SCR: GARP.SCR.ExamTopics.2025-11-07.61q.vcex - Free Practice VCEX Download

In preparation for an upcoming global climate conference, organizers develop climate science training materials for business executives.

How should the training material compare anthropogenic and natural climate changes?

Human-caused warming is occurring much faster than natural warming after the last ice age.
Human-induced warming currently exhibits a nonlinear relationship with global CO2 levels, whereas natural warming shows a linear relationship.
Human activities slowed water vapor feedback, whereas natural climate changes do not alter water vapor balance.
Human activities caused temperature changes greater than any previous natural temperature changes.

Correct answer: A

Explanation:

A: 8 - MostedD: 3

A major hurricane extensively damages the electrical infrastructure of a utility company. To improve the utility’s risk management, the risk director prepares a strategy plan and incorporates climate risk considerations within the existing risk management framework.

Which recommendation should the director make to incorporate climate risk into the framework’s risk identification component?

Evaluate the vulnerability and adaptive capacity of facilities using data gathered on the scope of climate risks.
Flag any substantial changes in the utility’s external environment to trigger a modification of the risk management process.
Examine the transmission channels of climate risk drivers into financial risk to determine which risks are likely to materialize for the utility.
Rate risks on impact and level of control to focus on risks with the most severe impact but over which the utility has the most control to improve outcomes.

Correct answer: C

Explanation:

A: 3C: 9 - Mosted

As climate change poses new financial risks to a central bank’s monetary policy operations, the bank decides to adapt operations with NGFS guidelines. Because the central bank does not include climate change in supervision practices, the bank consults subject matter experts (SMEs) to develop a proposal for central bank action on climate change. After completing the risk assessment, SMEs recommend the bank incorporate microprudential and macroprudential measures to embed climate change into supervision practices.

Which action are SMEs likely to recommend?

Conduct climate stress tests with standardized policy scenarios and feedback loops as a microproduential measure.
Increase internal resources and establish an external review process for climate risk integration as a macroprudential measure.
Adhere to disclosure best practice when integrating climate risk by following TCFD disclosure recommendations as a microprudential measure.
Implement the widely adopted macroprudential measure of a procyclical capital buffer to increase equity capital during periods of carbon-intensive credit.

Correct answer: C

Explanation:

C: 11 - Mosted

At an international finance bank, a lack of staff clarity regarding sustainability, climate, and ESG definitions led to overlapping and inefficient initiatives. To minimize inefficiencies, the sustainability department develops new terminology for use across the bank.

What should the department include in this new terminology?

Sustainability issues fall exclusively within climate change impacts.
ESG and sustainability risks are completely interchangeable.
ESG risks are broader than all sustainability risks.
Sustainability should include all governance and social risks.

Correct answer: D

Explanation:

C: 4D: 12 - Mosted

A senior portfolio analyst at a global asset management firm performs a portfolio review to identify assets that may be affected by climate risk. Preliminary findings show the firm heavily invests in food and beverage companies with high climate risk exposure due to extreme temperatures and droughts. In a report to senior management, the analyst notes the firm can improve portfolio performance by examining physical risk, as the firm currently focuses primarily on transition risk.

Which approach to examining physical risk at the portfolio level should the analyst recommend?

Best- and worst-in class of an index
Temperature score methodology
“Warming potential” measurement on portfolios
Downscaled global climate modeling

Correct answer: A

Explanation:

A: 6 - Mosted

The board of directors of a growing asset management firm recommends the firm expand its ERM framework to incorporate climate risks. In response, the risk team references the COSO ERM framework for applying ESG-related risks to develop and propose a strategy to implement climate risk into the various ERM components.

How will the risk team modify the existing strategy component of the company’s ERM framework?

Gather and use scores and physical and transition risk exposure data to conduct various analyses to determine if excess risk would exist in an unfavorable climate scenario.
Evaluate the full business context on climate risk and understand how climate change affects the inputs, business activities, and outputs.
Factor in climate risk impacts when reassessing risks after considerable business changes.
Rank climate risks by likelihood of occurrence and severity to examine resulting outcomes and how the firm can mitigate these risks.

Correct answer: B

Explanation:

B: 14 - MostedD: 2

An investment management firm signs a net zero asset management initiative. An analyst engages with client companies to encourage adoption of targets that align with Paris Agreement goals. The analyst provides clients with a guide explaining the principles and protocols unique to the Paris Agreement.

How will the analyst most likely describe the feature that distinguishes the Paris Agreement?

A framework that recognizes many stakeholders, from subnational actors to private-sector businesses and financial institutions, can help contribute to climate goals
An emissions reduction mechanism that allows Annex 1 countries that make deeper emissions cuts to sell surplus emissions allowances to other Annex 1 countries
A structure that legally binds signed parties to develop national climate policy plans that are reviewed and approved annually by the UN
A clean development mechanism that provides a way for emissions cuts to be spread to developing economies

Correct answer: A

Explanation:

A: 6 - Mosted

A large real estate investment firm increases resources to understand transition and physical risks as it expands into markets with climate regulations and increasing flooding events. Senior leadership requires the risk team train all business units in understanding how both climate risks can impact operations.

During this process, how should the risk team define commonalities between both risks?

Each risk type can lead to stranded assets of investee companies.
Renewable energy investment returns will likely increase as each risk type grows.
The timing of impacts from each risk type will follow similar trajectories.
The majority of impacts from each risk type will manifest after 2050.

Correct answer: A

Explanation:

A: 6 - Mosted

A global investment bank expands its risk department to include climate risk assessment. Senior management directs the department to implement approaches for evaluating how climate change affects traditional risk types. A risk manager recommends risk metrics for key risk types that measure physical and transition risk impacts.

To measure credit risk, which metric should the analyst recommend?

Level of company preparedness
Bid-ask spread
Loan-to-deposit ratio
Loss given default

Correct answer: D

Explanation:

D: 10 - Mosted

A global electronics manufacturer experiences severe flooding in one of its key locations. Company senior management will mitigate supply chain risk and adhere to environmental standards by issuing a bond. The bond proceeds will simultaneously address floodwater contaminated by industrial chemicals and assist communities experiencing deterioration of health conditions due to waterborne diseases.

Which bond is the company likely to issue?

Green bond
Sustainability-linked bond
Social bond
Sustainability bond

Correct answer: D

Explanation:

B: 1D: 5 - Mosted

A technology company expands its sustainable offerings and develops a flight booking application that allows customers to offset a flight’s carbon emissions. An analyst at the company researches climate agreements to inform the structure of the offsetting program.

How does the analyst describe the achievements and shortcomings of the agreements?

A shortcoming of COP21 (Paris) is that countries are legally obligated to annually submit nationally determined contributions (NDCs), and most have kept NDCs at unchanged levels.
COP3 (Kyoto) resulted in differentiated national responsibilities wherein developing countries were not subject to emissions reduction obligations, which disincentivized Annex 1 countries to take action.
The main achievement of COP15 (Copenhagen) was the creation of the IPCC, an influential scientific body that became the leading body in guiding subsequent climate agreements.
Although COP1 (Berlin) ended with no binding treaty, it was the first COP to establish a goal that global warming remains below 2°C.

Correct answer: B

Explanation:

B: 3 - Mosted

Vendor:	GARP
Exam Code:	SCR
Exam Name:	Sustainability and Climate Risk
Date:	Nov 07, 2025
File Size:	170 KB
Downloads:	1

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