FIN 540 Sustainable Finance



Course Catalog Description

Introduction

This course introduces students to sustainable finance. In this course, sustainable finance is understood as the process of ensuring the inclusion of environmental, social, and governance (ESG) considerations into corporate decisions. A sustainable corporation will make their investment decisions that consider not only financial returns but also its social impact. Our textbook provides a clear and masterful discussion of the principles of sustainable business based on “growing the pie” principle. By focusing on “growing the pie” as a corporate objective, the sustainable businesses are able to create shareholder values as well as stakeholder value.

This course will provide the graduate and undergraduate students a solid foundation and introduction to this most important topic. Students taking this course will not only have the knowledge about sustainable finance they need, but the understanding to put that knowledge to practical use. This course will answer many fundamental questions about sustainable finance including the following:

  1. What is sustainability and the social impact of corporations?
  2. What are the challenges to corporations in dealing with climate change?
  3. How do companies finance green projects?

Prerequisites: Basic knowledge in Corporate Finance, for instance, at the level of BT 321 or equivalent.


Campus Fall Spring Summer
On Campus X X
Web Campus

Instructors

Professor Email Office
Balbinder Singh Gill
bgill@stevens.edu

More Information

Course Objectives

Students will:

  1. Apply finance and sustainability as integrated subjects beginning with an introduction of the principles of sustainable finance and moving through financial analysis, financing, and valuation of sustainable projects.
  2. Understand and apply the basic terms and concepts in sustainable finance
  3. Identify the origins, drivers and trends in sustainable finance
  4. Achieve expertise in discussing the major sustainability challenges faced by societies worldwide and how they are being addressed at the international level and local level.
  5. Be able to integrate ESG methodologies and solutions in financial decision making.

Course Outcomes

By the end of the semester, you should be able to

  1. Understand the importance of a corporate objective of growing the total pie and avoiding conflicts about splitting the pie among shareholders, stakeholders, and society.
  2. Understand, and discuss current developments and trends in the area of sustainable finance.
  3. Distinguish between different types of sustainable finance products and relevant eligibility criteria.
  4. Identify opportunities for corporations to issue green bonds and green loans.
  5. Understand and discuss a number of different sustainable investment strategies.
  6. Apply sustainable finance mechanisms to a real-life investment case study.
  7. Discuss opportunities, challenges, and enabling conditions for corporations to benefit from growing sustainable investment opportunities.

Textbook

  • Alex Edmans, Grow the Pie. How Great Companies Deliver Both Purpose and Profit, 2020, Cambridge University Press (ISBN: 9781108494854).

Articles and readings

  • Caroline Flammer, 2021, Corporate Green Bonds, Journal of Financial Economics
  • The World Bank, 2019. Green Bond Impact Report.
  • The Economist, 2020. Special Report on Business and Climate Change: The Great Disrupter
  • The Economist, 2019. The past, present, and future of climate change.
  • Royal Dutch Shell PLC, 2019. Sustainability report
  • Tuck School of Business (Dartmouth College), 2020. Case: Apple’s Renewable Power Investments in Maiden North Carolina
  • The World Bank 2020. State and Trends of Carbon Pricing
  • PWC, 2021. Global Private Equity Responsible Investment Survey
  • Barclays, 2021. Climate FinTech Report.
  • BlackRock, 2020. Investment stewardship annual report
  • Kogan Page, 2021. Chapter 4 in Green and Sustainable Finance : Principles and Practice, Limited, by Thompson, Simon (ISBN: 9781789664546)
  • Matthew W. Sherwood and Julia Pollard, 2019. Chapters 2 and 3 in “Responsible Investing. An Introduction to Environmental, Social and Governance”, Routledge (ISBN: 9780203712078
  • Schwabe, Paul, Feldman, David, Jason, Fields, and Edward Settle, 2017. Wind Energy Finance in the United States: Current Practice and Opportunities

Pedagogy

To familiarize graduate and undergraduate students with the challenges and opportunities that arises through the implementation of a sustainability strategy at the organizational and institutional levels, I will employ a mix of lectures, guest lectures, and applied cases.

Course Organization

The main concepts of sustainable finance will be reviewed in class. My classes will also include case studies and presentations by industry professionals that integrate class material with real life decisions. I will use Canvas extensively to post reading material, presentation slides and for other communication.

Attendance and class participation; Case study, Midterm exam and final project

Attendance and class participation: We will follow a lecture and discussion format in the class. You are expected to come prepared to discuss the material assigned for each class. Your class participation is crucial to successful learning. Active class participation will also make the class discussion lively and exciting. I will keep track of your attendance and the comments that you make during class discussions. Regular attendance and active participation will constitute 20% of the grade.

Midterm: The midterm will test the material covered in the first seven weeks of the class. The midterm constitutes 30% of the grade.

Case Study: Students will evaluate the long-term economic and financial profitability of a corporate investment project that reduces the quantity of greenhouse gas (GHG) emissions that were produced because of the company’s operations. The Case Study constitutes 20% of the grade.

Homework assignment: Energy Efficiency Calculations. You will analyze the energy and Greenhouse gas emissions consequences of switching to Compact fluorescent lamp (CFL) light bulbs (from incandescent bulbs), and that of switching personal transportation mode from that of a typical car driven in the US to a hybrid/electric vehicle. The homework assignment constitutes 10% of the grade.

Final project

Final project (Selection of topic and group discussions)

In the first class, I will post a large number of interesting topics in sustainable business and climate finance on canvas. Please see Appendix 1 that is attached to this syllabus. The groups may choose any of those topics. The groups are also invited to come up with a topic of their own and choose that as the topic of their group project. I expect the groups to meet multiple times in the different stages of their work on the project:

  • Choice of project
  • Selection of subtopics and relevant analyses.
  • Allocation of work on the presentation, presentation slides, and project report. The presentation slides and the project report from each group. All groups will prepare and make a 10-minute presentation in class.

Final project presentation (Guidelines for presentation)

Each group will put together a well-organized presentation that takes no more than 10 minutes. Please involve multiple members of your group in the presentation. See below for a general rubric for the grading of the project presentation.

The group grade of 10% for the presentation will be allocated as follows.

  • The novelty of the topic chosen, and the ideas presented: 2%
  • The clarity and effectiveness of the organization of the presentation: 3%
  • Use of data and relevant analysis: 3%
  • The quality of Q&A: 2%

Final project report (Guidelines for project report)

Each group will put together a short report (6 pages double-spaced) presenting the central ideas that they have learned during the semester on their topic from their readings and group discussions. The report should be clear and well-organized. See below for a general rubric for the grading of the project report.

The group grade of 10% for the report will be allocated as follows.

  • Creativity in the topic choice and ideas discussed and analyzed: 2%
  • Use of relevant data and analysis: 3%
  • Integration of related topics learned in the course in the report: 3%
  • Relating the concluding analysis to important ideas in sustainable finance: 2%

Lecture Outline

Topic Readings Assignments
Week 1
  • Introduction and welcome to the class, Discussion of course syllabus.
  • What is sustainability and why does it matter?
Grow The Pie: Chapters 1 and 2
Week 2
  • The ESG rating system
  • Putting corporate responsibility into practice
  • Responsible Investing: Chapter 3.
  • Grow The Pie: Chapters 3 and 8
Week 3
  • The returns to responsible business
  • Social impact
  • Grow The Pie: Chapters 4 and 5
Week 4
  • Financing of climate change projects
  • Corporate Green Bonds, Caroline Flammer (2021), Chapter 7: Green and Sustainable Finance: Principles and Practice
Week 5
  • The Economist, 2020 Special Report on Business and Climate Change: The Great Disrupter.
  • Corporate Green Bonds, Caroline Flammer (2021), Chapter 7: Green and Sustainable Finance: Principles and Practice
  • The Economist, 2019. The past, present and future of climate change
  • Chapters 2 and 3 in “Green and Sustainable Finance: Principles and Practice”
Week 6
  • Midterm exam
  • Implications of climate change on corporations, carbon regulation: Carbon pricing market trade and regulation
  • The Economist, 2020 Special Report on Business and Climate Change: The Great Disrupter.
  • The Economist, 2019. The past, present and future of climate change Chapters 2 and 3 in “Green and Sustainable Finance: Principles and Practice”
  • Chapters 2 and 3 in “Green and Sustainable Finance: Principles and Practice”
Week 7
  • Implications of climate change on corporations, carbon regulation: Carbon pricing market trade and regulation
  • The Economist, 2020 Special Report on Business and Climate Change: The Great Disrupter.
  • The Economist, 2019. The past, present and future of climate change Chapters 2 and 3 in “Green and Sustainable Finance: Principles and Practice”
  • Chapters 2 and 3 in “Green and Sustainable Finance: Principles and Practice”
Week 8
  • Corporate investments policy to reduce emissions
  • Corporate Climate Strategy
  • Sustainability report 2019 Royal Dutch Shell PLC
  • Case Study (Part 1)
Week 9
  • Discounted cash flow analysis of sustainable investment project
  • How does carbon regulation affect NPV?
  • Case Study (Part 2)
  • World Bank. 2020. State and Trends of Carbon Pricing 2020
Week 10
  • Sustainable private equity – Green Venture Capital
  • World Bank. 2020. State and Trends of Carbon Pricing 2020
  • Global Private Equity Responsible Investment Survey
Homework on Energy Efficiency Calculations
Week 11
  • Fintech strategies in climate finance
  • Responsible investing
  • Climate FinTech Report Barclays (2021)
  • Grow The Pie: Chapter 6 (p 151-164), Chapter 9 (p230-235)
Week 12
  • Responsible investing
  • Sustainable investing: Case BlackRock
  • Grow The Pie: Chapter 6 (p 151-164), Chapter 9 (p230-235)
  • Investment Stewardship Annual Report, Blackrock, 2020
Week 13
  • Applications of ESG investing in portfolio management
  • Responsible Investing: Chapters 5, 6, and 7
Week 14
  • Project presentations