As you prepare for the GARP Sustainability and Climate Risk (SCR) exam in the October 2024 window, mastering the key concepts across the curriculum is critical. The exam spans ten chapters covering climate change foundations, sustainability, risk management, and transition planning. With 90 equally weighted multiple-choice questions, the SCR exam assesses both theoretical knowledge and practical application. Below are the focus areas for each chapter, including where students should concentrate their efforts for exam success.
Chapter 1: Foundations of Climate Change – What Is Climate Change?
Exam Weight: 8-12 Questions
The foundational chapter lays the groundwork for understanding the scientific and economic implications of climate change. Exam questions here are likely to test your grasp of the basic science and terminology related to climate systems and greenhouse gases.
Key Focus Areas:
Differentiate between weather and climate: Questions may test whether you understand the long-term nature of climate versus the short-term variations of weather.
The Greenhouse Effect and Energy Balance: Expect questions that assess your understanding of how the Earth's energy balance and greenhouse gases contribute to global warming.
Human vs. Non-human Contributions to Climate Change: Be prepared to explain the various anthropogenic (human-caused) and natural mechanisms behind climate change.
Mitigation and Adaptation Strategies: You’ll likely face questions requiring you to describe different climate change mitigation technologies (such as carbon capture) and the challenges associated with them.
Exam Tip: Focus on understanding key climate concepts and be ready to apply them to practical scenarios. Don’t just memorize the data—understand the mechanisms driving climate change.
Chapter 2: Sustainability
Exam Weight: 8-12 Questions
This chapter broadens the scope to discuss sustainability in policy, corporate responsibility, and investment. The focus is on integrating Environmental, Social, and Governance (ESG) factors into business practices.
Key Focus Areas:
Sustainability and ESG: Be prepared to explain the three pillars of sustainability—environmental, social, and economic—and how they relate to corporate ESG practices.
Sustainable Development Goals (SDGs): Pay attention to how the SDGs are being integrated into corporate strategy and policy.
Greenwashing: Learn the different ways organizations may misrepresent their sustainability practices, and be ready to identify regulatory frameworks aimed at curbing greenwashing.
Exam Tip: Expect questions related to the intersection of corporate governance, sustainability, and ESG. These are likely to be presented as case studies where you need to evaluate an organization’s sustainability claims.
Chapter 3: Climate Change Risk
Exam Weight: 8-12 Questions
This chapter introduces the financial risks associated with climate change, particularly focusing on physical and transition risks. You will need to understand how these risks impact different sectors and assets.
Key Focus Areas:
Physical and Transition Risks: Be able to distinguish between these two types of risks. Expect questions on the impact of physical climate hazards and how transitioning to a low-carbon economy creates financial risks for companies.
Stranded Assets: Know which industries are more prone to stranded assets as climate policies evolve, especially in sectors like fossil fuels and heavy industry.
Opportunities for Companies: Some questions may challenge you to identify opportunities that climate risks can present to forward-thinking companies.
Exam Tip: Focus on real-world examples of how climate risk translates into financial risk, as case studies will likely test your ability to apply this knowledge in practice.
Chapter 4: Sustainability and Climate Policy, Culture, and Governance
Exam Weight: 8-12 Questions
This chapter explores how international climate policy and governance frameworks have evolved. It’s important to understand how these policies affect businesses and financial institutions.
Key Focus Areas:
International Climate Agreements: Be familiar with the history and key components of agreements like the Paris Agreement. Focus on understanding carbon pricing mechanisms, such as carbon taxes and emissions trading systems.
Scope 1, 2, and 3 Emissions: Understanding the differences between these types of emissions will be crucial, especially the complexity of accounting for Scope 3 emissions.
Green Taxonomies: Know how different regulatory frameworks classify green and sustainable finance products.
Exam Tip: Expect questions on how national and international policies affect corporate behavior. Be ready to discuss the role of central banks and regulatory bodies in promoting climate risk management.
Chapter 5: Green and Sustainable Finance – Markets and Instruments
Exam Weight: 8-12 Questions
This chapter focuses on financial markets and instruments developed to address climate change. You will need to understand both the tools and the trends in sustainable finance.
Key Focus Areas:
Green and Sustainability Bonds: Focus on learning the specific components of these financial products, including the Green Bond Principles.
Sustainability-Linked Loans (SLLs): Know how SLLs work and how they link financial incentives to the achievement of sustainability targets.
ESG Integration: Understand how ESG factors influence investment and lending decisions.
Exam Tip: Be prepared to analyze specific financial instruments in case studies, and know how green bonds and other sustainable finance products contribute to corporate climate strategies.
Chapter 6: Climate Risk Measurement and Management
Exam Weight: 12-18 Questions
The focus here is on the measurement and management of both physical and transition risks at the company level, making this one of the most heavily weighted chapters.
Key Focus Areas:
ERM Frameworks: Understand how climate risks are integrated into existing Enterprise Risk Management frameworks. Be prepared to explain how companies measure and mitigate operational, credit, liquidity, and market risks driven by climate factors.
Climate Value at Risk (CVaR): You may need to calculate risk metrics like CVaR and explain their importance in managing climate risks.
Data and Tools for Measuring Risk: Be familiar with the various data sets and tools used for both physical and transition risk analysis.
Exam Tip: The exam is likely to include quantitative questions, so practice calculating financial risk metrics using hypothetical scenarios.
Chapter 7: Climate Models and Scenario Analysis
Exam Weight: 8-12 Questions
Scenario analysis is crucial for managing climate risks and preparing for different climate-related outcomes.
Key Focus Areas:
IPCC and IEA Scenarios: Understand the reference scenarios used in climate risk analysis and how these are applied in corporate and financial settings.
Use of Scenario Analysis in Risk Management: Know how different companies, particularly in the financial sector, use scenario analysis to manage both physical and transition risks.
Exam Tip: Practice interpreting data from scenario analyses. You might be asked to recommend strategies based on projected climate risks under different scenarios.
Chapter 8: Net Zero
Exam Weight: 4-6 Questions
Net zero is a key target for governments and companies alike. This chapter covers how entities set, measure, and report on their net-zero targets.
Key Focus Areas:
Net-Zero Targets and Transition Plans: Be able to explain the steps involved in creating a credible net-zero transition plan.
Metrics for Measuring Progress: Focus on understanding the metrics companies use to track their progress toward net-zero emissions.
Sector-Specific Challenges: Be ready to discuss how net-zero targets vary by sector, especially in high-emissions industries.
Exam Tip: Questions in this chapter may involve assessing the credibility of net-zero commitments based on real or hypothetical transition plans.
Chapter 9: Climate and Nature Risk Assessment
Exam Weight: 4-6 Questions
This chapter expands on climate risk to include nature-related risks like biodiversity and water risk.
Key Focus Areas:
TNFD Framework: Study the Taskforce on Nature-related Financial Disclosures (TNFD) and the LEAP framework for assessing nature risk.
Water Risk: Be prepared to conduct water risk assessments and understand the financing challenges for biodiversity and ecosystem services projects.
Exam Tip: Expect questions that require you to differentiate between climate and nature risks and provide actionable recommendations for managing these risks.
Chapter 10: Transition Planning and Carbon Reporting
Exam Weight: 4-6 Questions
This final chapter focuses on how companies plan and report their transitions to low-carbon operations.
Key Focus Areas:
Science-Based Targets initiative (SBTi): Know the principles for setting SBTi Net-Zero targets and the reporting requirements for organizations.
GHG Accounting: Be familiar with calculating GHG emissions across Scopes 1, 2, and 3, and know how to report these emissions according to international standards like the GHG Protocol.
PCAF Standard: Study the Partnership for Carbon Accounting Financials (PCAF) standard for reporting financed emissions.
Exam Tip: Practice GHG accounting and financed emissions calculations. Questions will likely require you to apply this knowledge in a practical, data-driven context.
Final Exam Tips for the GARP SCR Exam 2024:
Practice Quantitative Problems: Be comfortable with performing calculations, especially for risk metrics like CVaR, GHG emissions, and carbon intensity.
Case Studies: Many questions are based on real-world applications. Be ready to analyze case studies that test your ability to apply theoretical concepts to practical situations.
Keep Up with Required Readings: The online readings are critical and highly testable. Ensure you thoroughly understand the implications of frameworks like TCFD, TNFD, and PCAF.
Practice with Mock Exams and Questions: Use practice exams and question banks to simulate the actual exam experience. The SCR exam tests your ability to not only recall information but also apply it in diverse scenarios. Practicing with mock exams can help you gauge your preparedness and identify areas that need improvement. Focus on questions related to risk measurement, scenario analysis, sustainability practices, and policy frameworks to sharpen your exam readiness.
By focusing on these key areas, candidates can strategically approach their study plan and ensure they cover the topics most likely to appear in the exam.
To significantly improve your chances of passing the GARP SCR exam, equip yourself with our comprehensive practice study materials designed to cover the entire curriculum and enhance your exam readiness.
Don’t leave your success to chance—get the best preparation tools today and maximize your potential for a first-time pass!
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