CFA Institute Updated Sustainable-Investing Exam Questions and Answers by jett

According to CFA guidance, both thesizeof a company (larger firms typically have more comprehensive reporting capabilities) and itslocation(jurisdictions with stricter disclosure regulations, such as in the EU, drive higher-quality ESG reports) significantly influence the scope, depth, and comparability of ESG disclosures.

Supportingfreedom of association(option A) reflects acore labor rights issueand is a fundamentalinternal social factor—it directly involves how the company treats and empowers its own workforce. In contrast, avoiding conflict-zone sourcing (B) is anexternal supply chain risk(environmental and social), and product fire-resistance (C) is aproduct safety measurerather than a direct internal social practice.

The GHG Protocol Standards defineScope 3 emissionsasindirect emissions from value chain activities, which include business travel andemployee commuting. Scope 1 coversdirect emissionsfrom owned sources, while Scope 2 is forindirect emissions from purchased electricity, heating, and cooling.

AnESG contingent assetis a potential benefit that emerges from a company’s ESG-related activities. In the health care sector, using data analytics to develop affordable health solutions for governments can be seen asunlocking new revenue opportunitiesor strengthening market position—making it an ESG contingent asset. In contrast, acting as a data custodian (option A) is more of aresponsibility(risk) than an asset, and lagging recruiting strategies (option B) represent ESG weaknesses.