What is ESG?
A framework to measure how companies/banks impact the world:
- E (Environmental): 🌳 Reduce carbon footprint, waste, energy use.
- S (Social): ❤️ Promote inclusion, healthcare, fair lending.
- G (Governance): 📜 Ethical practices, compliance, diverse leadership.
Examples:
- E → Solar energy projects ☀️
- S → Loans for rural schools 🏫
- G → Transparent board decisions 🏢
How Banks Use ESG (5 Key Practices)
- Create ESG Policies 📄 → Align with UN Principles for Responsible Banking.
- Assess Risks 🔍 → Climate risks (floods), social risks (unfair lending).
- Green Loans 💸 → Cheaper loans for eco-projects (e.g., solar farms).
- Report Progress 📊 → Use GRI/TCFD like a sustainability scorecard.
- Engage Stakeholders 🤝 → Tree planting, education programs.
ESG in Lending: How It Works
- Check borrower’s ESG risks (e.g., pollution 🚯).
- Reward good ESG behavior → Lower interest rates 🌱.
- Monitor performance → Track carbon emissions yearly.
Top ESG Reporting Standards
| Standard | Focus |
|---|---|
| GRI | 📋 Full ESG report (E, S, G) |
| SASB | 🏭 Industry-specific metrics |
| TCFD | 🌡️ Climate risks (e.g., sea levels) |
| CDP | ☁️ Carbon emission tracking |
ESG Evolution Timeline
- 1960s–90s → Early eco & social movements (“Save the planet!”).
- 2000s → UN Global Compact 🌐 (companies pledge sustainability).
- 2010s → TCFD launched (climate risks mainstream).
- 2020s → ESG reporting becomes mandatory.
🇮🇳 India’s ESG Commitments
- Paris Agreement 🌍 → Cut emissions 33–35% by 2030 (per GDP).
- 40% electricity from renewables (solar, wind) by 2030.
- National Climate Plan → Green tech + energy efficiency.
✅ Quick Revision Keywords:
E = Carbon footprint 🌳 | S = Inclusion ❤️ | G = Ethics 📜 | GRI 📋 | SASB 🏭 | TCFD 🌡️ | CDP ☁️ | India → 33–35% cut + 40% renewables
ESG – Important MCQs
(Environmental, Social, Governance)
Section A: Basic ESG Concepts
- ESG stands for:
A. Environmental, Social, Governance
B. Economic, Social, Geopolitical
C. Environmental, Structural, Global
D. Ecological, Sustainable, Green
Answer: A - ESG investing primarily focuses on:
A. Short-term profit maximization
B. Ethical, sustainable and responsible investment decisions
C. High-risk market speculation
D. Currency derivatives
Answer: B - ESG was popularized globally after guidelines by:
A. IMF
B. UN PRI (Principles for Responsible Investment)
C. WTO
D. World Bank
Answer: B - The “E” in ESG focuses mainly on:
A. Audit quality
B. Workforce diversity
C. Carbon emissions & climate impact
D. Board composition
Answer: C - The “G” in ESG includes:
A. Biodiversity conservation
B. Corporate governance, ethics, transparency
C. Gender ratio
D. Work safety
Answer: B - The “S” in ESG refers to:
A. Social impact, employee welfare, human rights
B. Structural reforms
C. Subsidy management
D. Sectoral alignment
Answer: A
Section B: ESG in Banking & Finance
- RBI included ESG-related issues in its Financial Stability Reports from:
A. 2018
B. 2020
C. 2021
D. 2022
Answer: C - Banks face ESG risks mainly under which category?
A. Credit risk
B. Market risk
C. Operational risk
D. All of the above
Answer: D - The RBI has issued climate risk guidance aligned with which framework?
A. Basel Framework
B. Kyoto Protocol
C. Paris Agreement
D. UN SDGs
Answer: A - Greenwashing is:
A. Overstating sustainability claims
B. Reducing emissions
C. Going paperless
D. Investing in eco-startups
Answer: A - Which of the following is a green banking initiative?
A. Increased ATM usage
B. Green bonds issuance
C. Frequent branch audits
D. Decreasing deposit rates
Answer: B - SEBI made ESG disclosures mandatory for top 1000 listed companies under:
A. BRSR
B. GRI
C. SASB
D. CDP
Answer: A (Business Responsibility and Sustainability Report) - BRSR replaced which earlier reporting system?
A. CSR Act
B. BRR
C. GSTN
D. FRBM
Answer: B (Business Responsibility Report) - Which bank issued India’s first green bond?
A. SBI
B. Yes Bank
C. HDFC Bank
D. ICICI Bank
Answer: B
Section C: ESG Standards, Frameworks, Reporting
- GRI stands for:
A. Global Reporting Initiative
B. Green Resource Index
C. Global Regulatory Interface
D. Government Rating Indicator
Answer: A - SASB standards originate from:
A. India
B. USA
C. EU
D. Japan
Answer: B - TCFD relates to:
A. Biodiversity reporting
B. Climate-related financial disclosures
C. Social welfare benchmarking
D. Corporate ethics
Answer: B - The Paris Agreement aims to limit global warming to:
A. 1.0°C
B. 1.5°C
C. 2.5°C
D. 3°C
Answer: B - Net Zero means:
A. Zero employees
B. Emissions = Removals
C. Zero investment
D. Zero policy gaps
Answer: B - GHG Protocol categorizes emissions into:
A. 5 Scopes
B. 2 Scopes
C. 3 Scopes
D. 4 Scopes
Answer: C (Scope 1, 2, 3) - Scope 3 emissions include:
A. Direct fuel combustion
B. Purchased electricity
C. Supply chain & customer-usage emissions
D. Air-conditioning
Answer: C - CSR spending requirement is given in:
A. Companies Act 2013
B. RBI Act 1934
C. Banking Regulation Act
D. SEBI Act
Answer: A
Section D: ESG in Indian Regulatory Context
- What percentage of profits must large Indian companies spend on CSR?
A. 1%
B. 2%
C. 3%
D. 5%
Answer: B - India’s ESG rating agencies are regulated by:
A. RBI
B. IRDAI
C. SEBI
D. Ministry of Finance
Answer: C - BRSR Core disclosures are mandatory from:
A. FY 2021-22
B. FY 2022-23
C. FY 2023-24
D. FY 2024-25
Answer: C (starting for top 1000 companies) - SEBI mandates assurance (audit-like verification) of ESG metrics under:
A. TCFD
B. GRI
C. BRSR Core
D. SASB
Answer: C - Carbon Credit Trading in India comes under:
A. Indian Energy Exchange
B. Bureau of Energy Efficiency (BEE)
C. RBI
D. NABARD
Answer: B - India’s green taxonomy is being developed by:
A. SEBI
B. MoEFCC
C. Ministry of Finance
D. NITI Aayog
Answer: C
Section E: ESG Investment, Markets & Risks
- ESG funds primarily avoid:
A. FMCG companies
B. Fossil-fuel heavy industries
C. IT companies
D. Telecom
Answer: B - Social impact investing focuses mainly on:
A. Derivatives
B. Community welfare & development
C. Ad revenue
D. Real estate flipping
Answer: B - Governance failures often lead to:
A. Lower credit ratings
B. Higher compliance scores
C. Stronger investor trust
D. Reduced market volatility
Answer: A - A company emitting excessive CO₂ faces which ESG risk?
A. Governance
B. Environmental
C. Social
D. Audit
Answer: B - Whistle-blower protection relates to:
A. Environmental
B. Social
C. Governance
D. Legal
Answer: C - Diversity & inclusion falls under:
A. Governance
B. Social
C. Both S and G
D. Environmental
Answer: B