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Exam SCR topic 1 question 35 discussion

Actual exam question from GARP's SCR
Question #: 35
Topic #: 1
[All SCR Questions]

A diversified industrial company embarks on a climate transition strategy to invest in a more fuel-efficient airline fleet. To finance the investment, the CSO analyzes sustainable finance instruments and recommends instruments most suitable to issue.
Which of the following financial instruments should the CSO recommend and why?

  • A. A sustainability-linked bond for the purpose of financing a company-wide transition strategy.
  • B. A social bond as it offers more flexibility because there is no external review requirement.
  • C. A green bond because the use of proceeds can be clearly identified and tied to a particular project.
  • D. A sustainable bond so the company will benefit from favorable pricing from the terms linked to the corporate sustainability objective.
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Suggested Answer: C 🗳️
by Anil_SUPER_STAR at Sept. 30, 2023, 5:04 a.m.

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79861dd
7 months ago
Sustainability bonds are a combination of the two, in that they are meant to simultaneously address both environmen-tal and social objectives.
upvoted 1 times
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chukks
1 year, 1 month ago
Green bond Under ICMA green bond principles, eligible green bond projects include energy efficiency
upvoted 1 times
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Gs2410
1 year, 1 month ago
Selected Answer: D
This should have been sustainability bond and not green bond ,as green bonds are for environment projects.
upvoted 1 times
Anil_SUPER_STAR
1 year, 1 month ago
Sustainability bonds are a combination of the two, in that they are meant to simultaneously address both environmental and social objectives. Also there is no concept of favorite pricing related to corporate sustainability objective. There is no need to address social objective in the case study, hence answer should be C.
upvoted 2 times
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Anil_SUPER_STAR
1 year, 1 month ago
C Green bonds are bonds whose proceeds are earmarked for environmental projects. They combine several innovations: They are separately labeled, their proceeds are ring-fenced, and the (planned) use of their proceeds is reported both to prospective bondholders ex ante and to current bondholders once projects are implemented. In this way, they differ from typical corporate or government bonds, which function as general-purpose borrowings, where the issuer can then use the proceeds as needed.
upvoted 1 times
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C (25%)
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