Financial risk from carbon pricing, early asset retirement, and stranded coal assets as the grid decarbonizes

Answer

Utilities face transition risk when carbon regulations, renewable competition, and changing investor expectations accelerate coal plant retirement before the end of their useful lives, creating stranded asset losses.

Question 2

What does the concept of 'just transition' add to corporate climate strategy?

Accepted Answer

Ensuring that the move to a low-carbon economy protects workers and communities dependent on high-carbon industries

Answer

A just transition addresses the social dimension of decarbonization—ensuring workers in fossil fuel industries, vulnerable communities, and developing regions share in transition benefits and are protected from its costs.

Question 3

What is 'avoided emissions' reporting and why is it controversial?

Accepted Answer

Claiming credit for emissions customers avoid by using a company's lower-carbon products, without reducing the company's own footprint

Answer

Avoided emissions (Scope 4) claims let companies assert positive climate impact via green products, but without standardization they risk misuse as a distraction from actual Scope 1-3 reductions.

Question 4

What is 'carbon border adjustment mechanism' (CBAM) and its ESG significance?

Accepted Answer

A trade policy tool (e.g., EU's CBAM) that imposes a carbon cost on imports from countries with weaker carbon pricing, affecting supply chain ESG strategy

Answer

The EU's CBAM levies carbon costs on imports of steel, cement, aluminum, and other products from non-EU countries, incentivizing global supply chain decarbonization and affecting trade-exposed sectors.

Question 5

What is 'absolute contraction' in the context of corporate emissions targets?

Accepted Answer

Reducing the total volume of greenhouse gas emissions by a fixed percentage regardless of business growth

Answer

Absolute contraction targets commit companies to reducing total emission volumes (e.g., 50% by 2030 vs. 2019), not merely improving emissions intensity per unit of output—which can mask growing absolute emissions.

(ESG) Certified Environmental, Social, and Governance Consultant Practice Test

(ESG) Certified Environmental, Social, and Governance Consultant Practice Test

ESG ESG Climate Change & Carbon Management 3