100+ Free Climate Investing Practice Questions

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Question 1

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The Task Force on Climate-related Financial Disclosures (TCFD) recommends disclosure across four core thematic pillars. Which of the following is NOT one of the four pillars?

Governance

Strategy

Assurance

Risk Management

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2026 Statistics

Key Facts: Climate Investing Exam

100

Multiple-Choice Questions

CFA Institute

2-3 hrs

Exam Time

CFA Institute

$675

Exam Fee

CFA Institute

~70%

Approx Passing Score (MPS)

CFA Institute

100-150 hrs

Recommended Study Time

Candidate reports

Topic Areas

CFA Institute

The CFA Institute Climate Risk, Valuation & Investing Certificate is a 100-question, 2-3 hour, $675 practitioner certificate for working investment analysts. It builds on the Sustainable Investing Certificate (recommended foundation) and teaches the application of climate factors to financial analysis, valuation, portfolio construction, disclosure (TCFD/ISSB/CSRD/SFDR/SEC), and net-zero alliances (GFANZ, NZAOA, NZAM, NZBA). Online self-paced study with online proctored delivery.

Sample Climate Investing Practice Questions

Try these sample questions to test your Climate Investing exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1The Task Force on Climate-related Financial Disclosures (TCFD) recommends disclosure across four core thematic pillars. Which of the following is NOT one of the four pillars?

A.Governance

B.Strategy

C.Assurance

D.Risk Management

Explanation: The TCFD framework consists of four core pillars: Governance, Strategy, Risk Management, and Metrics & Targets. Assurance is not a TCFD pillar — it is a separate audit/verification activity that may be applied to climate disclosures.

2Which two IFRS Sustainability Disclosure Standards were issued by the ISSB and became effective for annual reporting periods beginning on or after 1 January 2024?

A.IFRS S1 and IFRS S2

B.IFRS 9 and IFRS 17

C.ESRS E1 and ESRS E2

D.SASB Climate and TCFD Climate

Explanation: The International Sustainability Standards Board (ISSB) issued IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) in June 2023, effective for annual periods beginning on or after 1 January 2024. IFRS S2 builds directly on the TCFD recommendations.

3An analyst is categorizing climate risks for a coastal utility. A category-4 hurricane that destroys substation equipment is best classified as which type of climate risk?

A.Acute physical risk

B.Chronic physical risk

C.Transition policy risk

D.Transition reputation risk

Explanation: Acute physical risks are event-driven, including hurricanes, wildfires, floods, and heatwaves. Chronic physical risks are longer-term shifts such as sea-level rise, sustained higher temperatures, and chronic drought. The TCFD distinguishes acute vs chronic within physical risk.

4Under the GHG Protocol, emissions from electricity purchased and consumed by a reporting company are classified as:

A.Scope 1

B.Scope 2

C.Scope 3 — upstream

D.Scope 3 — downstream

Explanation: Scope 2 covers indirect emissions from purchased electricity, steam, heat, or cooling consumed by the reporting company. Scope 1 is direct emissions from owned/controlled sources, and Scope 3 covers other indirect value-chain emissions.

5Under EU SFDR, a fund that has sustainable investment as its objective is classified under which Article?

A.Article 6

B.Article 8

C.Article 9

D.Article 11

Explanation: Article 9 funds (often called 'dark green') have sustainable investment as their objective. Article 8 funds promote environmental or social characteristics ('light green'). Article 6 covers all other funds with basic sustainability risk integration disclosure.

6Which alliance is the asset-owner-led net-zero initiative convened by UNEP FI in 2019, requiring members to commit to net-zero portfolio emissions by 2050 with interim 5-year targets?

A.Net Zero Asset Managers Initiative (NZAM)

B.Net Zero Asset Owner Alliance (NZAOA)

C.Net Zero Banking Alliance (NZBA)

D.Climate Action 100+

Explanation: The Net Zero Asset Owner Alliance (NZAOA), convened by UNEP FI in 2019, is the asset-owner-led group requiring members to set 5-year interim portfolio decarbonization targets en route to net-zero by 2050. NZAM is the asset-manager equivalent; NZBA covers banks.

7An analyst applies a $75/tCO2e shadow carbon price to a steel manufacturer's projected Scope 1 emissions in a DCF model, even though the company faces no current statutory carbon price. The most likely purpose of this adjustment is to:

A.Reduce reported earnings to satisfy ISSB disclosure requirements

B.Assess the valuation impact of plausible future carbon regulation

C.Convert the model from nominal to real cash flows

D.Apply a sustainability premium to the equity discount rate

Explanation: A shadow carbon price is an internal price applied in scenario or sensitivity analysis to estimate how plausible future carbon costs would affect cash flows and valuation. It is forward-looking risk modelling, not a statutory or accounting requirement.

8A portfolio manager wants to align an equity portfolio with a 1.5°C decarbonization pathway by reducing portfolio carbon intensity by at least 7% per year. This approach is most consistent with the:

A.EU Climate Transition Benchmark (CTB) minimum standard

B.EU Paris-Aligned Benchmark (PAB) minimum standard

C.TCFD recommended decarbonization rate

D.MSCI ACWI standard methodology

Explanation: The EU Paris-Aligned Benchmark (PAB) requires at least a 50% immediate cut in carbon intensity vs the parent index plus a year-on-year decarbonization trajectory of at least 7%. The Climate Transition Benchmark (CTB) requires only a 30% initial reduction with the same 7% trajectory.

9The Science Based Targets initiative (SBTi) provides a framework for companies to set emissions reduction targets aligned with climate science. Which entity is NOT a founding partner of SBTi?

A.CDP

B.UN Global Compact

C.World Resources Institute (WRI)

D.International Energy Agency (IEA)

Explanation: SBTi was founded in 2015 as a partnership between CDP, the UN Global Compact, the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The IEA produces climate scenarios used by SBTi but is not a founding partner.

10Climate beta is best described as:

A.The covariance of a security's returns with broad market returns under a 1.5°C scenario

B.The sensitivity of a security or portfolio's value to changes in expected climate transition risk pricing

C.The ratio of Scope 1 to Scope 3 emissions on a market-cap-weighted basis

D.The implied temperature rise (ITR) divided by 1.5°C

Explanation: Climate beta measures how a security or portfolio's value moves in response to changes in market-priced climate transition risk — for instance, when expectations of policy stringency shift. It is analogous to traditional CAPM beta but with respect to a climate-risk factor.

About the Climate Investing Exam

Free CFA Institute Climate Risk, Valuation & Investing Certificate practice questions covering TCFD, ISSB, climate-adjusted valuation, decarbonization, SFDR, and net-zero alliances.

Questions

100 scored questions

Time Limit

2-3 hours

Passing Score

70%

Exam Fee

$675 (CFA Institute)

Climate Investing Exam Content Outline

15%

Climate Science & Risk Frameworks

TCFD 4 pillars, ISSB IFRS S1/S2, IPCC SR1.5/AR6, NGFS scenarios, IEA NZE/APS/STEPS, GHG Protocol Scopes 1/2/3

20%

Physical Risk vs Transition Risk Analysis

Acute vs chronic physical risk, transition risk taxonomy (policy, technology, market, reputation), stranded assets, carbon pricing (EU ETS, RGGI, California, CBAM)

25%

Climate-Adjusted Valuation

DCF integration, shadow carbon price, climate VaR, scenario analysis, credit spread adjustment, sector deep-dives (utilities, energy, cement, real estate, insurance)

20%

Portfolio Construction

Decarbonization pathways, EU PAB/CTB benchmarks, climate beta, ITR, WACI, EVIC-based footprint, active vs passive, tilt-and-engage

10%

Climate Disclosure Standards

TCFD, ISSB IFRS S1/S2 cross-industry metrics, SEC Climate Rule (March 2024, currently stayed), EU CSRD/ESRS E1, EU SFDR Article 6/8/9, California SB 253/SB 261, EU Taxonomy DNSH, TPT, TNFD

Engagement, Stewardship & Net Zero Alliances

GFANZ, NZAOA, NZAM, NZBA, Climate Action 100+, SBTi, PCAF financed emissions, transition plans, just transition, escalation

Greenwashing & Ethics

SFDR Article 9 to 8 downgrades, SEC enforcement (DWS, BNY Mellon), CFA Institute ESG Disclosure Standards for Investment Products (2021), ICVCM Core Carbon Principles, green bonds vs SLBs

How to Pass the Climate Investing Exam

What You Need to Know

Passing score: 70%
Exam length: 100 questions
Time limit: 2-3 hours
Exam fee: $675

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

Climate Investing Study Tips from Top Performers

1Master the four TCFD pillars (Governance, Strategy, Risk Management, Metrics & Targets) and how IFRS S2 builds on them with cross-industry metric categories

2Drill the alphabet soup: NGFS scenarios (Net Zero 2050, Below 2C, Delayed Transition, Current Policies, Hot House) vs IEA scenarios (NZE, APS, STEPS) — know the assumptions of each

3Distinguish acute vs chronic physical risk and the four transition risk categories (policy/legal, technology, market, reputation) with concrete examples

4Practice climate-adjusted DCF: shadow carbon prices in cash flows (preferred) vs WACC adjustments (caveat-heavy), terminal-value treatment for stranded assets

5Memorize EU PAB vs CTB thresholds (50% vs 30% initial cut, 7% YoY trajectory) and SFDR Article 6/8/9 with the 2022-23 reclassification wave

Frequently Asked Questions

What is the CFA Institute Climate Risk, Valuation & Investing Certificate?

The CFA Climate Investing Certificate is a practitioner credential from CFA Institute teaching investment professionals how to apply climate factors — physical, transition, regulatory, and disclosure — to financial analysis, valuation, and portfolio construction. The exam is 100 multiple-choice questions delivered online with proctoring, typically completed in 2-3 hours.

How much does the CFA Climate Investing exam cost?

The exam fee is approximately $675 (USD), which includes access to the official curriculum and the proctored online exam. CFA Institute periodically updates pricing and may offer discounts for CFA charterholders or members; check the official CFA Institute website for the latest fees and member pricing.

Do I need the CFA Sustainable Investing Certificate first?

It is recommended but not strictly required. The Climate Investing Certificate assumes familiarity with ESG concepts and frameworks (PRI, TCFD, basic SFDR), most of which are covered in the Sustainable Investing Certificate. Candidates with strong existing ESG/climate experience may sit Climate Investing directly.

How long should I study for the CFA Climate Investing exam?

Most candidates report 100-150 hours of study over 2-4 months. Working investment professionals with prior ESG or climate exposure may complete it in 80-100 hours. Plan to cover all curriculum chapters, work through practice questions, and finish with full-length timed mocks scoring 75%+ before sitting the exam.

What topics are covered in the CFA Climate Investing exam?

The curriculum spans seven topic areas: Climate Science & Risk Frameworks (TCFD, ISSB) ~15%; Physical vs Transition Risk Analysis ~20%; Climate-Adjusted Valuation (DCF, scenario analysis) ~25%; Portfolio Construction (decarbonization, climate beta) ~20%; Climate Disclosure Standards (TCFD, SEC, CSRD, SFDR) ~10%; Engagement, Stewardship & Net Zero Alliances ~5%; Greenwashing & Ethics ~5%.

How is the exam scored?

The exam is scored against a Minimum Passing Score (MPS) set by CFA Institute, generally interpreted as approximately 70% of items correct. CFA Institute does not publish a fixed pass rate. Aim to consistently score 80%+ on full-length practice tests before booking your exam date.