FSA SASB LEVEL I TEST QUESTIONS
WITH COMPLETE ANSWERS
What are the four main characteristics of sustainability disclosure guidance? - Answer-
Interpretive Guidance: interprets or clarifies how sustainability disclosure applies to
existing disclosure guidance (requests it without making it a rule)
Principle-Based Guidance: provides a list of tenants to guide companies
Comply-or-explain Guidance: applies to new and mandatory disclosure requirements,
where companies must comply or explain why they have not
Line-item Disclosure: disclosure using specified metrics and methodologies to produce
specific line items.
What two considerations must sustainability disclosure guidance balance and how do
standards help achieve that balance. - Answer- Flexibility and Usability.
Standards that are well crated offer long term solution by enabling comparability while
also allowing for slight adjustments and additions. Metrics reported in the same way by
different companies but are tailored to industry context and regulatory environment.
What role do frameworks and standards play in the sustainability disclosure value
chain? - Answer- Organizations produce information--> organizations that use
information. Frameworks and standards connect producers and users. They influence
what and how companies disclose and how to structure data, increase transparency,
and engage in market feedback loops (which they use to shape their frameworks and
standards to consider the needs of both companies and users)
What three types of organizations are most influential ESG data quality, and how are
they different from one another? - Answer- 1. Organizations that issue sustainability
disclosure guidance: promote transparency (internally and externally), free to access,
publically conductor decision making
2. ESG Data Aggregators: compile and present publically-available data, investors use
this to access and analyze data from a variety of companies in one place.
3. Third parties that rate/rank ESG performance of companies: use unique
methodologies to assess the ESG performance of individual companies, sourcing data
from public and private sources.
The last two usually charge a fee and have protected intellectual property. They all exist
along the value chain (data aggregators and rating providers downstream of disclosure
guidance), provide different services, and have unique stakeholder relationships.
What are some of the most common disclosure frameworks and standards? How do
they differ? How are they complementary? - Answer- Frameworks and standards: CDP,
CDSB (climate disclosure standards board), GRI (global reporting initiative), IIRC
,(international integrated reporting council), SASB (sustainability accounting standards
board), TCFD (Task force on climate-related financial disclosures)
Differ: scope covered, type of guidance they offer, the industry agnosticism or
specificity, target audience, approach to materiality, governance models employed to
develop
The same: Materiality and scope. Frameworks offer concepts (CDSB, IIRC, TCFD) and
what topics should be covered. Standards (GRI, SASB) are specific, replicable, and
detail guidance for what should be disclosed. Standards make frameworks actionable.
CDP and GRI define materiality in terms of understanding a company's outward impact
on economy, environment, and people. The rest focus on info needed to understand the
impact of sustainability issues on enterprise value.
How do jurisdictions throughout the world traditionally define materiality? - Answer-
Traditionally defined by securities regulators and accounting standards bodies, in the
context of financial disclosure. Most are the same, the nuances exist regarding the
means to determine materiality, legal concepts of reasonable investor, treatment of
misstatements/omissions.
How do traditional characteristics of materiality apply to materiality in the context of
sustainability disclosure? - Answer- Sustainability materiality is broadly defined as info
relevant to decisions of multiple stakeholders. However, it is more and more traditional
(treated the same as traditional material financial info) where the scope of info is limited
to what is necessary to understand a company's performance and prospects.
What is 'dynamic materiality' and how does it apply to sustainability information? -
Answer- What is material in sustainability changes over time as new
risks/opportunities/understandings emerge and evolve. This demonstrates the
connectedness between environmental social issues and financial materiality.
What are the three primary objectives of the SASB Standards, and how is the standard-
setting process designed to meet those objectives? - Answer- Financially Material:
robust research process that assess each topic for financial impact (revenue, costs,
assets, liability, cost of capital)
Decision Useful: Assess each disclosure topic and metrics under different decision-
useful characteristics, such as financial impact, level of interest amongst providers of
capital, prevalence in an industry, and how actionable they are. Metrics must represent
a topic's performance, provide complete info, be comparable between and across
companies and over time, verifiable and replicable, aligned with standards, able to be
added to investment decisions, and free from bias
Cost Effective: feedback from stakeholders as to costs associated with disclosure of
different topics. Considers if already calculated, easy to calculate, is actually necessary
and material. Meant to surface the minimum set of disclosure topics that are likely to be
financially material, avoiding excess info generation
, What are disclosure topics in a SASB Standard, and what purpose do they serve? -
Answer- Topics in each SASB Standard that are likely to have financially material
impacts on a company in a given industry. They represent industry-specific impacts of
General Issue Categories (GICs).
What are the different types of metrics in a SASB Standard, and what purpose do they
each service? - Answer- Accounting Metrics: quantitative or narrative discussion. KPIs
and benchmarks, very useful for investors
Activity Metrics: not performance measurement, but the scale of the business itself,
which allows for contextualization of impact.
How does SASB achieve each of the four fundamental tenets to SASB's approach to
standard-setting? - Answer- 1.Evidence based: robust research process to assess
financial impact of each disclosure topics
2.Market informed: actively reaches out to stakeholders to gain perspectives 3.Industry
specific: Develops these at the industry level to understand how each industry is
affected, using the SIC (categorizing industries based on resource use, sustainability
impact, business model, and regulatory environment)
4. Transparent: embedded throughout, ots of public engagements and commentary, as
well as transparent public messaging.
Characteristics of SASB D&A - Answer- D&A metrics contextualize understanding of a
firm's operations and strategic initiatives
What is SICS? - Answer- Sustainable Industry Classification System create and outline
SASB Sectors and Industries
Classification system to meet the needs of users of financially material sustainability
information to classify and categorize industries. Falls in between granular classification
and repetition, focusing on risks and opportunities and value creation
Why are investors demanding quality sustainability information? - Answer- Financial and
sustainability performance are linked. It gives a better understanding of risk and long
term success. Investment goals vary but include Achieving above market returns,
assessing risk and protecting against losses, an evaluating the predictability of
investment outcomes.
What factors drive demand for quality sustainability information? - Answer- SI, both
qualitative and quantitative, provides insight into financial performance, contributes to
short/med/long-term success by improving management of sustainability-related risks
and opportunities.
Companies may be better equipped to identify and mitigate risks, reduce costs, optimize
efficiencies, and even increase market share and revenue growth through new products
and services. Can improve cost of capital. Demand for SI usually is to drive bottom-line
performance.
WITH COMPLETE ANSWERS
What are the four main characteristics of sustainability disclosure guidance? - Answer-
Interpretive Guidance: interprets or clarifies how sustainability disclosure applies to
existing disclosure guidance (requests it without making it a rule)
Principle-Based Guidance: provides a list of tenants to guide companies
Comply-or-explain Guidance: applies to new and mandatory disclosure requirements,
where companies must comply or explain why they have not
Line-item Disclosure: disclosure using specified metrics and methodologies to produce
specific line items.
What two considerations must sustainability disclosure guidance balance and how do
standards help achieve that balance. - Answer- Flexibility and Usability.
Standards that are well crated offer long term solution by enabling comparability while
also allowing for slight adjustments and additions. Metrics reported in the same way by
different companies but are tailored to industry context and regulatory environment.
What role do frameworks and standards play in the sustainability disclosure value
chain? - Answer- Organizations produce information--> organizations that use
information. Frameworks and standards connect producers and users. They influence
what and how companies disclose and how to structure data, increase transparency,
and engage in market feedback loops (which they use to shape their frameworks and
standards to consider the needs of both companies and users)
What three types of organizations are most influential ESG data quality, and how are
they different from one another? - Answer- 1. Organizations that issue sustainability
disclosure guidance: promote transparency (internally and externally), free to access,
publically conductor decision making
2. ESG Data Aggregators: compile and present publically-available data, investors use
this to access and analyze data from a variety of companies in one place.
3. Third parties that rate/rank ESG performance of companies: use unique
methodologies to assess the ESG performance of individual companies, sourcing data
from public and private sources.
The last two usually charge a fee and have protected intellectual property. They all exist
along the value chain (data aggregators and rating providers downstream of disclosure
guidance), provide different services, and have unique stakeholder relationships.
What are some of the most common disclosure frameworks and standards? How do
they differ? How are they complementary? - Answer- Frameworks and standards: CDP,
CDSB (climate disclosure standards board), GRI (global reporting initiative), IIRC
,(international integrated reporting council), SASB (sustainability accounting standards
board), TCFD (Task force on climate-related financial disclosures)
Differ: scope covered, type of guidance they offer, the industry agnosticism or
specificity, target audience, approach to materiality, governance models employed to
develop
The same: Materiality and scope. Frameworks offer concepts (CDSB, IIRC, TCFD) and
what topics should be covered. Standards (GRI, SASB) are specific, replicable, and
detail guidance for what should be disclosed. Standards make frameworks actionable.
CDP and GRI define materiality in terms of understanding a company's outward impact
on economy, environment, and people. The rest focus on info needed to understand the
impact of sustainability issues on enterprise value.
How do jurisdictions throughout the world traditionally define materiality? - Answer-
Traditionally defined by securities regulators and accounting standards bodies, in the
context of financial disclosure. Most are the same, the nuances exist regarding the
means to determine materiality, legal concepts of reasonable investor, treatment of
misstatements/omissions.
How do traditional characteristics of materiality apply to materiality in the context of
sustainability disclosure? - Answer- Sustainability materiality is broadly defined as info
relevant to decisions of multiple stakeholders. However, it is more and more traditional
(treated the same as traditional material financial info) where the scope of info is limited
to what is necessary to understand a company's performance and prospects.
What is 'dynamic materiality' and how does it apply to sustainability information? -
Answer- What is material in sustainability changes over time as new
risks/opportunities/understandings emerge and evolve. This demonstrates the
connectedness between environmental social issues and financial materiality.
What are the three primary objectives of the SASB Standards, and how is the standard-
setting process designed to meet those objectives? - Answer- Financially Material:
robust research process that assess each topic for financial impact (revenue, costs,
assets, liability, cost of capital)
Decision Useful: Assess each disclosure topic and metrics under different decision-
useful characteristics, such as financial impact, level of interest amongst providers of
capital, prevalence in an industry, and how actionable they are. Metrics must represent
a topic's performance, provide complete info, be comparable between and across
companies and over time, verifiable and replicable, aligned with standards, able to be
added to investment decisions, and free from bias
Cost Effective: feedback from stakeholders as to costs associated with disclosure of
different topics. Considers if already calculated, easy to calculate, is actually necessary
and material. Meant to surface the minimum set of disclosure topics that are likely to be
financially material, avoiding excess info generation
, What are disclosure topics in a SASB Standard, and what purpose do they serve? -
Answer- Topics in each SASB Standard that are likely to have financially material
impacts on a company in a given industry. They represent industry-specific impacts of
General Issue Categories (GICs).
What are the different types of metrics in a SASB Standard, and what purpose do they
each service? - Answer- Accounting Metrics: quantitative or narrative discussion. KPIs
and benchmarks, very useful for investors
Activity Metrics: not performance measurement, but the scale of the business itself,
which allows for contextualization of impact.
How does SASB achieve each of the four fundamental tenets to SASB's approach to
standard-setting? - Answer- 1.Evidence based: robust research process to assess
financial impact of each disclosure topics
2.Market informed: actively reaches out to stakeholders to gain perspectives 3.Industry
specific: Develops these at the industry level to understand how each industry is
affected, using the SIC (categorizing industries based on resource use, sustainability
impact, business model, and regulatory environment)
4. Transparent: embedded throughout, ots of public engagements and commentary, as
well as transparent public messaging.
Characteristics of SASB D&A - Answer- D&A metrics contextualize understanding of a
firm's operations and strategic initiatives
What is SICS? - Answer- Sustainable Industry Classification System create and outline
SASB Sectors and Industries
Classification system to meet the needs of users of financially material sustainability
information to classify and categorize industries. Falls in between granular classification
and repetition, focusing on risks and opportunities and value creation
Why are investors demanding quality sustainability information? - Answer- Financial and
sustainability performance are linked. It gives a better understanding of risk and long
term success. Investment goals vary but include Achieving above market returns,
assessing risk and protecting against losses, an evaluating the predictability of
investment outcomes.
What factors drive demand for quality sustainability information? - Answer- SI, both
qualitative and quantitative, provides insight into financial performance, contributes to
short/med/long-term success by improving management of sustainability-related risks
and opportunities.
Companies may be better equipped to identify and mitigate risks, reduce costs, optimize
efficiencies, and even increase market share and revenue growth through new products
and services. Can improve cost of capital. Demand for SI usually is to drive bottom-line
performance.
