21210454 - Sustainable finance and ESG investing

The purpose of the course is to provide students with concepts and knowledge of sustainable finance. After introducing the basics of traditional finance, they will be developed, extended, and integrated, to explain how an apparently purely financial and short-term concept is indeed strongly related to environmental and social aspects, that are long-term values. The course describes why and how serving shareholders’ interest and having success in the long run require looking after environmental, social, and governance needs. It also demonstrates that stakeholders’ and shareholders’ interests are more aligned than one can think.

Curriculum

scheda docente | materiale didattico

Programma

- Finance as usual (shareholder value theory): traditional tools to analyze stocks, bonds, and their portfolios
➡️Basics of fundamental analysis of stocks and estimating their financial value
➡️Basics of bond and credit risk analysis
➡️Basics of portfolio performance and risk analysis
- From shareholder value to sustainable finance: theory, approaches, and ongoing debate
➡️Finance as usual and Milton Friedman
➡️Enlightened shareholder value
➡️Stakeholder value (Triple Bottom Line)
➡️Pieconomics and common good value: Principles of materiality, comparative advantage, and multiplication
- Estimating social and environmental values
➡️Determining relevant social and environmental issues: the concept of materiality
➡️Quantifying social and environmental impacts
➡️Monetizing social and environmental impacts: the concept of shadow prices
➡️Discounting social and environmental impacts: the social discount rate
- Externalities and internalization
➡️Pricing externalities
➡️How to internalize social and environmental externalities into the financial value
➡️The concept and estimation of integrated value
- Social and environmental risks
➡️Risk forms: physical, transition and litigation risks
➡️Incorporating social and environmental risks into the cost of capital: multifactor pricing models
➡️The cost of integrated capital
➡️The impact of social and environmental risks on bond valuation and credit risk
- Sustainable financial products
➡️Green bonds
➡️Social bonds
➡️Sustainability-linked bonds
➡️Social impact bonds
- Integrating ESG issues in equity investment strategies
➡️Negative screening, integration, best-in-class, impact investing, and other strategies
➡️Is sustainability a source of higher investment performance? Evidence from ESG funds’ performance and risk
- The role of a firm’s corporate governance for creating long term value
➡️Optimizing executive and employee compensation
➡️Investor engagement: the role of hedge funds; mutual, pension, and index funds
➡️Incorporating sustainability into the board of director and internal committees
➡️Investment coalitions for sustainability: PRI and other initiatives
- Measuring and disclosing a firm’s sustainability
➡️Common metrics and Integrated Reporting
➡️ESG data providers: scores and rating
➡️Pros and cons of ESG ratings
➡️Sustainability reporting standards: IFRS S and ESRS
- EU Regulation on sustainability
➡️Taxonomy (Regulation (EU) 2020/852)
➡️Non-Financial Reporting Directive (2014/95, NFRD) and Corporate Sustainability Reporting Directive (2022/2464, CSRD)
➡️Sustainable Finance Disclosure Regulation (2019/2088, SFDR)
➡️Greenwashing: supervising sustainability issues
- Firm performance and sustainability: Empirical evidence
- The bottom line: conclusions, proposals, guidelines, and challenges of tomorrow’s sustainable finance


Testi Adottati

Textbooks

a) Schoenmaker, D., & Schramade, W. (2023), Corporate finance for long-term value, Springer
b) Edmans, A. (2021). Grow the pie: How great companies deliver both purpose and profit, updated and revised version. Cambridge University Press
c) Schoenmaker, D., & Schramade, W. (2018). Principles of sustainable finance. Oxford University Press.

Detailed outline of chapters and sections for each book will be explained during the course

Bibliografia Di Riferimento

Recommended readings - Barber, B. M., Morse, A., & Yasuda, A. (2021). Impact investing. Journal of Financial Economics, 139(1), 162-185. - Berg, F., Koelbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315-1344. - Bolton, P., & Kacperczyk, M. (2021). Do investors care about carbon risk?. Journal of financial economics, 142(2), 517-549. - Flammer, C. (2021). Corporate green bonds. Journal of Financial Economics, 142(2), 499-516. - Gibson Brandon, R., Glossner, S., Krueger, P., Matos, P., & Steffen, T. (2022). Do responsible investors invest responsibly? Review of Finance, 26(6), 1389-1432.

Modalità Erogazione

Il corso sarà svolto mediante lezioni tradizionali

Modalità Frequenza

Attending lessons is not mandatory but strongly encouraged

Modalità Valutazione

Esame orale

scheda docente | materiale didattico

Programma

- Finance as usual (shareholder value theory): traditional tools to analyze stocks, bonds, and their portfolios
➡️Basics of fundamental analysis of stocks and estimating their financial value
➡️Basics of bond and credit risk analysis
➡️Basics of portfolio performance and risk analysis
- From shareholder value to sustainable finance: theory, approaches, and ongoing debate
➡️Finance as usual and Milton Friedman
➡️Enlightened shareholder value
➡️Stakeholder value (Triple Bottom Line)
➡️Pieconomics and common good value: Principles of materiality, comparative advantage, and multiplication
- Estimating social and environmental values
➡️Determining relevant social and environmental issues: the concept of materiality
➡️Quantifying social and environmental impacts
➡️Monetizing social and environmental impacts: the concept of shadow prices
➡️Discounting social and environmental impacts: the social discount rate
- Externalities and internalization
➡️Pricing externalities
➡️How to internalize social and environmental externalities into the financial value
➡️The concept and estimation of integrated value
- Social and environmental risks
➡️Risk forms: physical, transition and litigation risks
➡️Incorporating social and environmental risks into the cost of capital: multifactor pricing models
➡️The cost of integrated capital
➡️The impact of social and environmental risks on bond valuation and credit risk
- Sustainable financial products
➡️Green bonds
➡️Social bonds
➡️Sustainability-linked bonds
➡️Social impact bonds
- Integrating ESG issues in equity investment strategies
➡️Negative screening, integration, best-in-class, impact investing, and other strategies
➡️Is sustainability a source of higher investment performance? Evidence from ESG funds’ performance and risk
- The role of a firm’s corporate governance for creating long term value
➡️Optimizing executive and employee compensation
➡️Investor engagement: the role of hedge funds; mutual, pension, and index funds
➡️Incorporating sustainability into the board of director and internal committees
➡️Investment coalitions for sustainability: PRI and other initiatives
- Measuring and disclosing a firm’s sustainability
➡️Common metrics and Integrated Reporting
➡️ESG data providers: scores and rating
➡️Pros and cons of ESG ratings
➡️Sustainability reporting standards: IFRS S and ESRS
- EU Regulation on sustainability
➡️Taxonomy (Regulation (EU) 2020/852)
➡️Non-Financial Reporting Directive (2014/95, NFRD) and Corporate Sustainability Reporting Directive (2022/2464, CSRD)
➡️Sustainable Finance Disclosure Regulation (2019/2088, SFDR)
➡️Greenwashing: supervising sustainability issues
- Firm performance and sustainability: Empirical evidence
- The bottom line: conclusions, proposals, guidelines, and challenges of tomorrow’s sustainable finance


Testi Adottati

Textbooks

a) Schoenmaker, D., & Schramade, W. (2023), Corporate finance for long-term value, Springer
b) Edmans, A. (2021). Grow the pie: How great companies deliver both purpose and profit, updated and revised version. Cambridge University Press
c) Schoenmaker, D., & Schramade, W. (2018). Principles of sustainable finance. Oxford University Press.

Detailed outline of chapters and sections for each book will be explained during the course

Bibliografia Di Riferimento

Recommended readings - Barber, B. M., Morse, A., & Yasuda, A. (2021). Impact investing. Journal of Financial Economics, 139(1), 162-185. - Berg, F., Koelbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of Finance, 26(6), 1315-1344. - Bolton, P., & Kacperczyk, M. (2021). Do investors care about carbon risk?. Journal of financial economics, 142(2), 517-549. - Flammer, C. (2021). Corporate green bonds. Journal of Financial Economics, 142(2), 499-516. - Gibson Brandon, R., Glossner, S., Krueger, P., Matos, P., & Steffen, T. (2022). Do responsible investors invest responsibly? Review of Finance, 26(6), 1389-1432.

Modalità Erogazione

Il corso sarà svolto mediante lezioni tradizionali

Modalità Frequenza

Attending lessons is not mandatory but strongly encouraged

Modalità Valutazione

Esame orale