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: BT 321 - Corporate Finance for undergraduates. There are no specific prerequisites for graduate students.

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

The textbook can be purchased via Amazon or via the Stevens Institute of Technology Official Bookstore.

• Alex Edmans, Grow the Pie. How Great Companies Deliver Both Purpose and Profit: Updated and Revised, 2020, Cambridge University Press (ISBN: 9781009054676).

Course Requirements

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: 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, the comments that you make during class discussions and your participation in the participation quiz available for each lecture on our Canvas course page.

Midterm: The midterm will evaluate the material covered in the first ten weeks of the class. The Midterm exam will be administered on November 11, 2024, during class time. The midterm constitutes 30% of the grade. Midterm will be based on all the material covered during the first ten weeks of the semester (lectures, textbook required readings of the chapters, lectures, videos,handouts, and case discussions). The precise details of the material covered by midterm will be announced in class closer to the exam. Midterm will be open book and open notes. There will be a makeup on the Midterm if you miss the midterm for medical or other emergency reasons.

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. We will use case study “TC1-0168: Reducing Data Center Emissions: Apple's Renewable Power Investments in Maiden, North Carolina” from the Tuck School of Business at Dartmouth. The case study is a group project. I will assign the students into 3 groups of 4 students on the first day of classes. The group names A, B and C. will designate the groups. Each group submit one excel file on canvas. It is expected that all team members will participate equally in this case assignment. The responsibility for ensuring equal participation lies with the group members. Please note that you will not be eligible for the group grade if you did not participate in solving the case study. Please note that you will also not be eligible for the group grade if you did not purchase the case studies “Green Apple: Environmental Sustainability Reporting & Climate Strategy at Apple,Tuck School of Business at Dartmouth” and “Reducing Data Center Emissions: Apple's Renewable Power Investments in Maiden, North Carolina, Tuck School of Business at Dartmouth.” I will accept late submissions, but your score will be reduced by 50% for each day you are late. The Case Study constitutes 20% of the grade.

Homework assignment: Sustainability Management Simulation: Net Zero. Students play the role of the General Manager of a 500-room, 4-star city-center hotel with the goal of reaching net zero greenhouse gas emissions by 2050. As a first major step, the hotel needs to reduce its emissions by 50% over the next 7 years and at the same time optimize its financial performance. Each year, students must prioritize and select up to 3 initiatives from a wide-ranging and evolving list that impact the hotel's emissions and business performance. Initiatives are divided into energy, purchasing, and management categories. Students must also make management decisions about expenditure on staff environmental awareness training and guest communication. Feedback is provided to students in terms of the hotel's emissions and their underlying drivers (including energy and water consumption, waste generation, food consumption and purchased products), as well as the hotel's financial performance after each round of decisions. Altogether, the hotel's emissions are reduced through a combination of technical solutions and behavioral changes by staff, customers and suppliers. Business performance is impacted through investments in initiatives, changes in operational costs, and potential improvements in revenue per available room (REVPAR). To complete this homework assignment, students need to purchase the Harvard Business Case course pack (see section COURSE MATERIALS). I will accept late submissions, but your score will be reduced by 50% for each day you are late. 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. The slide-deck for the presentation should be uploaded on Canvas prior to the beginning of the session in which the project will be discussed. The entire group will be responsible for discussing the key issues of the project and preparing the presentation slides as well as the plan for the presentation. The group members will also be ready to answer questions on their project from the other students in the class. The maximum grade for the presentation will be 10%. 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 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%

It is expected that all team members will participate equally in this case assignment. The responsibility for ensuring equal participation lies with the group members. Please note that you will not be eligible for the group grade if you did not participate in preparing the presentation or the written report. I will accept late submissions, but your score will be reduced by 50% for each day you are late.