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CFA Sustainable-Investing Exam
Sustainable Investing Certificate(CFA-SIC) (Page 17 )

Updated On: 9-Feb-2026
Page 17 of 162
PDF with 802 Questions

Jurisdictions are most likely to impose extraterritorial laws in relation to:

  1. bribery and corruption
  2. paying suppliers appropriately and promptly.
  3. upholding high standards in health and safety

Answer(s): A

Explanation:

Jurisdictions are most likely to impose extraterritorial laws in relation to bribery and corruption.

Extraterritorial laws are those that have legal force beyond the borders of the issuing country, and they are often applied to combat global issues such as corruption.

Global Standards: Countries impose extraterritorial laws to ensure that their nationals and corporations comply with anti-bribery and anti-corruption standards, regardless of where they operate. This helps maintain ethical business practices internationally.

Regulatory Frameworks: Prominent examples of extraterritorial laws include the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act, which apply to activities conducted abroad by U.S. and UK entities, respectively. These laws aim to prevent and penalize bribery and corruption on a global scale.

Enforcement and Compliance: By implementing extraterritorial anti-corruption laws, jurisdictions can enforce compliance and hold companies accountable for corrupt practices in foreign countries, promoting transparency and integrity in international business.


Reference:

MSCI ESG Ratings Methodology (2022) - Discusses the role of extraterritorial laws in combating bribery and corruption and their impact on global business practices.

ESG-Ratings-Methodology-Exec-Summary (2022) - Highlights the significance of extraterritorial regulations in maintaining ethical standards and preventing corruption in international operations.



According to the framework of the Task Force on Climate-Related Financial Disclosures (TCFD): the formula for carbon intensity at the portfolio level weighs emissions based upon an issuer's:

  1. profit.
  2. revenue.
  3. net assets

Answer(s): B

Explanation:

The Task Force on Climate-Related Financial Disclosures (TCFD) framework uses the weighted average carbon intensity metric, which calculates carbon intensity based on an issuer's revenue. The formula is as follows: \text{Weighted Average Carbon Intensity} = \sum \left( \frac{\text{Current Value of Investment}}{\text{Current Portfolio Value}} \times \frac{\text{Issuer's Scope 1 and 2

Emissions}}{\text{Issuer's Revenue in US$m}} \right) This approach helps investors understand their portfolio's exposure to carbon-intensive companies based on financial performance metrics such as revenue.



According to a study of the Hermes UK Focus Fund: which of the following engagement objectives was most likely to be achieved through shareholder activism?

  1. Renumeration policy changes
  2. Improvements to investor relations
  3. Restructuring and financial policies

Answer(s): C

Explanation:

According to a study of the Hermes UK Focus Fund, engagement objectives most likely to be achieved through shareholder activism include restructuring and financial policies. The study found that the success rate for achieving objectives related to restructuring and financial policies was higher compared to other objectives such as remuneration policy changes and improvements to investor relations. This indicates that shareholder activism is more effective in driving changes in corporate structure and financial strategies.



Which of the following climate risks are systemic risks to the financial system?

  1. Policy and legal risks
  2. Technology and stability risks
  3. Physical and transitional risks

Answer(s): C

Explanation:

Systemic risks to the financial system from climate change include both physical and transitional risks. Physical risks refer to the direct impact of climate change, such as extreme weather events and gradual changes in climate. Transitional risks are associated with the shift to a lower-carboneconomy, including policy changes, technological advancements, and changing consumer preferences. These risks are interconnected and can significantly affect economic and financial stability.



Which of the following types of ESG bonds provide financing to issuers who commit to future improvements in sustainability outcomes?

  1. Green bonds
  2. Sustainability bonds
  3. Sustainability-linked bonds

Answer(s): C

Explanation:

Sustainability-linked bonds (SLBs) provide financing to issuers who commit to specific improvements in sustainability outcomes. Unlike green or sustainability bonds that fund specific projects, SLBs are tied to the issuer's overall sustainability performance and commitments to achieving predefined sustainability targets. These bonds incentivize issuers to enhance their ESG performance across various aspects, making them a flexible tool for promoting broader sustainability goals.

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