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Sustainable Investing Certificate(CFA-SIC) Questions 366–370 (page: 75)

Updated On: 10-Feb-2026

Bonds that fund projects that provide access to essential services, infrastructure, and social programs to underserved people and communities are best described as:

  1. green bonds.
  2. social bonds.
  3. transition bonds.

Answer(s): B

Explanation:

Social bonds are designed to finance projects that provide social benefits, such as affordable housing or access to healthcare, particularly in underserved communities. (ESGTextBook[PallasCatFin], Chapter 8, Page 422)



A small company based in Sweden operates in an industry that has good sustainability ratings. The company has a low ESG rating that an analyst believes to be biased. The bias would most likely result from the company's:

  1. industry.
  2. company size.
  3. geographical base of operations.

Answer(s): B

Explanation:

Smaller companies often receive lower ESG ratings due to their limited resources for ESG reporting and engagement, even if their actual practices are sustainable. (ESGTextBook[PallasCatFin], Chapter 7, Page 364)



For investments in wastewater treatment plants, a significant obstacle is:

  1. lack of demand.
  2. high capital intensity.
  3. availability of unskilled labor.

Answer(s): B

Explanation:

Wastewater treatment plants are capital-intensive projects, requiring significant investment upfront for infrastructure and technology, which can be a major barrier to entry. (ESGTextBook[PallasCatFin], Chapter 3, Page 153)



ESG integration should be considered as part of:

  1. systematic strategies only.
  2. discretionary strategies only.
  3. both systematic strategies and discretionary strategies.

Answer(s): C

Explanation:

ESG integration can be applied to both systematic and discretionary strategies, as it enhances traditional investment processes by incorporating ESG factors to improve risk management and long- term returns. (ESGTextBook[PallasCatFin], Chapter 7, Page 319)



Which of the following is most likely associated with positive screening?

  1. Green investing
  2. Thematic investing
  3. Best-in-class investing

Answer(s): C

Explanation:

Positive screening, or best-in-class investing, involves selecting companies that rank highly on ESG criteria relative to their peers within the same sector, rather than excluding entire sectors.
(ESGTextBook[PallasCatFin], Chapter 7, Page 325)



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