SASB EXAM QUESTIONS AND
ANSWERS
How does sustainability information support investor's goals? - Correct Answers -
Improve ability to achieve above market returns - companies committed to sustainability
tend to outperform
Reduce risk and volatility/protect against diminished returns - sustainability info can be
strong signal for Price Volatility (higher ESG ratine = lower EPS volatility)
ESG performance linked to improved profitability (reduced costs, higher worker
productivity, mitigated risk, increased revenue generating opportunities )
Poor ESG performers have higher likelihood of negative credit events
What internal benefits do companies see for sustainability information? - Correct
Answers -Helps provide insight into financial performance and contributes to success in
near, medium and long term
Sound sustainability standards can lower the cost of capital
Data can be used to inform strategic decisions, drive financial performance, and foster
long term success
Sustainability can drive competitive advantage through new markets, products, services
and resources productivity/efficiency
Besides companies and their investors, what other institutions influence demand for
sustainability information? - Correct Answers -Policy making institutions such as the
European commission
Individual nations
Non-policy efforts like the Sustainable Stock Exchange (SSE) offering global platform
for exploring how exchanges, in collaboration with investors, companies, regulators, and
policymakers and relevant international organizations can enhance performance on
ESG issues and encourage sustainable investing
, Why was disclosure the basis of regulatory reform in wake of the 1930's stock market
crash? - Correct Answers -Thought that public exposure and transparency were the key
to monitoring the companies and investors that shape capital markets
built on seminal values of transparency, corporate governance, and informed decision
making at the service of market efficiency and price discovery
What is the relevance of "materiality" in the context of disclosure, and how has the
concept historically been interpreted? - Correct Answers -Materiality guides companies
on what info is important to disclose, helps regulators determine whether enforcement
action is appropriate, and helps courts make final decision in cases of disclosure based
litigation
Historically information was thought to be material if its exclusion was significantly likely
to be considered by reasonable investor in their decision process (Total Mix Concept)
Materiality can also be assessed by the probability that an event may take place and the
magnitude of the event on the company (Probability and Magnitude Test)
How has the purpose of accounting changed since the 1930's, and why did financial
reporting move from flexible implementation to standardization? - Correct Answers -
Purpose of accounting has shifted from strict historical asset valuation towards decision
usefulness of reported information to user of disclosed information
Accounting measurements are to serve a specific purpose (inform decisions) rather
than perform singular function (provide accurate measurement data)
Purpose of accounting has shifted to assist in making economic decisions
Standardization results in reliable, comparable, decision useful info across markets
allowing investors to see info presented on comparable basis
What does the rise of intangible assets mean for corporate disclosure? - Correct
Answers -Value of non-financial information has increased
Traditional financial statements tell an increasingly smaller part of the story
What factors contribute to increasing investor interest in non-financial information? -
Correct Answers -Endorsement by several key organizations in the financial reporting
community
Increasing percentage of market value attributed to intangibles
ANSWERS
How does sustainability information support investor's goals? - Correct Answers -
Improve ability to achieve above market returns - companies committed to sustainability
tend to outperform
Reduce risk and volatility/protect against diminished returns - sustainability info can be
strong signal for Price Volatility (higher ESG ratine = lower EPS volatility)
ESG performance linked to improved profitability (reduced costs, higher worker
productivity, mitigated risk, increased revenue generating opportunities )
Poor ESG performers have higher likelihood of negative credit events
What internal benefits do companies see for sustainability information? - Correct
Answers -Helps provide insight into financial performance and contributes to success in
near, medium and long term
Sound sustainability standards can lower the cost of capital
Data can be used to inform strategic decisions, drive financial performance, and foster
long term success
Sustainability can drive competitive advantage through new markets, products, services
and resources productivity/efficiency
Besides companies and their investors, what other institutions influence demand for
sustainability information? - Correct Answers -Policy making institutions such as the
European commission
Individual nations
Non-policy efforts like the Sustainable Stock Exchange (SSE) offering global platform
for exploring how exchanges, in collaboration with investors, companies, regulators, and
policymakers and relevant international organizations can enhance performance on
ESG issues and encourage sustainable investing
, Why was disclosure the basis of regulatory reform in wake of the 1930's stock market
crash? - Correct Answers -Thought that public exposure and transparency were the key
to monitoring the companies and investors that shape capital markets
built on seminal values of transparency, corporate governance, and informed decision
making at the service of market efficiency and price discovery
What is the relevance of "materiality" in the context of disclosure, and how has the
concept historically been interpreted? - Correct Answers -Materiality guides companies
on what info is important to disclose, helps regulators determine whether enforcement
action is appropriate, and helps courts make final decision in cases of disclosure based
litigation
Historically information was thought to be material if its exclusion was significantly likely
to be considered by reasonable investor in their decision process (Total Mix Concept)
Materiality can also be assessed by the probability that an event may take place and the
magnitude of the event on the company (Probability and Magnitude Test)
How has the purpose of accounting changed since the 1930's, and why did financial
reporting move from flexible implementation to standardization? - Correct Answers -
Purpose of accounting has shifted from strict historical asset valuation towards decision
usefulness of reported information to user of disclosed information
Accounting measurements are to serve a specific purpose (inform decisions) rather
than perform singular function (provide accurate measurement data)
Purpose of accounting has shifted to assist in making economic decisions
Standardization results in reliable, comparable, decision useful info across markets
allowing investors to see info presented on comparable basis
What does the rise of intangible assets mean for corporate disclosure? - Correct
Answers -Value of non-financial information has increased
Traditional financial statements tell an increasingly smaller part of the story
What factors contribute to increasing investor interest in non-financial information? -
Correct Answers -Endorsement by several key organizations in the financial reporting
community
Increasing percentage of market value attributed to intangibles
