This course deals with the integration of environmental, social and governance (ESG) issues, as well as ethical considerations, in investment and financing decisions. It reviews the evidence on how these factors matter for long-term value creation, and examines the concepts, tools and frameworks that allow managers and investors to make informed and ethical decisions.
The financial system’s primary aim is to allocate capital to its most productive use. Traditional finance often focuses solely on financial returns, disregarding ethical considerations and the impact of business on society and the environment (externalities). Ethical business practices and the internalization of externalities often increase the financial value of a business, but not always. This course deals with the complex trade-offs that arise in such cases.
In the first part of the course, students learn the main concepts in Sustainable Finance and Business Ethics, and reflect on the purpose of business. The second part of the course focuses on sustainability and ethical challenges from the corporate perspective. Students learn about the internalization of externalities, corporate governance and ethical business practices, sustainable business models, and integrated reporting. Students also apply important tools like stakeholder analysis, materiality matrix, and scenario and sensitivity analysis. The third part of the course focuses on sustainable lending and investing. It covers long-term value creation, and includes an overview of how ESG issues and ethical considerations affect the practice of Asset Management, Banking and Insurance. Students learn about financial instruments and strategies that align with investor preferences and evolving policies. Impact investing - actively targeting ethical, social and/or environmental objectives - is also covered. In the fourth and final part of the course, we discuss how to transition towards a sustainable and inclusive economy, by focusing on coalitions for Sustainable Finance, Transition Management and Integrated Thinking.
Our purpose is to acquire practical business skills: the ability to identify the ethical and ESG dimensions of typical financial problems, the ability to make reasoned decisions when faced with dilemmas, and the ability to justify those decisions in a language that is both clear and persuasive.