EMT Practice Test

1. Question Content...

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Question1: Formal corporate governance codes are most likely to

Question2: To be aligned with the EU Taxonomy for Sustainable Activities, economic activities should make a substantive contribution to:

Question3: Company reporting and transparency are led by the:

Question4: Which of the following is most likely the easiest to demonstrate in attributing returns to ESG-related actions?

Question5: Regarding ESG issues, which of the following sets the tone for the investment value chain?

Question6: A hurdle to adopting ESG investing is most likely a:

Question7: 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:

Question8: An emissions trading system (ETS):

Question9: Which of the following most likely outlines an investment firm's ESG integration approach?

Question10: When searching for an asset manager with an ESG approach, in the request for proposal (RFP) an institutional asset owner would most appropriately ask:

Question11: Which of the following scenarios best illustrates the concept of a 'just' transition?

Question12: A drawback of ESG index-based investment strategies is that they:

Question13: Which of the following statements about ESG integration in credit ratings is most accurate?

Question14: Which of the following is one of the five main drivers of nature change described by the Taskforce on Nature-related Financial Disclosures (TNFD)?

Question15: Which of the following is an example of quantitative ESG analysis?

Question16: A situation in which a company making good strides toward more sustainable practices but is unwilling to reveal as much for fear of retribution or misinterpretation is best described as:

Question17: Compared to developed markets, ESG investing in emerging markets is most likely characterized by:

Question18: When employing an ESG integration strategy, asset managers are most likely to:

Question19: Investors in a natural gas power plant identified a material risk that clients will switch to lower greenhouse gas (GHG) energy sources in the future. This risk is best incorporated in the financial modeling of:

Question20: In the investment management industry, triple bottom line accounting theory:

Question21: An investor requires a social return and will tolerate a sub-market financial return. This best characterizes:

Question22: Which of the following sectors receives the highest investment from the Inflation Reduction Act of 2022 (IRA)?

Question23: According to market reviews conducted by the Global Sustainable Investment Alliance at the start of 2022, which of the following regions has the largest proportion of sustainable investing relative to total managed assets?

Question24: Which of the following is most likely an example of a negative externality?

Question25: Which of the following social factors most likely impacts a company's internal stakeholders?

Question26: Which of the following encourages institutional investors to work together on human rights and social issues?

Question27: According to Greenhouse Gas (GHG) Protocol Standards, the emissions associated with suppliers and consumers are classified as:

Question28: A common characteristic of the EU Paris-Aligned Benchmarks and the EU Climate Transition Benchmarks is that they both:

Question29: A credit investor uses fundamental credit measures and sector-specific ESG indicators to evaluate a beverage company. Water is a key input for the ingredients used in the company's products. For the investor, the company's efforts to ensure a steady supply of water would most likely be considered:

Question30: By 2030, the European Strategy for Plastics in a Circular Economy will require:

Question31: When integrating ESG analysis into the investment process, deriving correlations on how ESG factors might impact financial performance over time is an example of a:

Question32: Based on the Sustainability Accounting Standards Board's (SASB) materiality map, which of the following is a material ESG risk for healthcare companies?

Question33: Uploading a portfolio to an external ESG data provider's online platform

Question34: When accounting for a critical weakness in a company's environmental management process, an analyst using a discounted cash flow (DCF) valuation model should:

Question35: The process of ESG portfolio optimization requires:

Question36: Formal corporate governance codes are most likely to:

Question37: The United Nations Framework Convention on Climate Change (UNFCCC) aims to:

Question38: Which of the following would credit rating agencies (CRAs) most likely focus on in order to test how well an issuer's management uses the assets under its control to generate sales and profit?

Question39: Tools that evaluate companies, countries, and bonds based on their exposure or involvement-specific factors, sectors, products, or services are referred to as:

Question40: Which of the following actions is best categorized as an escalation of engagement?

Question41: Which of the following is an example of indirectly sourced primary ESG data?

Question42: Impact investment funds most likely align their portfolios with:

Question43: Compared with younger people, older people are more likely to have:

Question44: Scopewashing is best described as a situation in which a company's management:

Question45: Which of the following statements about good corporate governance is most accurate?

Question46: Regime switching strategic asset allocation models are:

Question47: The "Protect, Respect, and Remedy" framework is the foundation for the:

Question48: Which of the following statements about corporate governance is most accurate?

Question49: Companies subject to the EU Taxonomy are required to:

Question50: Which of the following statements about quantitative ESG analysis is most accurate?

Question51: As a result of an aging population, which of the following sectors is most likely to experience slower growth?

Question52: An ESG-contingent asset for a healthcare company may result from:

Question53: With respect to ESG reporting, company management has:

Question54: With respect to ESG reporting by investment managers, the 2020 version of the UK Stewardship Code calls for more reporting on the:

Question55: In Australia, a managing director of a company is the:

Question56: With respect to the current state of ESG disclosure globally, issuer reporting frameworks for ESG information are:

Question57: According to the Sustainability Accounting Standards Board (SASB), GHG emission is material for more than 50% of the industries in which sector?

Question58: Scores used to construct ESG index benchmarks can be

Question59: According to the Global Sustainable Investment Alliance (GSIA), as of 2020, the largest sustainable investment strategy globally is:

Question60: Which of the following tests defines the internal theoretical cost on carbon emissions to guide a company's decision-making process in energy-intensive sectors?

Question61: Which of the following initiatives is most closely associated with the increased prevalence of antimicrobial resistance?

Question62: Stock exchanges can contribute to the growth of ESG market by:

Question63: Investment in fossil fuels is permitted under:

Question64: EU regulators manage the independence of audits for public companies by:

Question65: A portfolio manager may need to adopt a more appropriate ESG benchmark rather than a broad market benchmark if the degree of exclusions results in:

Question66: Research on ESG integration in strategic asset allocation has tended to focus most on:

Question67: Corporate disclosures in line with the recommendations of the Corporate Sustainability Reporting Directive (CSRD) are a regulatory requirement for companies in:

Question68: Which of the following investor types most likely prefers exclusions as an ESG approach?

Question69: Avoiding long-term transition risk can most likely be achieved by:

Question70: When undertaking an ESG assessment of a private equity deal ESG screening and due diligence will most likely take place during:

Question71: A company's emission reduction commitments are best evaluated using:

Question72: Scorecards for ESG analysis are most likely:

Question73: An investment in a fund developing low-cost community housing is best categorized as:

Question74: Which of the following is most likely a characteristic of good corporate governance?

Question75: ESG integration is most likely enforced by regulating:

Question76: Which of the following statements about the Green Claims Directive (GCD) is most accurate? The GCD:

Question77: Which of the following statements regarding ESG tools is most accurate?

Question78: With regard to screening, exclusions that are not supported by global consensus are best described as:

Question79: The launch of the European Green Deal in 2020 is intended to:

Question80: Which of the following challenges is most likely related to the attribution of returns to ESG factors?

Question81: Which of the following projects are most likely to be financed in the green bond market?

Question82: 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?

Question83: For developed markets, an increase in inequality between the richest and the poorest population of a country most likely results in:

Question84: Which of the following is responsible for ensuring the composition of a company's board is balanced and effective?

Question85: The potential impacts of climate risk on asset allocation strategies are:

Question86: A fund focused on avoiding the worst ESG performers relative to industry peers is most likely engaged in:

Question87: According to Mercer Consulting, which of the following asset classes has the highest availability of sustainability-themed strategies compared to its asset-class universe?

Question88: A bond issued to fund projects that provide a clear benefit to the environment best describes a:

Question89: Which of the following is a form of individual engagement?

Question90: According to the UK Investor Forum which of the following is a key success factor for effective engagement?

Question91: Excluding tobacco from the investment universe is an example of which of the following ESG screening approaches?

Question92: Which of the following is most likely a reason for concern regarding the quality of a company's ESG disclosures?

Question93: In which of the following circumstances is Free, Prior, and Informed Consent (FPIC) most applicable?

Question94: According to the Stockholm Resilience Centre, how many of the nine planetary boundaries have already been crossed as a result of human activity?

Question95: A globally aging population has resulted in the ratio between the active and inactive parts of the workforce to:

Question96: Primary ESG data can be sourced:

Question97: Which of the following statements regarding the impact of social issues on potential investment opportunities is most accurate?

Question98: Which of the following are social megatrends?

Question99: Which of the following sectors has the highest percentage of corporate profits at risk from state intervention?

Question100: The Integrated Biodiversity Assessment Tool (IBAT) is best described as an interactive mapping tool allowing decision makers to:

Question101: According to most of the world's corporate governance codes, the expectation is that remuneration committees are populated by:

Question102: ESG factors that relate to future growth opportunities are most relevant to:

Question103: Compared to public companies, creating private company scorecards is challenging as:

Question104: According to the Brunel Asset Management Accord, which of the following is least likely a cause for concern when conducting an annual performance evaluation of a manager against a long-term ESG investment mandate?

Question105: Which of the following types of ESG bonds provide financing to issuers who commit to future improvements in sustainability outcomes?

Question106: Which of the following refers to a network where investors engage with the world's largest corporate emitters of greenhouse emissions?

Question107: For consistency purposes, the International Sustainability Standards Board (ISSB) requires sustainability disclosures to be:

Question108: ESG philosophy can be embedded within an investment mandate to determine:

Question109: Exclusion-based screening approaches:

Question110: A challenge for the positive alignment ESG approach is the:

Question111: When incorporating ESG factors into valuation inputs, which of the following would most likely require the lowest discount rate?

Question112: The concept of double-agency in society refers to the conflict of interest between

Question113: Which of the following is best described as a risk management framework for assessing environmental and social risk in project finance?

Question114: Increased investment crowding into more ESG-friendly sectors is most likely to increase:

Question115: To produce a rating, an ESG rating provider will most likely apply a weighting system to

Question116: The size of the discount rate adjustment to account for ESG risks most likely depends on:

Question117: Which of the following transition risks is most likely associated with increased environmental standards?

Question118: The investor initiative FAIRR focuses on screening out companies

Question119: An investor positively screening for bonds that commit to specific improvements in ESG outcomes is most likely to tilt her portfolio towards:

Question120: Which of the following was established by the United Nations Environment Programme Finance Initiative (UNEP FI)?

Question121: The debate around regulating the social media industry is based on risks associated with:

Question122: Single-tier boards dominated by executive directors are commonly seen in:

Question123: According to the International Corporate Governance Network (ICGN) Model Mandate:

Question124: Which of the following would most likely see its estimate of intrinsic value increased by analysts?

Question125: A company's exposure to social trends and factors:

Question126: Which of the following statements about ESG integration in fixed income is most accurate?

Question127: The offering of indexes and passive funds with ESG integration by asset managers

Question128: Which of the following ESG integration techniques is an example of policy engagement? An investor:

Question129: The mechanism of dual-class shares most likely favors:

Question130: The Sustamalytics database is most likely used for:

Question131: Which of the following strategies is most consistent with an investment mandate focusing on risk management?

Question132: Which of the following most likely indicates strong corporate governance? A company board with:

Question133: A discount retailer facing high employee turnover due to poor working conditions will most likely experience:

Question134: According to the Active Ownership study, which of the following statements regarding ESG engagement is most accurate?

Question135: Which of the following technologies is most likely to be viewed by investors as a strategic solution to the decarbonization of high-temperature processes?

Question136: Which of the following is part of the ASEAN Taxonomy for an economic activity to be considered environmentally sustainable?

Question137: Which of the following actions seeks to avoid exploitation of minority shareholders?

Question138: As part of executive pay structures, annual key performance indicators are most likely to be a determinant of:

Question139: The triple bottom line accounting theory considers people, profit, and:

Question140: The rules that can be used to construct ESG exchange-traded funds (ETFs) include:

Question141: Carbon intensity is calculated as Scope 1 plus Scope 2 emissions divided by:

Question142: Competition and corruption within the general business environment is most likely a material governance factor for investments in:

Question143: To address conflicts of interest and maintain the independence of audit firms, EU law requires firms to abide by:

Question144: Best-in-class funds most likely:

Question145: What is the underlying principle of the corporate governance code in most markets?

Question146: The Sustainability Accounting Standards Board's (SASB) Materiality Map:

Question147: If a company faces significant environmental regulations, investors would most likely decrease the company's:

Question148: Concerns about the capital structure and financial viability of an investee company are most likely reflected in an active investor's voting decisions in relation to:

Question149: Pension funds are most likely classified as:

Question150: Assessing the alignment of local labor laws with International Labour Organization (ILO) principles is an example of social analysis at the:

Question151: 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?

Question152: ESG integration should be considered as part of:

Question153: To fall in scope of mandatory compliance with the EU's Corporate Sustainability Reporting Directive (CSRD), companies would need to meet which of the following conditions?
Condition 1EUR40 million in net turnover
Condition 2EUR20 million in assets
Condition 3250 or more employees

Question154: Leased assets of a company contribute to:

Question155: In the transition to a low-carbon economy, a coal-powered utility without a mitigation strategy will most likely pose the highest risk to its:

Question156: Which of the following is most likely a direct impact of the tighter regulation of pollution on a company's financial performance?

Question157: For engagement strategies to deliver meaningful results in a cost-effective and time-effective manner, investors must:

Question158: Which of the following best describes a fund manager's actions regarding specific assets to preserve or enhance their value?

Question159: An investor uses relative screening for 20 sustainable funds. In the sequence of steps outlined by the Principles for Responsible Investment (PRI), which step immediately follows publicizing clear screening criteria?

Question160: Which of the following steps in the ESG rating process is most likely the earliest source of the dispersal of opinions between different ESG rating agencies?

Question161: Suppose the average price-to-earnings (P/E) ratio for the financial industry is 10x. A financial institution with high ESG risk compared to its industry, is most likely assigned a fair value P/E ratio:

Question162: Under the International Corporate Governance Network's (ICGN) Global Governance Principles, a board chair's independence is most likely to be questioned if the person:

Question163: In ESG integration, model adjustments are typically performed at the:

Question164: Which of the following statements about the effects of globalization are most likely correct?
Statement 1: Globalization has led to increased efficiency in markets, resulting in wider availability of products at lower costs.
Statement 2: Globalization has led to increased social well-being due to a reduction in social structural inequality.

Question165: Which of the following statements regarding optimization of portfolios for ESG criteria is most accurate?

Question166: The first step in the effective design of a client ESG investment mandate is to:

Question167: When considering material ESG factors in real estate, which of the following is classified as an environmental factor?

Question168: Which of the following private equity investors is most susceptible to allegations of greenwashing? An investor that views ESG integration as a way of:

Question169: Determining which ESG issues are material:

Question170: When screening individual companies, a practice of avoiding the worst ESG performers best defines:

Question171: Among ESG data and research providers, traditional providers tend to:

Question172: A pension fund concerned about climate change will most likely:

Question173: Which of the following is most likely categorized as an external social factor?

Question174: low risk exposure to this factor in the short run

Question175: ESG portfolio optimization most likely:

Question176: With respect to infrastructure assets, externalities are best described as issues that may be:

Question177: Over the past several years, the proportion of sustainable investing relative to total managed assets has fallen in:

Question178: Engagement teams with a history of governance-led engagement are most likely to be organized:

Question179: Which of the following best characterizes a climate mitigation strategy rather than a climate adaptation strategy?

Question180: Which of the following emphasizes that short-term investment performance will be of limited significance in evaluating the manager?

Question181: The Taskforce on Nature-Related Financial Disclosure (TNFD) defines nature as:

Question182: A challenge to ESG integration at the asset allocation level when using mean-variance optimization is that it:

Question183: An advantage of the carbon footprinting approach to environmental risk analysis is that it allows for:

Question184: An analyst would most likely increase a company's discount rate if the company:

Question185: Institutional investors achieve their stewardship and engagement objectives in practice through which of the following?

Question186: A discount retailer facing a consumer boycott due to its poor working conditions will most likely face:

Question187: Scorecards for ESG analysis are most likely used to translate:

Question188: Which of the following engagement styles is most likely closely aligned with passive investments?

Question189: Which of the following statements about materiality is most accurate?

Question190: Negative screening for ESG factors in portfolios:

Question191: Scope 3 carbon emissions are accounted for under:

Question192: Which of the following statements regarding corporate governance is most accurate?

Question193: Compared to equities, bonds most likely:

Question194: The perpetual compound annual rate that a company's cash flow is assumed to change by after the discrete forecasting period is referred to as the:

Question195: The first step in the effective design of an investment mandate is determining the:

Question196: Which of the following is most likely a result of monitoring rather than engagement?

Question197: The consulting firm McKinsey & Company includes transparency as part of which of the following dimensions of an asset manager's investment approach?

Question198: Compared to developed markets, ESG investing in emerging markets is most likely characterized by:

Question199: Measuring a portfolio's carbon intensity using the European Union's Sustainable Finance Disclosure Regulation (SFDR) accounts for:

Question200: Which of the following is most likely to cast doubt on a director's independence?

Question201: Which of the following ESG megatrends relates to issues around human rights, including free speech, and tensions between big social media companies and sovereign nation-states that point in the direction of a possible new ordering of societal power?

Question202: Which of the following subclasses is most likely to have the highest level of ESG integration using Mercer's ratings?

Question203: Performance materiality:

Question204: Which of the following is most likely a secondary source of ESG information?

Question205: The scorecard technique to assess ESG risks is dependent on:

Question206: Compared to traditional index-based funds, ESG index-based funds typically have:

Question207: Which of the following is one of the six environmental factors in the "Materiality Map" by Sustainability Accounting Standards Board (SASB)?

Question208: All else equal, which of the following companies would most likely have a lower price-to-earnings (P/E) ratio than industry average?

Question209: Which of the following ESG investing approaches aims to drive positive change in the way investee companies are governed and managed?

Question210: Regulations relating to ESG investing generally involve which of the following themes?

Question211: With regards to the climate, financial materiality:

Question212: Exclusionary screening: