Chapter 3 Test

Question 1

In relation to shadow carbon pricing, which of the following is incorrect:

Answer 1

(b) Shadow carbon pricing is used to reduce a business’s carbon footprint.

Question 2

Which of the following would be considered a climate change mitigation strategy?

Answer 2

(d) Protecting Coastlines

Question 3

The Natural Capital Protocol currently provides guidance for the following sectors:

Answer 3

Food and Beverage

It currently provides guidance for the apparel sector, food and beverage sector and forest products

Question 4

The Stockholm Resilience Centre reported in 2015 that four of the nine planetary boundaries have now been crossed. Which of the following boundaries have been crossed:

Answer 4

▶ climate change;
▶ loss of biosphere integrity;
▶ land-system change; and
▶ altered biogeochemical cycles (phosphorus and nitrogen).4

Question 5

11. Which body sets out the Green Bond Principles (GBP)?

Answer 5

(d) The International Capital Markets Association (ICMA).

The International Capital Markets Association (ICMA) sets out voluntary best practice guidelines called the Green Bond Principles (GBP), which were established in 2014 by a consortium of investment banks to promote the integrity of the green bond market by recommending transparency, disclosure and reporting.105 As part
of ensuring the integrity of the use of proceeds, an external verification is obtained through a second party opinion provider who will track and report on whether proceeds are used as promised.

The Institutional Investors Group on Climate Change (IIGCC) published a practical investor guide, which provides a useful framework (see Figure 3.10) in which to approach climate-related scenario analysis The guide sets out two objectives of undertaking scenario analysis:

Financial impact: the use of scenario analysis enables the assessment and pricing of climate-related risks and opportunities.

Alignment: aligning the portfolio(s) with a 2°C (3.6°F) or lower future. This is typically driven by a set of investment beliefs.

SASB (Sustainability Accounting Standards Board),

An example used by companies for reporting and disclosure, and investors in assessing the environmental (including social and governance) risks of companies is the SASB (Sustainability Accounting Standards Board), which was established in 2011 to develop and disseminate sustainability accounting standards.

The standards identify financially material issues that are reasonably likely to impact the financial condition or operating performance of a company and therefore are most important to investors.

SASB provides an interactive proprietary tool that identifies and compares disclosure topics across different industries and sectors, described as a ‘materiality map’

 Environmental factors cover:
greenhouse gas emissions;
air quality;
energy management;
water and wastewater management;
waste and hazardous materials management; and ecological impacts.