Module 3: Environmental Factors Quiz Flashcards
(27 cards)
Quiz #1 No.1
A sustainability bond funding a climate-friendly project that will reduce emissions in the near term but does not represent a climate resilient long-term solution would be graded by CICERO as:
A. brown.
B. light green.
C. medium green.
B. light green.
Explanation:
CICERO (Center for International Climate and Environmental Research – Oslo) provides independent assessments of sustainability bonds and their alignment with climate goals. Their Shades of Green framework grades bonds based on how well the funded projects align with a low-carbon and climate-resilient future.
Light Green is assigned to projects that contribute to short-term environmental improvements but do not fully align with long-term climate resilience goals.
This could include projects that reduce emissions or improve efficiency in the near term but rely on technologies or systems that are not fully sustainable over the long run.
Why B. light green is correct:
The bond funds a climate-friendly project that reduces emissions in the near term, which is positive. However, because it does not represent a long-term climate-resilient solution, it falls into the “Light Green” category.
Examples of potential light green projects include energy-efficient fossil fuel infrastructure or transitional technologies.
Why the other options are incorrect:
A. brown: “Brown” is not a category used by CICERO. It generally refers to projects that are harmful to the environment, such as those linked to fossil fuels or activities that increase emissions. A climate-friendly project would not be graded as brown.
C. medium green: Medium Green represents projects that are on the path to long-term sustainability but are not fully aligned with a low-carbon future. These might include renewable energy projects that still have some transitional reliance on less sustainable methods. The project described in the question does not meet this level because it lacks long-term climate resilience.
Quiz #1 No.2
Sustainable finance initiatives are intended to embed sustainability in the practices of:
A. asset owners and investee companies.
B. asset owners and financial intermediaries.
C. asset owners, investee companies, and financial intermediaries.
C. asset owners, investee companies, and financial intermediaries.
Explanation:
Sustainable finance initiatives are designed to integrate environmental, social, and governance (ESG) considerations into the entire financial system. This involves embedding sustainability into the practices of all key stakeholders in the investment value chain, including:
Asset owners: These are entities like pension funds, insurance companies, and sovereign wealth funds that allocate capital. They play a critical role in driving demand for sustainable investments.
Investee companies: These are the companies receiving investments. Sustainability initiatives encourage them to adopt ESG-friendly practices, such as reducing carbon emissions, improving corporate governance, and ensuring social responsibility.
Financial intermediaries: These include banks, asset managers, and investment firms that facilitate the flow of capital. They are expected to integrate ESG considerations into their products, services, and decision-making processes.
By targeting all these groups, sustainable finance initiatives aim to ensure systemic alignment with sustainability goals.
Why C. asset owners, investee companies, and financial intermediaries is correct:
Sustainability initiatives involve the entire investment ecosystem, from the capital providers (asset owners), to the capital recipients (investee companies), to the intermediaries that guide and manage investments.
This holistic approach ensures that capital flows are directed toward sustainable outcomes and that all parties are accountable for ESG integration.
Quiz #1 No.3
Which of the following initiatives recommends that signatories incorporate climate change effects into macroeconomic policy and fiscal planning?
A. Helsinki Principles
B. Equator Principles
C. Climate Resilience Principles
A. Helsinki Principles
Explanation:
The Helsinki Principles are a set of voluntary principles developed by the Coalition of Finance Ministers for Climate Action. These principles guide countries in integrating climate considerations into macroeconomic policy, fiscal planning, and public financial management. The goal is to align financial policies with the Paris Agreement and promote sustainable and climate-resilient economic growth.
Why A. Helsinki Principles is correct:
The Helsinki Principles specifically focus on incorporating climate change effects into economic and fiscal decision-making.
They aim to:
Promote national climate action through fiscal policy.
Align public finances with the objectives of the Paris Agreement.
Foster knowledge sharing and capacity building among finance ministries.
Why the other options are incorrect:
B. Equator Principles: These are a risk management framework used by financial institutions to assess and manage environmental and social risks in project financing. They focus more on specific projects rather than macroeconomic or fiscal policies.
C. Climate Resilience Principles: While these principles address climate resilience in infrastructure and other projects, they do not cover macroeconomic policy or fiscal planning at the national level.
Quiz #1 No.4
The first international convention to set targets for emissions of the main greenhouse gases was the:
A. Kyoto Protocol.
B. Paris Agreement.
C. United Nations Sustainable Development Goals.
A. Kyoto Protocol
Explanation:
The Kyoto Protocol, adopted in 1997 and entered into force in 2005, was the first international convention to set legally binding targets for reducing emissions of the main greenhouse gases (GHGs), such as carbon dioxide (CO₂), methane (CH₄), and nitrous oxide (N₂O). It required industrialized countries and economies in transition (Annex I countries) to reduce their collective GHG emissions to 5% below 1990 levels during its first commitment period (2008–2012).
Why A. Kyoto Protocol is correct:
The Kyoto Protocol introduced binding emission reduction targets for developed nations, making it the first international agreement of its kind.
It established mechanisms like carbon trading and Clean Development Mechanisms (CDM) to help countries achieve their targets.
It laid the groundwork for subsequent global agreements, such as the Paris Agreement.
Why the other options are incorrect:
B. Paris Agreement: While the Paris Agreement (adopted in 2015) is a landmark climate accord, it came after the Kyoto Protocol and focuses on limiting global temperature rise to well below 2°C, with commitments from all countries (not just developed ones). It does not impose legally binding targets but instead relies on voluntary national contributions.
C. United Nations Sustainable Development Goals (SDGs): The SDGs, adopted in 2015, provide a broader framework for sustainable development, addressing a wide range of issues, including poverty, education, and climate action. However, they do not set specific GHG emission reduction targets.
Conclusion:
The Kyoto Protocol was the first international convention to set targets for emissions of the main greenhouse gases, making A the correct answer.
Quiz #1 No.5
In relation to the European Green Deal, the “green supporting factor” refers to:
A. standards and labels for green bonds.
B. a classification system for sustainable activities.
C. the treatment of “green” assets in the capital requirements of banks and insurers.
C. the treatment of “green” assets in the capital requirements of banks and insurers.
Explanation:
The “green supporting factor” is a concept introduced as part of the European Green Deal to encourage banks and insurers to finance environmentally sustainable projects and activities. It refers to adjusting capital requirements for financial institutions when they hold “green” assets, such as loans or investments tied to sustainable activities. The goal is to incentivize financing for projects that align with the EU’s climate and environmental objectives by potentially reducing the capital banks and insurers are required to hold against these assets.
Why C. the treatment of “green” assets in the capital requirements of banks and insurers is correct:
The “green supporting factor” encourages financial institutions to allocate more capital toward environmentally sustainable projects by lowering the risk weightings of “green” assets in their portfolios.
This approach aims to make green investments more attractive and cost-effective for financial institutions.
It is part of the EU’s broader efforts to align the financial system with the goals of the European Green Deal, which include achieving net-zero emissions by 2050.
Why the other options are incorrect:
A. standards and labels for green bonds: This refers to the EU Green Bond Standard, which is a separate initiative under the European Green Deal to create a standardized framework for green bonds. It is unrelated to the “green supporting factor.”
B. a classification system for sustainable activities: This describes the EU Taxonomy, a classification system to define what constitutes a sustainable economic activity. While the taxonomy supports the European Green Deal, it is distinct from the “green supporting factor.”
Quiz #1 No.6
The Paris Agreement:
A. is legally binding under the local law of each signatory country.
B. requires every signatory to provide an annual update on its national emission commitments.
C. aims to limit the increase in global average temperature to below 2°C above pre-industrial levels by the end of the century.
C. aims to limit the increase in global average temperature to below 2°C above pre-industrial levels by the end of the century.
Explanation:
The Paris Agreement, adopted in 2015 during COP21, is a landmark international treaty under the United Nations Framework Convention on Climate Change (UNFCCC). Its primary aim is to combat climate change by limiting global warming to well below 2°C above pre-industrial levels, with efforts to limit the temperature increase to 1.5°C, as this would significantly reduce the risks and impacts of climate change.
Why C. aims to limit the increase in global average temperature to below 2°C above pre-industrial levels by the end of the century is correct:
The central goal of the Paris Agreement is to limit global warming to well below 2°C, with an aspirational target of 1.5°C, as agreed upon by all participating nations.
To achieve this, countries submit Nationally Determined Contributions (NDCs), which outline their plans for reducing greenhouse gas emissions and adapting to climate impacts.
Why the other options are incorrect:
A. is legally binding under the local law of each signatory country:
The Paris Agreement is not legally binding in the sense of enforcing compliance with emission reduction targets. It relies on voluntary commitments (NDCs) and international cooperation.
While the submission of NDCs is binding, the implementation of these commitments is not enforceable under international law.
B. requires every signatory to provide an annual update on its national emission commitments:
Signatories are not required to provide annual updates. Instead, they must submit updated NDCs every five years, with each update reflecting increased ambition compared to previous commitments.
Quiz #1 No.7
Which of the following countries has the highest level of investments in the low-carbon energy transition?
A. Japan
B. China
C. United States
B. China
Explanation:
China has consistently ranked as the country with the highest level of investments in the low-carbon energy transition, driven by its substantial investments in renewable energy, electric vehicles, battery technologies, and other clean energy infrastructure. It is a global leader in solar and wind energy production and dominates the manufacturing of key components such as solar panels, batteries, and electric vehicles.
Supporting Details:
China:
China has been the world’s largest investor in clean energy for many years, contributing hundreds of billions of dollars annually to renewable energy projects.
It leads in the installation of renewable energy capacity, including solar, wind, and hydropower.
The country is also a global leader in the electric vehicle (EV) market, with significant government policies supporting the transition to low-carbon transportation.
United States:
The U.S. is a major investor in the low-carbon energy transition, particularly through federal incentives such as those included in the Inflation Reduction Act (IRA) of 2022.
While the U.S. has made significant progress in renewable energy investments, it still lags behind China in total investment levels.
Quiz #1 No.8
Which of the following carbon pricing methods is used by companies to determine the impact of climate change on the profitability of a new project?
A. Carbon taxation
B. Shadow carbon pricing
C. Emission trading system (ETS)
B. Shadow carbon pricing
Explanation:
Shadow carbon pricing is an internal tool used by companies to estimate the potential financial impact of carbon emissions on the profitability of a project. It involves assigning a hypothetical price to carbon emissions, even in the absence of actual carbon pricing regulations, to evaluate the risks and costs associated with future climate policies or carbon markets. This allows companies to make informed decisions about their investments and strategies in light of potential carbon costs.
Why B. Shadow carbon pricing is correct:
Companies use shadow carbon pricing to simulate the cost of carbon emissions and assess how future carbon regulations might affect the financial performance of a project.
It is a proactive measure to incorporate the risk of carbon pricing into decision-making processes.
This method helps companies prepare for potential regulatory changes, such as carbon taxes or emissions trading systems, which could impose real costs on carbon-intensive activities.
Why the other options are incorrect:
A. Carbon taxation:
A carbon tax is an actual government-imposed levy on greenhouse gas emissions. It is not a tool used by companies internally to assess profitability but rather an external regulatory mechanism that directly impacts costs.
C. Emission trading system (ETS):
An ETS, also known as a cap-and-trade system, is a market-based mechanism where companies buy or sell emissions allowances. Like carbon taxes, it is an external regulatory framework, not an internal tool for project evaluation.
Quiz #1 No.9
The Network for Greening the Financial System (NGFS) comprises:
A. multilateral institutions and agencies.
B. asset managers and investment banks.
C. central banks and financial supervisors.
C. central banks and financial supervisors.
Explanation:
The Network for Greening the Financial System (NGFS) is a global coalition of central banks and financial supervisors. It was established in 2017 to enhance the role of the financial sector in managing risks related to climate change and to support the transition toward a sustainable economy. NGFS members work collaboratively to integrate climate and environmental risks into financial supervision and monetary policy.
Why C. central banks and financial supervisors is correct:
The NGFS consists of central banks, such as the European Central Bank (ECB) and the Federal Reserve, as well as financial supervisors, which oversee the stability and regulation of financial systems.
Its primary objectives include:
Developing best practices for managing climate-related financial risks.
Encouraging green finance.
Supporting a smooth transition to a low-carbon economy.
Why the other options are incorrect:
A. multilateral institutions and agencies:
While some multilateral institutions (e.g., the International Monetary Fund) are NGFS observers, they are not the core members of the network. The NGFS is primarily composed of central banks and financial regulators.
B. asset managers and investment banks:
The NGFS does not include private financial institutions like asset managers or investment banks as members. Its focus is on the public sector, specifically financial supervisors and central banks.
Quiz #2 No.1
Compared to the rest of the world, the Arctic is warming:
A. one-third as fast as the global average.
B. in line with the global average.
C. three times as fast as the global average.
C. three times as fast as the global average.
Explanation:
The Arctic is warming at a rate approximately three times faster than the global average, a phenomenon known as Arctic amplification. This is primarily due to feedback mechanisms, such as:
Loss of sea ice: As sea ice melts, it exposes darker ocean water, which absorbs more solar radiation compared to the reflective ice. This leads to further warming and more ice melt.
Changes in albedo: The reduced reflectivity (albedo) of the Earth’s surface accelerates warming in the region.
Atmospheric and oceanic circulation changes: Shifts in wind and ocean currents contribute to the disproportionate warming in the Arctic.
Why C. three times as fast as the global average is correct:
Studies, including those from the IPCC and the Arctic Monitoring and Assessment Programme (AMAP), confirm that Arctic temperatures are rising approximately three times faster than the global average.
This rapid warming has significant consequences, including accelerated sea level rise, thawing permafrost, and disruptions to ecosystems and Indigenous communities.
Why the other options are incorrect:
A. one-third as fast as the global average: This is incorrect because the Arctic is warming much faster than the global average, not slower.
B. in line with the global average: While global warming is occurring everywhere, the Arctic is experiencing amplified warming, making its rate of temperature increase much higher than the global average.
Quiz #2 No.2
Which of the following statements about CO2 is most accurate?
A. CO2 levels are the highest they have been in over 800,000 years.
B. About 10% of CO2 emissions from the 17th century onward occurred in the last 30 years.
C. Agriculture and land-use changes account for the highest share of CO2 emissions.
A. CO2 levels are the highest they have been in over 800,000 years.
Explanation:
A. CO2 levels are the highest they have been in over 800,000 years:
Ice core data reveals that atmospheric CO2 concentrations have fluctuated between 180-280 parts per million (ppm) over the past 800,000 years during glacial and interglacial cycles.
However, since the Industrial Revolution, human activities such as burning fossil fuels, deforestation, and industrial processes have dramatically increased CO2 levels. As of today, CO2 levels exceed 420 ppm, which is unprecedented in the last 800,000 years (and likely much longer, based on geological evidence).
This rapid rise is a key driver of climate change.
Why the other options are incorrect:
B. About 10% of CO2 emissions from the 17th century onward occurred in the last 30 years:
This is incorrect because more than 50% of cumulative CO2 emissions from fossil fuels and cement production have occurred in the last 30-40 years. The rapid acceleration of emissions since the mid-20th century, often referred to as the “Great Acceleration,” far exceeds this figure.
C. Agriculture and land-use changes account for the highest share of CO2 emissions:
This is incorrect because the burning of fossil fuels (coal, oil, and natural gas) accounts for the largest share of CO2 emissions. Agriculture and land-use changes (e.g., deforestation) are significant sources of greenhouse gases, but they primarily contribute methane (CH4) and nitrous oxide (N2O), rather than CO2.
Quiz #2 No.3
Economist Nicholas Stern argued that moral considerations warrant using a low discount rate when assessing future climate damages to place adequate value on the lives and welfare of future generations.
The Jevons paradox states that:
A. feeding a rapidly growing population is possible without further deforestation.
B. relative improvements in efficiency may be offset by increased consumption of a given product.
C. the quality of remaining phosphorus reserves is expected to fall while its costs continue to rise.
B. relative improvements in efficiency may be offset by increased consumption of a given product.
Explanation:
The Jevons paradox, named after economist William Stanley Jevons, refers to the phenomenon where improvements in the efficiency of resource use lead to increased overall consumption of that resource, rather than a decrease. This occurs because the efficiency gains make the resource cheaper or more accessible, which can stimulate higher demand.
Why B. relative improvements in efficiency may be offset by increased consumption of a given product is correct:
For example, improvements in the fuel efficiency of vehicles might reduce the cost of driving per mile, which could lead to people driving more, ultimately increasing total fuel consumption rather than reducing it.
This paradox highlights the importance of combining efficiency improvements with policies to control consumption.
Why the other options are incorrect:
A. feeding a rapidly growing population is possible without further deforestation:
This is not related to the Jevons paradox. It might describe approaches to sustainable agriculture, but it does not address the relationship between efficiency and consumption.
C. the quality of remaining phosphorus reserves is expected to fall while its costs continue to rise:
This describes the concept of resource depletion, not the Jevons paradox. While phosphorus is a finite resource with declining quality, the Jevons paradox pertains to the unintended consequences of efficiency improvements.
Quiz #2 No.4
The set of actions taken to adapt human practices to function better in a warming world is called climate change:
A. mitigation.
B. adaptation.
C. resilience measures.
B. adaptation.
Explanation:
Climate change adaptation refers to the actions taken to adjust human practices, systems, and infrastructure to better cope with the impacts of a warming world. These actions aim to reduce the vulnerability of communities, ecosystems, and economies to changes like rising sea levels, extreme weather events, and shifting ecosystems.
Why B. adaptation is correct:
Adaptation focuses on preparing for and managing the effects of climate change that are already occurring or are likely to occur in the future.
Examples of adaptation include:
Building seawalls to protect against rising sea levels.
Developing drought-resistant crops.
Improving water management systems in response to changing rainfall patterns.
Why the other options are incorrect:
A. mitigation:
Mitigation refers to efforts to reduce or prevent the emission of greenhouse gases, such as transitioning to renewable energy, improving energy efficiency, or reforestation. Mitigation addresses the root causes of climate change, not its impacts.
C. resilience measures:
While resilience is related to adaptation, it is a broader concept that includes the capacity to recover quickly from climate impacts, rather than taking proactive measures to adjust systems. Resilience is often an outcome of effective adaptation strategies.
Quiz #2 No.5
According to the Global Reporting Initiative (GRI) framework, which of the following is most likely to have an indirect impact on biodiversity resources?
A. The use of surface water for irrigation purposes
B. The construction of a road to transport products from a forestry operation
C. The disturbance of local species by the noise and light produced at a processing site
B. The construction of a road to transport products from a forestry operation
Explanation:
According to the Global Reporting Initiative (GRI) framework, impacts on biodiversity can be direct (e.g., habitat destruction, species disturbance) or indirect, meaning they result from activities that create secondary or cascading effects on biodiversity.
Why B. The construction of a road to transport products from a forestry operation is correct:
Building a road is an indirect impact on biodiversity because, while the road itself does not directly destroy a large area of habitat, it facilitates increased human activity, resource extraction, and habitat fragmentation.
Roads can lead to:
Habitat fragmentation, which isolates species and reduces genetic diversity.
Increased human access, leading to poaching or illegal logging.
Altered animal movement patterns and ecosystem dynamics.
These secondary effects can have significant long-term impacts on biodiversity.
Quiz #2 No.6
The term “dismal theorem” refers to the idea that:
A. potentially catastrophic outcomes should be valued to negative infinity.
B. moral considerations related to future climate change warrant low discount rates.
C. the probability of total civilizational collapse causes the discount rate to increase dramatically.
A. potentially catastrophic outcomes should be valued to negative infinity.
Explanation:
The dismal theorem, introduced by economist Martin Weitzman, addresses how society should evaluate low-probability but high-impact events (such as catastrophic climate change) in economic models. It suggests that:
If there is even a small chance of catastrophic outcomes, such as the complete collapse of ecosystems or human civilization, standard cost-benefit analysis breaks down.
These catastrophic outcomes should theoretically be assigned an extremely high negative value (approaching negative infinity) because their impacts are so severe that they outweigh other considerations.
This creates a situation where mitigating catastrophic risks becomes a top priority, regardless of the costs.
Why A. potentially catastrophic outcomes should be valued to negative infinity is correct:
The dismal theorem highlights the challenges of using traditional economic frameworks to evaluate climate risk because extreme events (even with low probabilities) dominate the analysis.
For example, the possibility of runaway climate change or irreversible tipping points (e.g., ice sheet collapse or permafrost thaw) would require massive action today to avoid such outcomes.
Quiz #2 No.7
In relation to ESG analysis, factors that cause investors to make adjustments to the credit assessment of a company include:
A. solely quantitative environmental factors.
B. the sector and geographic location of the company’s assets.
C. all environmental effects on the company, irrespective of their materiality.
B. the sector and geographic location of the company’s assets.
Explanation:
In ESG (Environmental, Social, and Governance) analysis, several factors influence an investor’s credit assessment of a company. These factors include sector-specific risks and geographic location, as they play a significant role in determining the company’s exposure to ESG-related risks and opportunities.
Why B. the sector and geographic location of the company’s assets is correct:
Sector: Different sectors have varying levels of exposure to ESG risks. For instance:
Companies in the energy or mining sectors face higher climate-related and environmental risks compared to those in technology or services.
Social risks (e.g., labor practices) may also vary by sector.
Geographic location: A company’s location determines its exposure to region-specific risks such as:
Physical risks from climate change (e.g., flooding, hurricanes, or droughts).
Regulatory risks, as some regions may have stricter environmental laws or governance standards.
Social and geopolitical risks, such as unstable political environments or labor disputes.
Investors consider these factors when adjusting credit assessments to reflect potential risks to a company’s financial stability and ability to repay debt.
Quiz #2 No.8
According to the Stockholm Resilience Centre, how many of the nine planetary boundaries have already been crossed as a result of human activity?
A. Three
B. Six
C. All nine
B. Six
Explanation:
The Stockholm Resilience Centre developed the concept of planetary boundaries to define the safe operating space for humanity. These boundaries represent critical thresholds in Earth’s systems that, if crossed, could lead to dangerous and potentially irreversible environmental changes.
As of recent assessments, six of the nine planetary boundaries have been crossed due to human activity. These include:
Climate change: Atmospheric CO2 levels and global temperatures have exceeded safe thresholds.
Biosphere integrity: The loss of biodiversity and species extinction rates are far above natural levels.
Biogeochemical flows: Excessive nitrogen and phosphorus use disrupt ecosystems and contribute to water pollution.
Land-system change: Large-scale deforestation and land-use change for agriculture have altered ecosystems.
Freshwater use: Overuse and mismanagement of freshwater resources are impacting ecosystems and water availability.
Novel entities (chemical pollution): The release of synthetic chemicals, plastics, and other pollutants into the environment exceeds safe limits.
Why the other options are incorrect:
A. Three:
This figure is outdated. Earlier assessments had fewer boundaries crossed, but updated research shows that six boundaries have now been exceeded.
C. All nine:
While six boundaries have been crossed, three remain within safe limits (though they are under pressure). These include:
Stratospheric ozone depletion (partially recovered due to global action like the Montreal Protocol).
Ocean acidification (approaching the threshold but not yet crossed).
Atmospheric aerosol loading (uncertain impacts but not fully quantified).
Quiz #2 No.9
Using surface water for irrigation purposes and disturbing local species through the noise and light produced at a processing site both impact biodiversity directly. In relation to shadow carbon pricing, which of the following is incorrect?
A. Shadow carbon pricing is used to understand the potential impact of external prices on the profitability of a project.
B. Shadow carbon pricing is used to conceal the true cost of an entity’s carbon emissions.
C. Shadow carbon pricing is used to create a theoretical cost per ton of carbon emissions by establishing a business’s internal price on carbon.
B. Shadow carbon pricing is used to conceal the true cost of an entity’s carbon emissions.
Explanation:
Shadow carbon pricing is a tool used by businesses and organizations to assign a hypothetical cost to carbon emissions. It helps companies assess the potential financial impact of carbon regulations, taxes, or other climate-related policies on their operations. Shadow carbon pricing is not used to conceal costs but rather to anticipate and manage the risks and opportunities associated with future carbon pricing.
Why B is incorrect:
Shadow carbon pricing is not about concealing costs. Instead, it provides transparency and helps companies internalize the external costs of carbon emissions in their decision-making processes.
Companies use shadow carbon pricing to prepare for potential regulatory changes, identify cost-saving opportunities, and align with sustainability goals.
Why the other options are correct:
A. Shadow carbon pricing is used to understand the potential impact of external prices on the profitability of a project:
This is correct. Shadow carbon pricing allows businesses to simulate how carbon taxes or emission trading schemes would affect the profitability of projects or investments.
C. Shadow carbon pricing is used to create a theoretical cost per ton of carbon emissions by establishing a business’s internal price on carbon:
This is correct. By creating an internal price, companies can evaluate the financial implications of carbon emissions and incentivize low-carbon operations and investments.
Quiz #3 No.1
Which of the following is not a Task Force on Climate-Related Financial Disclosures (TCFD) core element of climate-related disclosures?
A. Governance
B. Impact
C. Risk management
B. Impact
Explanation:
The Task Force on Climate-Related Financial Disclosures (TCFD) framework is designed to help organizations disclose climate-related financial risks and opportunities in a structured and consistent way. It has four core elements of climate-related disclosures:
Governance: The organization’s governance around climate-related risks and opportunities.
Strategy: The actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.
Risk Management: The processes used to identify, assess, and manage climate-related risks.
Metrics and Targets: The metrics and targets used to assess and manage relevant climate-related risks and opportunities.
Why B. Impact is not a core element:
While the TCFD addresses the impact of climate-related risks on an organization as part of the Strategy category, Impact is not one of the four named core elements. The focus is on how risks and opportunities affect the organization’s financial performance and strategy, rather than having “Impact” as a standalone category.
Why the other options are correct:
A. Governance:
Governance is a core element and focuses on the board’s and management’s role in overseeing and addressing climate-related issues.
C. Risk management:
Risk management is another core element and addresses how the organization identifies, assesses, and manages climate-related risks.
Quiz #3 No.2
Which of the following best describes a transition risk?
A. Policy change to encourage low-carbon technologies
B. Occurrence of extreme weather events
C. Breakdowns in business supply chains
A. Policy change to encourage low-carbon technologies
Explanation:
Transition risks are risks associated with the shift to a low-carbon economy. These risks arise from changes in policy, regulation, technology, and market dynamics as governments, businesses, and societies work to reduce greenhouse gas (GHG) emissions. Transition risks can impact businesses that rely heavily on carbon-intensive processes or products, as they may face higher costs, reduced demand, or stricter regulations.
Why A. Policy change to encourage low-carbon technologies is correct:
A policy change encouraging low-carbon technologies (e.g., carbon taxes, renewable energy subsidies, or stricter emissions regulations) is a clear example of a transition risk. It can increase compliance costs for businesses reliant on fossil fuels and disrupt industries that are slow to adapt to cleaner technologies.
Why the other options are incorrect:
B. Occurrence of extreme weather events:
This describes a physical risk, not a transition risk. Physical risks arise from the direct impacts of climate change, such as hurricanes, floods, or droughts, which can damage assets, disrupt operations, and impact supply chains.
C. Breakdowns in business supply chains:
While supply chain disruptions could be caused by extreme weather (a physical risk), they are not inherently a transition risk unless they result from regulatory or market responses to climate change (e.g., shifts to sustainable sourcing or restrictions on carbon-intensive goods).
Conclusion:
A policy change to encourage low-carbon technologies is a clear example of a transition risk, making A the correct answer. Transition risks are distinct from physical risks, which involve the direct impacts of climate change.
Quiz #3 No.3
Which of the following would be considered a climate change adaptation strategy?
A. Releasing sunlight-reflecting aerosols into the atmosphere to reduce temperatures
B. Retrofitting buildings to become more energy efficient
C. Protecting coastlines from erosion
C. Protecting coastlines from erosion
Explanation:
Climate change adaptation involves strategies designed to help ecosystems, communities, and economies adjust to the current and anticipated impacts of climate change. These strategies aim to reduce vulnerability and increase resilience to changes such as rising sea levels, extreme weather events, and shifting ecosystems.
Why C. Protecting coastlines from erosion is correct:
Protecting coastlines from erosion is a clear example of an adaptation strategy, as it addresses the consequences of rising sea levels and increased storm intensity caused by climate change.
Examples include constructing seawalls, restoring mangroves, or implementing dune stabilization measures to reduce the impact of coastal erosion and flooding.
Why the other options are incorrect:
A. Releasing sunlight-reflecting aerosols into the atmosphere to reduce temperatures:
This is an example of geoengineering, specifically a climate change mitigation strategy, not adaptation. Geoengineering seeks to reduce global temperatures by altering Earth’s systems but does not address how to live with the impacts of climate change.
B. Retrofitting buildings to become more energy efficient:
This is a mitigation strategy because it reduces greenhouse gas emissions by lowering energy consumption. While it contributes to slowing climate change, it does not directly address adapting to its impacts.
Quiz #3 No.4
Which of the following emission sources are considered Scope 3 under the GHG Protocol Standards?
A. Company facilities
B. Purchased electricity
C. Purchased goods and services
C. Purchased goods and services
Explanation:
Under the GHG Protocol Standards, emissions are categorized into three scopes:
Scope 1: Direct emissions from sources owned or controlled by the company (e.g., emissions from company facilities or vehicles).
Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating, or cooling consumed by the company.
Scope 3: All other indirect emissions that occur in the value chain of the reporting company, both upstream and downstream. This includes emissions from activities such as purchased goods and services, business travel, employee commuting, waste disposal, and the use of sold products.
Why C. Purchased goods and services is correct:
Emissions resulting from purchased goods and services are part of the Scope 3 category because they occur in the company’s supply chain (upstream) and are indirect emissions.
Why the other options are incorrect:
A. Company facilities:
Emissions from company facilities are Scope 1, as they are direct emissions from sources owned or controlled by the company (e.g., on-site fuel combustion).
B. Purchased electricity:
Emissions from purchased electricity are Scope 2, as they are indirect emissions associated with the generation of energy consumed by the company.
Quiz #3 No.5
For a reasonable chance of limiting the global average temperature rise to 1.5°C (2.7°F), the Intergovernmental Panel on Climate Change (IPCC) recommends that global emissions of CO2 must reach “net zero” around:
A. 2030.
B. 2050.
C. 2100.
Explanation:
The Intergovernmental Panel on Climate Change (IPCC) states that to limit global warming to 1.5°C (2.7°F) above pre-industrial levels—a target established by the Paris Agreement—global CO2 emissions must reach net zero by around 2050. Achieving net zero means the amount of CO2 emitted into the atmosphere is balanced by the amount removed (e.g., through carbon capture, reforestation, or other methods).
Key Points:
Limiting warming to 1.5°C significantly reduces the risks of extreme climate impacts, such as severe heatwaves, rising sea levels, and biodiversity loss.
The IPCC suggests that to stay within this threshold, global CO2 emissions need to be reduced by about 45% by 2030 (compared to 2010 levels) and reach net zero by 2050.
Why the other options are incorrect:
A. 2030:
While substantial emissions reductions are needed by 2030 (about 45%), reaching net zero CO2 emissions by 2030 is not realistic. The IPCC emphasizes 2050 as the target for net zero.
C. 2100:
Reaching net zero by 2100 would be too late to limit warming to 1.5°C. Delayed action would result in significantly higher global temperatures, with severe and irreversible consequences.
Conclusion:
To have a reasonable chance of limiting global average temperature rise to 1.5°C, global CO2 emissions must reach net zero by around 2050, making B the correct answer.
Quiz #3 No.6
Which of the following best describes the concept of “natural capital”?
A. Natural resources (such as oil, gas, or timber) that can be sold for a profit in a capitalist economy
B. The stock of natural assets, which include geology, soil, air, water, and all living things
C. The sum total of monetary benefits that are directly dependent on nature
B. The stock of natural assets, which include geology, soil, air, water, and all living things
Explanation:
Natural capital refers to the world’s stock of natural assets, including resources such as geology, soil, air, water, and all living organisms. These assets provide essential ecosystem services that benefit humans, such as clean air, water filtration, pollination, climate regulation, and raw materials. The concept emphasizes the value of nature’s contributions to economies and societies.
Why B is correct:
Natural capital encompasses the stock of natural assets and their ability to provide ecosystem services essential for human well-being and economic activity.
Examples include:
Forests that sequester carbon and provide timber.
Wetlands that purify water and protect against floods.
Biodiversity that supports pollination and ecosystem resilience.
Why the other options are incorrect:
A. Natural resources (such as oil, gas, or timber) that can be sold for a profit in a capitalist economy:
This definition is too narrow. While natural resources such as oil, gas, and timber are part of natural capital, the concept also includes ecosystem services (e.g., climate regulation, biodiversity) that are not directly sold for profit but are critical for sustainability.
C. The sum total of monetary benefits that are directly dependent on nature:
This focuses only on the monetary benefits derived from nature, ignoring the broader value of natural assets, such as their intrinsic value and non-monetary ecosystem services (e.g., recreation, cultural value).
