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How to Pass the CFA ESG Exam

This blog post aims to run you through everything you need to know in order to pass the CFA Institute Certificate in ESG Investing ("CFA ESG"), administered by the CFA Institute. As a reminder, Brainie's CFA ESG package has been created by industry practitioners with experience in taking numerous self-study financial exams. The tips below express our view on how to pass CFA ESG at the first attempt.

How hard is the CFA ESG exam?

Let's tackle the first question - How hard is the CFA ESG Certificate? This question cannot be asked in a vacuum - multiple factors play into determining the difficulty level of the CFA ESG.

One is: Do we measure the difficulty level compared to CFA Institute's regular CFA exam?

The other: How much prior knowledge do you have in ESG Investing or Sustainable Investing more broadly?

On the first question, a 300h blog post describes the CFA ESG Certificate to be at a level 4 difficulty, which is one lower than the Level 1 of the regular CFA program. Level 4 qualifications are at the same difficulty level as the first year of an undergraduate program. From own experience (having done the CFA program and obtained the CFA ESG certification), the CFA ESG requires good understanding of definitions of the many ESG-related terms, as well as the history of how the ESG market came to be, versus the regular CFA program which includes much more mathematical skills.

The second question is a big factor on how difficult you will find the CFA ESG exam - In my profession as a business development manager at a large Asset Management firm, I have numerous conversations with colleagues and clients on all sorts of ESG topics. In today's investment industry, ESG integration has become an important factor when appoint Asset Managers to manage their mandates.

As such, even before studying for the CFA ESG I dealt with concepts like how to integrate material ESG factors, ESG analysis, portfolio analytics, portfolio construction, risk management, etc. So when I read the CFA ESG book I had found that most of the terms were familiar. While this does not absolve from studying the entire curriculum, you will find that you'll get through it quicker and none of the content will scare you.

What score do you need to pass CFA ESG?

Again, many people unfamiliar with the CFA ESG exam will see "CFA Institute" and think of the notoriously low passing scores. There is a big difference though between the regular CFA designation and the CFA ESG Certificate. The pass mark can range between 60-70%, and the average pass rate has been little over 80%. This is a big difference compared to the regular CFA levels.

What common challenges do candidates face, and how can I overcome them?

  • Difficulty Memorizing All Content

    • Use interactive tests and summary notes for better retention.
  • Time Management

    • Stick to a prep schedule using a time scheduler to stay on track.
  • Exam Anxiety

    • Practice mock exams to build confidence and reduce stress.
  • Balancing Work and Studying

    • Set clear priorities and create a flexible, balanced study plan.
  • Lack of Focus for Long Exams

    • Build endurance with mock exams that replicate real conditions.

How long does it take to study for the CFA ESG certificate?

This question largely goes back to the first the candidates prior experience with the ESG market in general. The CFA Institute suggests an exam preparation period of 100 hours minimum. Even though I had prior experience with things like ESG considerations, Responsible Investment and key concepts of how this is incorporated in the wealth management industry, it still took me a good 100h to go through the study materials, all practice questions (of which there aren't many provided by the CFA Institute, so a third-party question platform like Brainie is recommended) and the mock exams to feel like I had a solid understanding of the ESG Investing Syllabus.

Even for investment professionals who already work in ESG Investing, we recommended reading the entire CFA ESG Curriculum at least once. Certain chapters, like chapters 6 and 7, we recommend reading twice.

What are the prerequisites for CFA ESG?

This is one of the most asked question - We are happy to share that the CFA Institute did NOT put any prerequisites to obtain the CFA ESG certification. Ever since the CFA Institute took the exam form the CFA UK society and rolled it out globally, anybody can take it. There was a misconception that candidates would need to pass the third CFA level, but that is not correct.

How long is the exam?

The CFA ESG exam consists of 100 multiple-choice questions, to be answered in 2 hours and 20 minutes. The exam can either be taken in a local test center or as online proctored exams.

How is the exam structured?

The chapters and the corresponding weightings of the CFA Certificate in ESG Investing are:

  1. Overview to ESG Investing and the ESG Market 8–15%

  2. Environmental Factors 8–15%

  3. Social Factors 8–15%

  4. Governance Factors 8–15%

  5. Engagement and Stewardship 5–10%

  6. ESG Analysis, Valuation and Integration 20–30%

  7. ESG Integrated Portfolio Construction and Management 10–20%

  8. Investment Mandates, Portfolio Analytics and Client Reporting 5–10%

These weightings explain why we recommend to read Chapters 6 and 7 at least twice. These will be the ones most challenging for candidates unfamiliar with things like investment process, portfolio analytics, integrated portfolio construction, etc.

How best to prepare for the exam?

We touched on this topic earlier in this blog post, but here's the strategy that helped me pass the CFA ESG Investing certificate at first attempt.

Despite already being quite familiar with the topic from my day-to-day job, I found it very helpful for my exam preparation to first review the entire syllabus and and read the curriculum. After going through each chapter in the study materials, I all self assessment questions provided by the CFA Institute. I used the Brainie CFA ESG gold package, which included apart from 2 mock exams also a question bank including 500 questions as well as summary notes. Once I read the entire study materials, I put them aside and only worked with the summary notes.

I went through each chapter's question bank, and whenever I found a particular topic difficult (ie. if I didn't hit an acceptable pass mark of 60%), I would re-read that section in the summary notes. Once I completed all questions of all chapters, I completed the two mock exams.

There again, I would review all sections I found difficult. My pass mark was low for the first mock exam but got progressively better. Only after doing that, I was ready to take the official mock exam provided in the original ESG certificate materials.

The areas I found most challenging were chapter 6, which describes how to value ESG issues - though important note here again: No calculations were asked. But even understanding which specific environmental, social and governance factors have potentially material impacts on the valuation of a company were difficult to grasp at first. Once I had completed all questions and mock exams I re-read the summary once or twice again and then headed to the actual CFA ESG exam, and passed.

Which study materials and resources are recommended?

After having gone through the experience myself, and having conducted many post-exam feedback sessions with successful candidates, I have confidence that Brainie's prep package for the CFA Certificate in ESG Investing is a very helpful tool to understand and memorize all relevant concepts of the syllabus.

The CFA ESG Certificate exam is less challenging then the regular CFA program, but still it requires serious studying. There are concepts that needed tedious study sessions, like the history of the ESG landscape, the regional differences in the focus of Governance factors, what specific items to analyze to arrive at companies' specific Environmental factors, how to square the pursuit to take into account ESG in the investment process while also complying with fiduciary responsibilities, to name a few.

Learn more about recommended CFA ESG study material.

Would I recommend the CFA ESG Certification?

My short answer is absolutely yes!

I get this question a lot - there are multiple ESG Certificates in the market. I did both, the GARP SCR as well as the CFA ESG Certificate. Prior to focusing on ESG, I had done both the CFA program and the CAIA program. I first started to get interested in ESG when the focus of my professional clients started shift in that direction. It seemed like the Asset Management industry had moved from traditional finance to focus on producing the same returns while also integrating ESG issues. It seemed also that the industry produced more and more career paths for investment professionals to engage with ESG. Especially on ESG, I had found that a particular focus was placed on the "E" in ESG - Environmental factors. And so a lot of my conversations with clients focused on Climate risks.

When the exam was rolled out globally (first having being administered by the CFA UK), I immediately paid the registration fees and got to study. I had found that the CFA ESG Certificate provided an optimal balance between technical knowledge and practical examples. After having gone through the CFA ESG curriculum I felt like I received a very good overview of every possible term associated with "ESG" - Terms like "Net Zero", "UN PRI", "SDGs", "Physical Climate Risk", "Modern Slavery", etc all became clear.

After taking the Certificate in ESG Investing I enrolled in the GARP SCR program. My fear first was that it was going to be the exact same materials, but I had found two things very insightful:

  • The perspective through which the materials are worked through. The GARP SCR (GARP standing for Global Association of Risk Professionals) looked at the Environmental Risks through the lens of risk management. That was a very different experience compared to the CFA ESG (CFA standing for Chartered Financial Analyst), which looked at similar issues through the lens of an investment analyst.

  • The GARP SCR was much more focused on Climate Risks specifically, while the ESG certificate had much broader focus on sustainability in general. The GARP exam provided a brief introduction into the science of climate risks, which was missed in the CFA ESG exam - I found that very refreshing.

So, if I had to make a recommendation, I would say that it is not wasted effort to first take the CFA ESG exam - for a broad understanding of sustainability in general, and then the GARP exam to hone in on Climate, which arguably is the most pressing of all three ESG components.

Some people have become more skeptical about the whole ESG space recently, but the conversations I see with professional clients like pension funds and wealth managers have not stopped. Climate risks continue to exist and financial market participants are still participating in the innovation to move capital in such a way that it can produce returns in line with their fiduciary duty while also being more mindful of the environment and society at large. There was a short negative narrative around the topic, but the secular trend is still sound and healthy and innovation in the financial industry is being created as we speak.

Luca Michienzi, CFA, CAIA

Partner at Brainie