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Sustainable Investing Certificate(CFA-SIC) Questions 381–385 (page: 78)

Updated On: 10-Feb-2026

The UK's Green Finance Strategy identifies the policy lever of greening finance as:

  1. strengthening the role of the UK financial sector in driving green finance.
  2. directing private sector financial flows to economic activities that support an environmentally sustainable and resilient growth.
  3. ensuring that the financial sector systematically considers environmental and climate factors in its lending and investment activities.

Answer(s): C

Explanation:

The UK's Green Finance Strategy emphasizes the importance of ensuring that environmental and climate factors are systematically considered in financial decisions, including lending and investment activities. (ESGTextBook[PallasCatFin], Chapter 3, Page 153)



If a company faces significant environmental regulations, investors would most likely decrease the company's:

  1. discount rate.
  2. terminal growth rate.
  3. cash flow projections.

Answer(s): C

Explanation:

Facing significant environmental regulations may reduce a company's cash flow projections due to the costs associated with compliance, fines, or the need to invest in cleaner technologies.
(ESGTextBook[PallasCatFin], Chapter 7, Page 325)



Which of the following countries have a joint audit requirement that all public interest entities must engage at least two independent accounting firms to perform an annual audit?

  1. France
  2. Germany
  3. United Kingdom

Answer(s): A

Explanation:

France has a joint audit requirement where public interest entities must engage at least two independent auditors, increasing transparency and reducing audit risk. (ESGTextBook[PallasCatFin], Chapter 5, Page 252)



When tailoring an ESG investment approach to client needs, the primary driver of ESG investment for general insurers is most likely:

  1. fiduciary duty.
  2. reputational risk.
  3. awareness of financial impacts of climate change.

Answer(s): C

Explanation:

For general insurers, the financial impacts of climate change, such as the increasing frequency of natural disasters and regulatory changes, are a primary driver of ESG investment approaches.

(ESGTextBook[PallasCatFin], Chapter 9, Page 494)



A mature company has launched a product that reduces customers' electricity usage. This should be incorporated into the company's discounted cash flow (DCF) analysis by increasing its:

  1. cost of capital.
  2. revenue projections.
  3. required rate of return.

Answer(s): B

Explanation:

The product's ability to reduce electricity usage can lead to increased sales and market share, which would improve revenue projections in the company's DCF analysis. (ESGTextBook[PallasCatFin], Chapter 7, Page 362)



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