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SCR GARP Practice Test Questions and Exam Dumps

Question No 1:

A climate scientist develops a presentation on modern climate change for a group of policymakers. What observation does the scientist include in the presentation that provides evidence of human attribution to current climate change?

A. Atmospheric CO2 with isotopes consistent with fossil fuel emissions have increased since the mid-20th century.
B. Glacial ice records indicate atmospheric CO2 increased by 135 parts per thousand since the Industrial Revolution.
C. In the past 200 years, CO2 is responsible for most negative radiative forcing.
D. In the past 100 years, the atmospheric lifetime of CO2 attributed to energy use increased.

Correct Answer: A

Explanation:

The question focuses on identifying an observation that links current climate change specifically to human activity, particularly in the form of fossil fuel emissions. To do so, evidence that connects the rise in atmospheric CO2 directly to human actions such as burning fossil fuels (coal, oil, and natural gas) is needed. Let’s break down the options:

• A. Atmospheric CO2 with isotopes consistent with fossil fuel emissions have increased since the mid-20th century: This is the strongest evidence for human attribution of climate change. Isotopes found in atmospheric CO2 can be traced back to specific sources, and fossil fuels (coal, oil, natural gas) have a distinct isotopic signature. The increase in atmospheric CO2 that matches this fossil fuel signature is direct evidence that human activities, particularly the burning of fossil fuels since the mid-20th century, are a major contributor to the observed rise in CO2 levels and the current phase of climate change.

• B. Glacial ice records indicate atmospheric CO2 increased by 135 parts per thousand since the Industrial Revolution: While glacial ice records provide valuable historical data on past CO2 concentrations, this statement does not directly attribute the rise in CO2 to human activities. The statement mentions a general increase, but it does not specify that the increase is linked to human-caused activities like fossil fuel burning. Therefore, it doesn't provide clear evidence for human attribution.

• C. In the past 200 years, CO2 is responsible for most negative radiative forcing: This statement refers to the radiative forcing effect, where the increase in CO2 and other greenhouse gases is linked to warming. While it highlights the role of CO2 in climate change, it does not directly connect the increase to human activities or provide the necessary evidence of human attribution, such as isotopic signatures.

• D. In the past 100 years, the atmospheric lifetime of CO2 attributed to energy use increased: This option refers to the lifetime of CO2 in the atmosphere, but it is not as direct in showing human attribution to the increase in CO2 levels. The concept of lifetime refers to how long CO2 stays in the atmosphere once it is emitted, but this doesn’t clearly link the cause (human energy use and fossil fuel burning) to the change in atmospheric CO2 levels.

Therefore, A is the best answer because it provides direct, empirical evidence of human activity (fossil fuel emissions) as the cause of the rise in atmospheric CO2, supporting human attribution to current climate change.

Question No 2:

The risk team at an agricultural company in Eastern Europe evaluates crop yield production performance. The evaluation reveals high temperature and water shortages will likely harm crop production, and current company insurance will not mitigate this exposure. The team recommends increasing coverage by purchasing an additional insurance policy that includes area yield protection. 

According to the COSO ERM framework, which risk response strategy did the team recommend?

A. Pursuit
B. Sharing
C. Reduction
D. Acceptance

Correct Answer: B

Explanation: 

The COSO ERM (Enterprise Risk Management) framework identifies several risk response strategies that an organization can take to manage identified risks. These strategies are categorized into risk avoidance, risk reduction, risk sharing, and risk retention. The goal is to identify the most effective approach for minimizing or managing risks that could have a significant impact on the organization.

Let's break down the options and determine which best matches the risk team's recommendation:

• A. Pursuit: Pursuit refers to a strategy where the organization actively seeks to increase or pursue the opportunities associated with the risk, often when the potential reward outweighs the potential risk. In the case of this agricultural company, the focus is on mitigating a potential risk (high temperatures and water shortages) rather than pursuing an opportunity. Therefore, pursuit does not align with the recommended strategy here.

• B. Sharing: The sharing strategy involves transferring part of the risk to a third party, typically through insurance, outsourcing, or partnerships. By purchasing an additional insurance policy that includes area yield protection, the risk team is effectively sharing the risk of crop yield losses due to high temperatures and water shortages with an insurance provider. This is a clear example of the sharing strategy as the company is seeking to offload part of the risk to an external party through insurance coverage. This makes B the correct answer.

• C. Reduction: The reduction strategy focuses on reducing the probability or impact of the risk occurring, often through mitigation actions such as improving processes, technologies, or safety measures. While the team’s recommendation for additional insurance coverage does help mitigate the financial impact of crop yield losses, it does not directly reduce the risk itself (such as improving irrigation or using drought-resistant crops). Therefore, the recommendation does not fully align with reduction in this case.

• D. Acceptance: The acceptance strategy involves acknowledging the risk and choosing not to take action, typically when the cost of mitigation is high relative to the potential loss, or the risk is deemed unavoidable. The risk team, however, is recommending action (buying additional insurance), which is the opposite of accepting the risk without intervention. Thus, acceptance is not the correct response here.

In conclusion, the risk team's recommendation to purchase additional insurance for area yield protection aligns with the sharing strategy under the COSO ERM framework. This strategy involves transferring part of the risk to a third party, in this case, the insurance company.

Question No 3:

A city planning commissioner consults with climate scientists to assess the impact of sea level rise on strategic infrastructure projects. The scientists discuss several climate model projections and indicate sea level rise has a fundamental relationship to GHG emissions, regardless of a specific warming scenario. 

How should the scientists describe this relationship?

A. Sea level rises proportionally faster than GHG emissions.
B. Sea level rise lags GHG emissions.
C. Sea level rises in response to ocean acidification.
D. Sea level rise will cease once global emissions peak.

Correct Answer: B

Explanation:

The relationship between sea level rise and greenhouse gas (GHG) emissions is an important consideration in climate science, particularly when assessing future climate risks such as flooding or infrastructure damage due to rising oceans. The question asks about the fundamental relationship between these two variables, specifically how sea level rise relates to GHG emissions over time.

• Sea level rise lags GHG emissions (Option B) is the correct answer. This describes the well-established scientific understanding that sea level rise is a delayed response to GHG emissions. GHGs, particularly carbon dioxide (CO2), contribute to global warming, which in turn causes the melting of glaciers and ice caps and thermal expansion of seawater. However, the physical processes leading to sea level rise take time to unfold. Even after a peak in emissions, the full effect of those emissions on sea levels might continue for centuries. This lag occurs because of the complex nature of the Earth’s climate system, including the slow response of the oceans and ice sheets to warming. Therefore, while emissions have a direct and rapid effect on global temperatures, the sea level rise resulting from those emissions is delayed.

• Sea level rises proportionally faster than GHG emissions (Option A) is incorrect because, while there is a connection between GHG emissions and sea level rise, the relationship is not one where sea level rises "faster" than emissions. Rather, sea level rise is a slow, cumulative process that is tied to long-term warming and ice melt rather than an immediate proportional increase. Emissions do not directly cause sea level to rise in a proportional manner.

• Sea level rises in response to ocean acidification (Option C) is also incorrect. Ocean acidification is primarily caused by the absorption of excess CO2 by the oceans, which leads to the lowering of pH levels, not directly to sea level rise. While both are related to increased CO2, acidification and sea level rise are separate phenomena, with sea level rise being a result of thermal expansion of water and ice melt, not acidification.

• Sea level rise will cease once global emissions peak (Option D) is inaccurate. While a peak in global emissions might slow the rate of warming and reduce future impacts on sea levels, sea level rise will not immediately cease upon reaching an emissions peak. This is because the effects of past emissions continue to influence sea level rise over long periods. Even if emissions peak and stabilize, sea level rise would continue for decades or even centuries due to the ongoing effects of warming and melting that are already in progress.

In conclusion, the scientists should describe the relationship between sea level rise and GHG emissions as lagging because sea level rise is a delayed response to the warming caused by those emissions. The effects of GHG emissions on sea levels continue for a long time after the emissions themselves peak, and this delayed process is fundamental to understanding the long-term impacts of climate change.

Question No 4:

After recent summer and winter temperature extremes disrupt operations, a national oil company evaluates its 10-year business plan. The risk department reviews how corporate assets, both physical and human, are resilient to climate change. Early in the planning process, a risk team member emphasizes the importance of planning for both acute and chronic climate hazards.

How should the team member describe acute and chronic hazards in terms of the 10-year strategy?

A. When determining locations for future production facilities, modeling shifts in climate requires more data on local conditions than modeling changes in wildfire prevalence.
B. When assessing climate impacts on facility worker productivity, the frequency of heatwaves influences average temperature.
C. When assessing climate impacts on offshore drilling operations, models of hurricane damage agree more than models of sea level rise.
D. When considering climate impacts on onshore assets, flood projections are more accurate than mean precipitation change projections.

Correct Answer: C

Explanation:

In the context of evaluating the resilience of assets to climate change, understanding the difference between acute and chronic climate hazards is crucial. Acute hazards are those that occur suddenly and have immediate effects, such as hurricanes, floods, or heatwaves, while chronic hazards refer to long-term changes in climate conditions, such as rising sea levels, average temperature increases, or shifts in precipitation patterns.

Let’s examine the given options and how they relate to acute and chronic climate hazards:

• A. When determining locations for future production facilities, modeling shifts in climate requires more data on local conditions than modeling changes in wildfire prevalence.
  This option focuses on local conditions versus wildfire prevalence. While it’s true that modeling local conditions is important for facility placement, it doesn't directly address acute vs. chronic hazards. This is more about specific risks rather than comparing acute and chronic climate threats.

• B. When assessing climate impacts on facility worker productivity, the frequency of heatwaves influences average temperature.
  This statement discusses the impact of heatwaves, which are acute climate hazards. However, it blends the effects of heatwaves (acute) with the idea of average temperature (chronic), which could confuse the distinction between short-term, sudden climate extremes and long-term trends. While relevant, it doesn't clearly emphasize the comparison of acute vs. chronic hazards.

• C. When assessing climate impacts on offshore drilling operations, models of hurricane damage agree more than models of sea level rise.
  Hurricanes are an acute climate hazard, as they are sudden, intense events that can cause significant damage in a short amount of time. In contrast, sea level rise is a chronic hazard, occurring gradually over time. The fact that models for hurricane damage tend to show more consensus than those for sea level rise reflects the difference between acute and chronic hazards: acute hazards are easier to model with more immediate impacts, while chronic hazards are long-term, slower to unfold, and subject to greater uncertainty. This distinction highlights the challenges faced in planning for both types of risks.

• D. When considering climate impacts on onshore assets, flood projections are more accurate than mean precipitation change projections.
  This statement addresses flood projections, which could be both acute (e.g., flooding events) and chronic (e.g., long-term shifts in flood patterns due to rising sea levels). However, it does not directly contrast acute and chronic hazards in a way that reflects both the short-term and long-term aspects of climate risks. Additionally, this statement does not emphasize how both types of hazards should be incorporated into the strategy.

Option C (hurricane damage vs. sea level rise) best captures the difference between acute (sudden, impactful events) and chronic (gradual, long-term changes) hazards. Hurricanes are acute, high-impact events, while sea level rise is a chronic, gradual process. This comparison is essential for understanding how to plan for both short-term extreme events and long-term gradual changes in a 10-year business strategy.

Question No 5:

Which recommendation will the analyst likely make to implement a company sustainability framework?

A. Follow NGFS sustainability best practices and verify company products and activities are considered sustainable through NGFS recommended voluntary disclosures.
B. Use the EU Taxonomy for classifying products as “green” when doing business in the EU market but develop new classification systems for jurisdictions outside the EU.
C. Conduct internal audits annually and disclose any greenwashed product findings to government green finance taskforces.
D. Incorporate mandatory disclosures and marketing requirements to ensure claims about sustainable products are fair and not misleading.

Correct Answer: D

Explanation:

To effectively implement a sustainability framework, a company must ensure that its claims about sustainability are accurate, transparent, and in compliance with existing standards. The most appropriate recommendation the sustainability analyst is likely to make is to incorporate mandatory disclosures and marketing requirements to ensure that the company’s claims about sustainable products are both fair and not misleading. This approach not only fosters trust among consumers but also aligns with the growing regulatory and consumer demand for transparency in sustainability practices.

Here’s why D is the best choice:

• D. Incorporate mandatory disclosures and marketing requirements to ensure claims about sustainable products are fair and not misleading: One of the key elements of a sustainability framework is ensuring that all claims made about a company's products—especially claims about sustainability—are substantiated by clear and verifiable information. As consumers increasingly expect businesses to provide sustainable options, false or exaggerated claims (known as “greenwashing”) can damage the company’s reputation and undermine trust in its products. By incorporating mandatory disclosures and ensuring marketing is not misleading, the company creates accountability and transparency. This aligns with international and national efforts to prevent greenwashing and provides a solid foundation for building long-term consumer loyalty. Furthermore, this recommendation supports regulatory initiatives, such as the EU's Non-Financial Reporting Directive (NFRD), which mandates the disclosure of sustainability-related information.

Now, let’s look at why the other options are less suitable:

• A. Follow NGFS sustainability best practices and verify company products and activities are considered sustainable through NGFS recommended voluntary disclosures: The NGFS (Network for Greening the Financial System) provides guidelines on sustainable finance, particularly focused on climate-related disclosures. However, its practices are primarily geared toward financial institutions, not necessarily cosmetic companies. While voluntary disclosures are useful for demonstrating commitment to sustainability, mandatory disclosures are increasingly required by governments and regulators around the world. Voluntary disclosures alone may not provide the level of transparency and accountability needed to build consumer trust or meet regulatory expectations.

• B. Use the EU Taxonomy for classifying products as “green” when doing business in the EU market but develop new classification systems for jurisdictions outside the EU: The EU Taxonomy is a regulatory framework that defines what activities can be considered environmentally sustainable in the EU. While it’s important for companies to adhere to this framework when operating in the EU, developing separate classification systems for other jurisdictions might lead to inconsistency and confusion. Instead, adopting global standards for sustainability disclosures would be more effective for ensuring consistent messaging and avoiding regulatory fragmentation across different markets.

• C. Conduct internal audits annually and disclose any greenwashed product findings to government green finance taskforces: While internal audits and identifying greenwashing are important practices, they don’t directly address the more proactive measures that need to be taken to implement a sustainability framework. The focus on disclosing findings of greenwashing to taskforces isn’t as effective as incorporating mandatory disclosures in product marketing and ensuring that sustainability claims are accurate from the start. Proactive transparency and fair marketing practices are essential for avoiding greenwashing before it happens, rather than just identifying it after the fact.

In summary, D provides the most comprehensive approach to ensuring transparency, accountability, and consumer trust, making it the best recommendation for implementing a sustainability framework that aligns with both consumer expectations and regulatory requirements.

Question No 6:

To improve sustainability, a railroad and transportation services company will revitalize its rail network by installing an operating system that reduces idle time. A reduction in idle time will decrease GHG emissions. To finance this plan, the company will issue green bonds beginning in 2024. The company’s sustainability director develops sustainability objectives and eligibility criteria to communicate to investors.

The director is fulfilling which core component of the Green Bond Principles?

A. Process for project evaluation and selection
B. Reporting
C. Management of proceeds
D. Use of proceeds

Correct Answer: A

Explanation:

The Green Bond Principles (GBP) provide a framework for issuing green bonds, focusing on the importance of ensuring transparency, integrity, and environmental benefits in the bond issuance process. The core components of the Green Bond Principles include four primary areas: Use of proceeds, Process for project evaluation and selection, Management of proceeds, and Reporting.

In this scenario, the sustainability director’s role is to develop sustainability objectives and eligibility criteria to guide which projects will qualify for green bond funding. This is directly related to the Process for project evaluation and selection, which is a critical aspect of ensuring that the projects financed by the green bonds align with the environmental goals and sustainability targets.

• A. Process for project evaluation and selection is about establishing a clear process that determines which projects are eligible for green bond financing. By developing sustainability objectives and eligibility criteria, the director ensures that the company’s projects align with the green bond framework, meaning they have clear environmental benefits (such as reducing GHG emissions). This allows investors to understand how the company will select the projects that will receive funding.

Let’s review the other options:

• B. Reporting refers to the ongoing reporting that the issuer provides to investors on the impact and progress of the financed projects. While reporting is important, the sustainability director is not yet in the stage of reporting on the outcomes, but rather, defining the projects eligible for funding.

• C. Management of proceeds involves tracking and ensuring that the funds raised from the green bonds are allocated properly to the selected projects. This step typically occurs after the bonds are issued and funds are raised, which is beyond the director's current responsibility of setting the criteria for project eligibility.

• D. Use of proceeds refers to the specific allocation of the funds raised from green bonds to environmentally beneficial projects. While this is a key principle, the director is focused on establishing criteria for selecting which projects qualify for funding, not yet on how the funds will be used once they are raised.

Therefore, the correct answer is A, Process for project evaluation and selection, because the director is responsible for defining the criteria that determine which projects will be financed through green bonds, ensuring alignment with sustainability goals.

Question No 7:

A large insurance company in South America expands use of climate scenario analysis. The company used RCPs in previous scenario analyses but now hires an actuary with climate expertise to incorporate SSPs in this process. 

How can the actuary advise the insurance company use SSPs going forward?

A. Demonstrate how SSP and RCP trajectories typically show contradictory emissions trend trajectories.
B. Combine SSPs with different RCPs to assess climate policy options.
C. Eventually replace SSPs with RCPs by integrating underlying data assumptions.
D. Use SSPs to provide alternative emissions pathways to RCPs.

Correct Answer: D

Explanation:

The integration of climate scenario analysis into the business practices of an insurance company is critical for understanding and managing climate-related risks. The company previously used Representative Concentration Pathways (RCPs) to assess potential climate outcomes but now wishes to incorporate Shared Socioeconomic Pathways (SSPs). Both RCPs and SSPs are important tools in climate modeling, but they serve different purposes. Understanding their roles and how they interact is key to effectively incorporating SSPs into the company's analysis.

Let's look at the role and interplay between RCPs and SSPs to identify the best approach for advising the company.

• A. Demonstrate how SSP and RCP trajectories typically show contradictory emissions trend trajectories: This option is misleading. While RCPs and SSPs are different, they are complementary rather than contradictory. RCPs describe potential climate outcomes based on different levels of greenhouse gas concentration in the atmosphere, while SSPs represent socioeconomic pathways that help understand how future human actions might affect emissions and climate change. SSPs do not contradict RCPs but provide additional context for understanding the drivers behind different emissions scenarios. Therefore, demonstrating contradictions between the two would not be the correct advice.

• B. Combine SSPs with different RCPs to assess climate policy options: This is a possible approach in certain situations but is not the most appropriate advice for how to integrate SSPs. The SSP framework is specifically designed to work with RCPs, but combining them requires careful consideration of the assumptions behind each. SSPs represent socioeconomic conditions (e.g., economic growth, technological development, population), while RCPs reflect different emissions outcomes. In practice, SSPs provide the context or scenarios for socioeconomic factors that influence emissions, and RCPs describe the outcomes of emissions scenarios. Therefore, combining them for policy analysis is valid, but it's not the best first step for advising the company.

• C. Eventually replace SSPs with RCPs by integrating underlying data assumptions: This option is incorrect because it suggests replacing SSPs with RCPs, which would be counterproductive. RCPs and SSPs serve different functions and cannot replace each other. RCPs provide scenarios based on different levels of greenhouse gas concentrations, while SSPs offer socioeconomic pathways that describe how human factors affect emissions. The idea should be to integrate both SSPs and RCPs rather than replace one with the other.

• D. Use SSPs to provide alternative emissions pathways to RCPs: This is the best approach. SSPs are used to provide alternative socioeconomic development pathways that lead to different emission levels and, subsequently, different climate outcomes. By using SSPs alongside RCPs, the actuary can offer a broader set of scenarios that reflect a range of possible future conditions driven by both human actions (via SSPs) and the resulting emissions (via RCPs). This approach allows for a more nuanced understanding of climate risks, taking into account both the potential for different climate policies and socioeconomic developments. SSPs thus complement RCPs by introducing a broader set of variables that influence future climate trajectories.

Therefore, the actuary should advise the insurance company to use SSPs to provide alternative emissions pathways to RCPs, as this will allow the company to model a more comprehensive range of climate scenarios, which is essential for understanding and managing long-term climate-related risks in insurance and investment planning.

Question No 8:

A climate risk consultant advises an Eastern European central bank. In response to regulatory changes, the bank will incorporate climate-related risks into bank policies. The consultant writes a summary on how central banks incorporated climate-related risks into policies. The summary highlights the Bank of England (BoE) example to demonstrate how the BoE integrated climate-related risks within the bank supervisory scope.

Which of the following BoE practices will the consultant recommend?

A. Integrate climate-related risks into bank monetary policy before attempting to integrate climate into other areas of bank operations.
B. Obligate firms to allocate responsibility for climate-related risks using a bottom-up approach where the risk team assesses climate risks while the board of directors approves or denies.
C. Require banks and insurers to include all material exposures relating to financial risks from climate change under capital adequacy and solvency assessments.
D. Adopt a policy that requires firms to submit climate risk disclosures that precisely follow NGFS guidelines.

Correct Answer: C

Explanation:

The Bank of England (BoE) has taken a proactive and structured approach to integrate climate-related risks into its financial system oversight and policies. The consultant will likely recommend practices based on the BoE's steps, particularly regarding regulatory frameworks for financial institutions, such as banks and insurers.

Why is C correct?

C refers to the BoE’s practice of incorporating climate-related risks into capital adequacy and solvency assessments for banks and insurers. This is part of the BoE’s approach to ensuring that financial institutions are resilient to the financial risks posed by climate change. The BoE, as part of its regulatory activities, expects financial institutions to consider the potential impacts of climate change on their financial stability. Therefore, requiring firms to include all material climate risks when calculating capital adequacy (e.g., how climate risks might affect the assets and liabilities of the institution) and solvency (e.g., their ability to meet long-term obligations) ensures that these risks are appropriately assessed and managed in line with overall financial resilience. This practice is aligned with international efforts to incorporate climate-related risks into financial risk assessments.

Why are the other options incorrect?

A is incorrect because integrating climate-related risks into monetary policy is a long-term goal, but it is not typically the first step. The BoE did not prioritize monetary policy integration over other areas such as financial stability or prudential regulation in the initial phases of integrating climate risk. Instead, central banks often begin by assessing and managing risks related to financial stability and bank resilience before making broader adjustments to monetary policy. Therefore, the consultant would not recommend starting with monetary policy integration as a primary action.

B is incorrect because the BoE generally promotes a top-down approach when it comes to accountability for climate-related risks. The central bank typically encourages boards of directors to take ownership of climate risks at the strategic level, ensuring that leadership takes responsibility for the integration of climate-related risks within their governance structures. In this way, the risk team may assess the risks, but the board is expected to oversee and approve policies. A purely bottom-up approach could lack the necessary leadership engagement to embed climate risk into core decision-making processes.

D is incorrect because while the BoE encourages climate risk disclosures, it does not require strict adherence to NGFS (Network for Greening the Financial System) guidelines. The BoE aligns with frameworks like the Task Force on Climate-related Financial Disclosures (TCFD), but there is flexibility in how institutions disclose these risks. Requiring firms to follow NGFS guidelines precisely could be too restrictive, as the NGFS guidelines are just one option among many for disclosing climate risks.

In summary, the BoE's practice of requiring banks and insurers to consider climate-related risks in their capital adequacy and solvency assessments (Option C) aligns with the best practices for regulatory oversight and resilience, which is why the consultant would recommend it. This ensures that financial institutions are adequately prepared for the financial implications of climate change.

Question No 9:

To address each component of ESG (Environmental, Social, and Governance), which metrics will the sustainability analyst socialize with company leaders?

A. Carbon dioxide emissions; labor conditions of agricultural workers; board diversity
B. Environmental health and safety record; adherence to code of ethics; risk management protocols
C. Water use efficiency; employee retention and satisfaction; community engagement
D. Energy use; GHG intensity reduction; executive leadership compensation

Correct Answer: A

Explanation:

The role of a sustainability analyst involves tracking and reporting ESG (Environmental, Social, and Governance) metrics, which are key to understanding how a company’s operations impact the environment, society, and governance practices. ESG metrics help investors evaluate a company’s long-term sustainability and the risks and opportunities it faces in these areas. To determine which metrics the analyst will focus on when meeting with business unit leaders, we need to understand what metrics align with each of the three ESG components: Environmental, Social, and Governance.

• A. Carbon dioxide emissions; labor conditions of agricultural workers; board diversity: This option aligns well with the key pillars of ESG:

Environmental: Carbon dioxide emissions measure a company’s environmental impact and its efforts to reduce its carbon footprint, a critical component of sustainability.

Social: Labor conditions of agricultural workers pertain to fair labor practices, ensuring workers are treated ethically and work in safe conditions, which is a central social responsibility.

Governance: Board diversity is a governance metric that looks at the composition of a company’s board of directors in terms of gender, race, and other factors, reflecting how inclusive and diverse the company’s leadership is.
This combination of metrics covers all the critical aspects of ESG, making A the correct answer.

B. Environmental health and safety record; adherence to code of ethics; risk management protocols: While this option addresses important factors, it doesn’t fully cover the broad range of ESG metrics needed:

Environmental health and safety record does address environmental and social concerns, but it doesn’t specifically focus on the environmental impact like carbon emissions or water usage.

Adherence to code of ethics relates to governance but is more of an internal policy rather than an externally reportable ESG metric.

Risk management protocols are crucial but are more about organizational preparedness and do not directly relate to the core ESG factors, especially the social and environmental components.
Therefore, while important, B does not fully represent the key ESG metrics.

• C. Water use efficiency; employee retention and satisfaction; community engagement: This option is partially correct:

Water use efficiency is an environmental metric and focuses on reducing water consumption, which is a key sustainability concern.

Employee retention and satisfaction relates to social factors, as it addresses employee well-being and job satisfaction, but it's not as specific as labor conditions or diversity.

Community engagement is another social metric but is broader and not as directly related to ESG indicators for reporting to investors.
While C contains relevant metrics, it doesn’t fully cover all aspects of ESG, particularly in the governance domain.

D. Energy use; GHG intensity reduction; executive leadership compensation: While these are important metrics, they don't fully address the social and governance components of ESG:

Energy use and GHG intensity reduction are strong environmental metrics related to energy efficiency and carbon emissions, aligning well with the environmental component.

Executive leadership compensation touches on governance but is more focused on remuneration practices rather than board diversity or corporate governance structures.
This option focuses primarily on environmental and governance metrics but lacks a strong social component, making it less comprehensive than A.

In conclusion, A provides a well-rounded selection of ESG metrics that address environmental, social, and governance factors, making it the most complete and relevant answer.

Question No 10:

In response to policy and technology changes, a cement manufacturer looks for new opportunities to raise profits by reducing GHG emissions. Because the cement industry accounts for a considerable percentage of global emissions, the manufacturer joins a coalition of company peers. The coalition lobbies country governments to adhere to the Paris Agreement nationally determined contributions (NDCs). 

Which of the following actions does the coalition recommend?

A. Aligned the first round of NDCs with a 2°C warming limit, followed by a second round of a 1.5°C limit.
B. Set 2019-2022 NDCs at a smaller scale to comply with the “ratchet” mechanism.
C. Tighten NDCs and report NDC progress every 5 years at COP meetings.
D. Revise NDC targets annually and submit to the UN for review and approval.

Correct Answer: C

Explanation:

The Paris Agreement establishes a global framework for reducing greenhouse gas (GHG) emissions in order to limit global warming. Under this agreement, each country submits Nationally Determined Contributions (NDCs), which are the individual targets each nation sets to reduce emissions. These NDCs are reviewed and updated periodically to ensure that global temperature rise remains well below 2°C, with efforts to limit it to 1.5°C.

Key Concepts in NDCs:

• C. Tighten NDCs and report NDC progress every 5 years at COP meetings: This aligns with the Paris Agreement framework. The agreement requires countries to submit updated NDCs every five years, with the intention to increase ambition over time. This is part of the ratchet mechanism, which encourages continuous improvement and tightening of emission reduction goals to keep the global temperature rise within the agreed targets. The COP (Conference of the Parties) meetings are the forums where countries report their progress and discuss further actions. This ensures that NDCs are not static and that progress is assessed regularly. Thus, C is the correct recommendation.

Breakdown of the Other Options:

• A. Aligned the first round of NDCs with a 2°C warming limit, followed by a second round of a 1.5°C limit: While the Paris Agreement aims to keep global warming well below 2°C, with efforts to limit it to 1.5°C, this statement doesn’t accurately reflect the Paris Agreement’s process. NDCs do not follow a “first round” and “second round” structure with distinct temperature limits. Rather, countries are expected to strengthen their commitments over time, but there is no distinct "first round" and "second round" approach. Therefore, A is not a correct recommendation.

• B. Set 2019-2022 NDCs at a smaller scale to comply with the “ratchet” mechanism: The ratchet mechanism is designed to increase ambition, not to lower it. This option incorrectly suggests that countries should scale back their NDCs, which goes against the spirit of the Paris Agreement. The mechanism encourages progressively more stringent targets, not smaller ones. Hence, B is incorrect.

• D. Revise NDC targets annually and submit to the UN for review and approval: The Paris Agreement requires countries to update their NDCs every five years, not annually. The idea is to ensure periodic reviews that align with the long-term goals of the agreement. An annual revision would be too frequent and inconsistent with the established process. Therefore, D is not the correct recommendation.

In summary, the coalition would recommend action C, which aligns with the Paris Agreement’s framework to tighten NDCs over time, with progress being reported every five years during the COP meetings. This process ensures that global emissions reduction efforts are continuously strengthened to meet the long-term climate targets.