FSA Level 2 120 Questions with Correct Answers

FSA Level 2 120 Questions with Correct Answers What are the 3 main considerations that shape each INDUSTRY's sustainability profile - Correct Answers 1. Societal License to operate;

• Use of common Capitals; and
• costs to society or environmental Externalities

Lets Climb Everest Societal licenses to operate - Correct Answers the ongoing acceptance of a business endeavor from the local, regional, or national community (in return for an extensive license to operate or for getting certain concessions that other industries don't, firms in specific industries are expected to fulfill certain societal goals or else to have restrictions placed on some aspects for their operations) Industries with extensive license to operate include (4): - Correct Answers 1. Quasi-public services (ex. utilities, mortgage and student loan providers, telephone and cable companies, transportation authorities);

• Have access to exclusive use of a public good (ex. utilities)
• Benefit from intellectual property protection
• Have a fiduciary duty that extends beyond shareholders (ex. finance and professional services)

Use of common capitals - Correct Answers include elements as varied as water and employees.These are nonfinancial capitals available to an industry as a source of value creation but not owned or controlled by the companies in that industry.Examples of common capitals include (3 categories): - Correct Answers - Natural capital: such as forests, mineral deposits and water

• Public infrastructure: such as roads and wastewater systems 1 / 3

• human capital

Costs to society or environmental externalities? How does it affect a company's financial performance? - Correct Answers include a diverse range of impacts that result from a company's operations such as high levels of pollution, degradation or ecosystems, or loss of biodiversity These costs do not currently affect a company's financial performance, though they tend to be internalized over time - for example through fines and penalties, lawsuits, depletion of key resources in production, depreciation of brand value *(note: externalities can also be positive. For example, pharmaceutical companies produce vaccines that benefit public health - not just that of the consumer - and thus result in positive impacts on society ) Examples of activities that can have externalities are: - Correct Answers - effluents and emissions that can affect public health

• outsourcing and offshoring
• high incidence of corruption
• significant GHG emissions

A company's differences from its SICS industry ("pure-play") can arise from 2 general types of factors:

• Correct Answers 1. Operations (internal factors)
• Operating environment (external factors)

A companies differences diferencies from its SIC industry can arise from - Correct Answers 1. Major revenue streams (the key products and/or services that provide sources of revenue) and

• Main inputs for value creation (key inputs, such as human capital or natural resources)

T or F: When considering SASB reporting standards and given information on revenue streams of a company, if a company's revenue stream only accounts for 1% of it's revenue it would be deemed immaterial to report on. - Correct Answers False. If this 1% of revenue accounts for a large market share by revenue it could be material 2 / 3

T or F: SASB disclosure topics and associated metrics within appropriate industry are always relevant.

• Correct Answers False. Ex, If a company outsources a lot of their work it may not be relevant (ex. a

Semiconductor company that outsources all of it's manufacturing will not have material metrics related to GHG and waste management) T or F: Time considerations can be an important factor in assessing influences of operations on material sustainability factors - Correct Answers True. it is important to consider the changes in internal operations over time as SASB standards may take time to develop. Investors and companies need to assess what topics apply on an ongoing basis.Operating Environment Factors (4) - Correct Answers - Business Climate

• Regulatory Climate
• Economic Climate
• Operating Location(s)

Business Climate - Correct Answers defined by COMPETATIVE FORCES and peer company behaviors, which may include factors such as pricing power, competition for resources, technological innovation, and expectations of key stakeholders (NGOs, customers...) Economic Climate - Correct Answers regional conditions that influence a company's economic performance such as taxes, inflation, interest rates, commodity prices and other factors Regulatory Climate - Correct Answers the presence of current regulation, possible future regulation, and the enforceability and severity of legal actions and penalties for non-compliance Operating Location (s) - Correct Answers exposure to changes in the natural environment, including changes in the availability of common capitals, particularly natural capital, and exposure to the physical impacts of climate change Four Pillars of ESG Management - Correct Answers Governance Strategy Risk Management Performance Metrics and Targets

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