Sustainable Finance

Question 1

What is a reallocation of capital ?

Answer 1

Investors and lenders will increasingly exit high climate-risk equity, bonds and new loans

Question 2

What will issuers do on the asset side of the of the balance sheet?

Answer 2

Hold assets that hedge the risks

Question 3

What will issuers do on the liabilities side of the balance sheet?

Answer 3

Avoid covering risks where it becomes no longer possible to evaluate the risk they would be talking on

Question 4

What is the starting point of the TCFD recommendations report?

Answer 4

That financial market pricing must reflect all the actual risks

Question 5

What is an essential function of financial markets?

Answer 5

To price risk to support informed, efficient capital-allocation details

Question 6

What does the expression net zero assume?

Answer 6

That some years before 2050 the world finds a technology that can economically and on a large scale remove carbon from smokestack emissions caused by burning fossil fuels and a second emission to CO2 from the atmosphere

Question 7

Why do some commentators doubt the finance industry’s commitment ?

Answer 7

Taxonomy regulations

Materiality approach to reporting climate related information

Question 8

What are the three largest emitters?

Answer 8

Energy

Materials

Buildings

Question 9

Three causes of global warming are?

Answer 9

Agriculture

Fossil fuel combustion

Déforestation

Question 10

Why are agricultural emissions poised to increase by 15-20 percent by 2050?

Answer 10

Increasing population

Rising per capita food consumption in emerging markets

Sustained share of meat in diets everywhere

Question 11

Understanding and analysing E S&G issues is likely to be what?

Answer 11

A means of achieving alpha performance and for banks a higher return in their capital from their lending activités

Question 12

How is is corporate governance defined?

Answer 12

The way which companies are governed and to what purpose. It also identifies who has power and accountability and who makes decisions

Question 13

What is one key purpose of of governance?

Answer 13

Achieving the appropriate risk-adjusted return for shareholders

Question 14

What does sustainable mean?

Answer 14

Integrating E& S criteria as well as normal economic financial criteria. Meeting the needs of the present without compromising the ability of future generations to meet theirs.

Question 15

What are the three main pillars of sustainability?

Answer 15

Social

Environmental

Economic

Question 16

What are the three benefits to society that commercial banks are increasingly integrating ESG factors into?

Answer 16

Aid to loan underwriters in banks in achieving lower loan losses

Enable central banks to reduce the risk of financial instability

Facilitate the drive to decarbonise the world through market forces and thus complement those regulations and taxes

Question 17

How does PRI define responsible investment?

Answer 17

An approach to investing that aims to incorporate environmental, social and governance

Question 18

What is responsible investment about?

Answer 18

Systematically identifying, assessing, pricing, managing and monitoring material ESG risks . It means preserving and enhancing the value of an asset through investment process

Question 19

What are the 6 principles?

Answer 19

Alignment 
Impact 
Clients and customers 
Stakeholders 
Governance and Target setting 
Transparency and accounting

Question 20

What are the 5 capitals

Answer 20

Natural capital 
Financial capital 
Social capital 
Physical capital 
Human capital 

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Question 21

How do business play a vital role in the economy?

Answer 21

Creating jobs

Fostering innovation

Providing essential goods and services

Question 22

What is one of the three long terms goals for Paris Agreement ?

Answer 22

Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development

Question 23

Why was the 2 degree investing initiative set up?

Answer 23

To reform investment frameworks and mobilise the financial sector to reallocate capital in line with below 2 degrees climate goals.

Question 24

What is the Paris Agreement’s central aim?

Answer 24

To strengthen the global response to the threat of climate change by keeping the global temperature rise this century well below 2 degrees and to pursue efforts to limit the temperature increase even further to 1.5 degrees.

Question 25

What could sudden re-pricing of assets arising from dramatic action by authorities trying to stop runaway climate change impact cause?

Answer 25

Equity and bond markets to suffer a sharp collapse with severe consequences for financial stability

Question 26

What is an externality?

Answer 26

A consequence of an industrial or commercial activity which affects other parties without being reflected in market prices

Question 27

What is ‘The Inevitable Policy Response’ ?

Answer 27

The risk that high emitting corporates face if they do not cut their emissions and of their financial firms fail to reduce their investment in such corporations

Question 28

What are stranded assets?

Answer 28

Valueless assets

Question 29

If the UK leaves the EU without a deal, what flat rate would be applied to each ton of carbon?

Answer 29

£16

Question 30

What is a just transition?

Answer 30

A transition that does not result in low income groups suffering disproportionately from a rise in their costs due to measures taken to mitigate climate change

Question 31

What must you assume about markets for carbon pricing to work?

Answer 31

Markets work freely with no monopoly power