Sustainable Investing Exam Preparation Material | Sustainable Investing Certificate(CFA-SIC) Exam

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Prepare for the Sustainable Investing Sustainable Investing Certificate(CFA-SIC) exam with CertQueen's independently developed study resources. Review important concepts, practice scenario-based questions, and use clear explanations to identify areas that require further study.

Question#1

Which of the following is a micro-channel for financial risk transmission to a company due to nature-related dependencies and impacts?

A. Commodity price volatility
B. Changing demand patterns
C. Changes in the value of company assets

Explanation:
The OTM discusses financial risk channels in the context of nature-related dependencies (aligned with the TNFD framework). It defines micro-channels as:
“Direct channels through which environmental degradation or natural resource depletion affectsa company’s asset values or balance sheet strength.”
Examples include losses in land value, stranded physical assets, or depreciated infrastructure resulting from ecosystem change or environmental policy shifts.
In contrast,commodity price volatilityandchanging demand patternsrepresent macroeconomic or sector-level transmission pathways. Therefore,changes in the value of company assetsbest describe a micro-channel impact, as it reflects a firm-level balance sheet effect.
Reference:2021​-Final-Book.pdf, Chapter 3 ― Environmental Factors (Systemic Relationships and Nature-Related Financial Risks section).

Question#2

According to the Principles of Responsible Investment (PRI), which of the following is an example of a social issue?

A. Lobbying
B. Employee relations
C. Bribery and corruption

Explanation:
Employee relations (e.g., fair wages, diversity, workplace safety) are a keysocial factorunder ESG.
Companies withstrong labor policiestend to havehigher productivity and lower turnover risks.
Lobbying (A)is agovernanceissue.
Bribery & corruption (C)are alsogovernance risks, not social risks.
Reference: Principles for Responsible Investment (PRI) ESG Social Issues Report CFA Institute ESG Risk Factors Guide
MSCI ESG Social Risk Methodology

Question#3

Investor engagement:

A. can be used as a cover for investment decision making.
B. is typically a one-way dialogue, with investors seeking insights.
C. creates conflicts of interest for investors in the execution of their fiduciary duty.

Explanation:
The CFA and stewardship guidelines highlight thatinvestor engagement can create conflicts of interest, for example when investors manage money for different clients with potentially conflicting goals. These potential conflicts must bemanaged and disclosedto ensure engagement activities align with fiduciary responsibilities. Engagement is not one-way (B), and it’s not simply a cover for decisions (A)―it’s an active stewardship process.

Question#4

Are the following statements relating to investor engagement accurate?
Statement 1: Investors need to frame the engagement topic into a broader discussion around strategy and long-term financial performance with the management team.
Statement 2: Active investment houses are working to ensure that their portfolio managers can deliver stewardship alongside their regular monitoring of investee companies.

A. No, only Statement 1 is accurate
B. No, only Statement 2 is accurate
C. Yes, both statements are accurate

Explanation:
Both statements are accurate. Effective engagement with companies often requires framing the discussion around strategy and long-term performance. Active investment houses are also focusing on integrating stewardship activities with ongoing portfolio management. (ESGTextBook[PallasCatFin], Chapter 6, Page 285)

Question#5

Which of the following are most likely to raise the risks of greenwashing by private equity investors?
Investors that integrate ESG factors for the purposes of:

A. Value creation
B. Risk management
C. Attracting ESG-conscious capital allocators

Explanation:
Greenwashing risk is highest when ESG integration is used primarily to attract ESG-conscious capital without genuine commitment to sustainability.
Value creation (A) and risk management (B) are legitimate ESG integration strategies that contribute to long-term business improvement.
However, if ESG is used mainly for marketing purposes (C) without meaningful impact, it leads to greenwashing.
Reference: CFA Institute Greenwashing Risks in Private Equity Report Principles for Responsible Investment (PRI) ESG in Private Markets EU Green Claims Directive & ESG Transparency Regulations

Exam Code: Sustainable Investing
Q & A: 802 Q&As         Updated:  Nov 03,2026

 

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Review Key Concepts

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Identify Knowledge Gaps

Use your results and the provided explanations to find weaker areas and focus your study more effectively.

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