Instructional goals
The course aims to provide students with a comprehensive understanding of the interconnections between global finance and environmental sustainability, with particular attention to the role of banking systems, financial markets, and investment decisions. Students will develop analytical skills to assess the impact of climate risks and ESG (Environmental, Social, Governance) criteria on financial strategies, international regulation, and the classification of sustainable investment instruments. Through a practical approach combining lectures, thematic workshops, and group projects, the course seeks to train students to critically interpret sustainability ratings, scores, and disclosures, compare different financial instruments, and understand the role of different investors, including those active in private markets. The ultimate goal is to equip students to critically navigate the global financial landscape, balancing economic objectives, social responsibility, and environmental constraints, with a focus on innovation and systemic resilience.
Prerequisites
Basic knowledge of financial principles (e.g., time value of money, risk-return tradeoffs), familiarity with corporate finance fundamentals (capital structure, valuation), introductory understanding of sustainability concepts (ESG, climate change).
Intended learning outcomes
By the end of the course, students will be able to critically analyze the impact of environmental risks and ESG criteria on financial decisions, banking policies, and global market dynamics, as well as interpret and assess sustainable financial instruments and their regulatory classifications in real-world contexts. They will also be able to critically read ESG data, ratings, and scores, integrating economic objectives, environmental constraints, and social responsibility into investment decisions to drive the ecological transition through innovative solutions and resilient strategies.
Course Contents
The course explores the interactions between global finance and environmental sustainability, starting with the theoretical foundations of international financial systems and environmental crises, with a focus on frameworks such as ESG, TCFD, and the EU Taxonomy. It delves into the implications of climate risks in the banking sector, analyzing environmental stress tests, central bank policies (e.g. ECB), and case studies on energy transitions and fossil fuel financing, while also considering the limits of ESG risk measurement and potential greenwashing issues. Sustainable financial markets are examined, including the integration of ESG criteria into equities, bonds, and other financial instruments, as well as the role of institutional investors and green equity indices. A specific focus is devoted to the regulatory classification of investment instruments under the European sustainable finance disclosure framework. In the final part of the course, attention shifts to investors in private markets, including business angels, venture capitalists, and private equity funds, and to the integration of ESG factors into investment decisions and firm valuation. Practical activities include the analysis of ESG data and rating, and group projects in which students select a target company and simulate the role of a specific investor. The course concludes with a critical discussion of real-world cases and a reflection on global policies for the ecological transition, preparing students for an oral exam that combines theory, case studies, and discussion of the projects developed.
Reference Books
Handbook of Sustainable Finance (Thierry Roncalli).
Berg, F., Kölbel, J. F., & Rigobon, R. (2022). Aggregate confusion: The divergence of ESG ratings. Review of finance, 26(6), 1315-1344.
Gibson Brandon, R., Krueger, P., & Schmidt, P. S. (2021). ESG rating disagreement and stock returns. Financial analysts journal, 77(4), 104-127.
Delmas, M. A., & Burbano, V. C. (2011). The drivers of greenwashing. California management review, 54(1), 64-87.
Teaching Methods
The course employs a blended teaching approach, combining lectures to convey theoretical foundations with interactive workshops to apply concepts to real-world cases. Guided group work enables students to develop practical projects.
Assessment Method
The overall assessment for the course comprises three integrated components: the group project (45%), which includes an oral presentation (15%) and a final written report (30%) to develop and defend practical solutions related to sustainable finance, evaluating design skills, teamwork, and the application of theoretical concepts; active participation (5%), based on critical contributions during lectures, workshops, and case study discussions; and the final oral exam (50%), an individual interview focused on analyzing course themes, real-world cases, and the group project, with emphasis on logical coherence, depth of reflection, and the ability to integrate theory, financial practices, and environmental criteria within a global context.
Thesis assignment criteria
Group project (45%: presentation 15% + report 30%), active participation (5%), final oral exam (50%). Assessment based on logical coherence, depth of reflection, and theory-practice integration.
Week 1
The first week establishes the theoretical foundations of the course, exploring the interplay between global financial systems and environmental crises. Lectures cover: a historical analysis of sustainable finance evolution; international regulatory frameworks (ESG, TCFD, EU Taxonomy, SDGs); technical tools such as carbon accounting and green bond principles.
Week 2
The second week introduces the interplay between banking intermediation and ESG challenges. Lectures cover: sustainable lending, ESG risks and opportunities for banks, non-financial reporting by banks, the evolution of the bank–firm relationship in a context of environmental transition, and attention to social and governance issues.
Week 3
The third week deepens the banking perspective. Lectures focus on: ESG risks regulatory expectations, drivers and effects of the climate and ESG integration in the lending processes and risk management frameworks, also by analyzing some case studies concerning the ESG Risk Scoring and Risk Appetite Framework as well as the Sustainable Finance Framework of some Globally Significant banks (G-SIBs). Particular attention will be paid to the limitations of measuring ESG risk and to potential discrepancies between actual risk and sustainability disclosure.
Week 4
The fourth week introduces the financial markets perspective. Lectures cover: the relevance of ESG factors in capital markets, the spread of a risk–return–impact approach, and the diffusion of equity and bond market instruments linked to environmental and social sustainability issues.
Week 5
The fifth week explores the main financial instruments linked to sustainability. Lectures cover: the different types of investment instruments, the regulatory framework for their classification (e.g. Articles 6, 8, and 9 of the Sustainable Finance Disclosure Regulation), relevant principles and standards, the role of benchmarks, and some pricing implications. Particular attention will be devoted to the differences among instruments, ESG ratings, and the critical issues related to their actual sustainability, including the risk of greenwashing.
Week 6
The sixth week explores in detail the sustainable investment market (ESG investing). Lectures cover: ESG investing strategies (exclusion, best-in-class screening etc.); shareholder activism, impact investing, Investing FOR impact vs. investing WITH impact.
Week 7
The seventh week focuses on asset pricing models and portfolio management. Lectures cover: the relationship between ESG factors and systematic risk; the integration of CAPM and Fama–French models; the ESG-efficient frontier; selected empirical evidence; and remaining challenges, such as divergent ESG data.
Week 8
Week 8 explores the role of investors in private markets within the context of sustainable finance. Lectures examine different types of investors, such as business angels, venture capitalists, private equity funds, and private debt investors (including direct lending and crowdfunding/lending platforms), and their approach to ESG criteria in investment decisions. The week also discusses firm selection processes, ESG due diligence activities, value creation logics, and real-world case studies of investors that have integrated these criteria into their portfolios.
Week 9
Week 9 delves into investment decisions in private markets and corporate finance operations, with a focus on firm valuation in sustainable contexts. Lectures cover: the integration of ESG criteria into valuation models (DCF, multiples); the impact of factors such as carbon pricing and climate transition risks on firms' intrinsic value and the ex ante target selection.
Week 10
In Week 10, students start their projects by selecting a target company and defining the role of their group as an investor, such as a venture capitalist, private equity fund, private debt investor, or crowdfunding/lending platform. Groups will frame their analysis from a financial and ESG perspective consistent with the chosen investor profile.
Week 11
In Week 11, groups deepen the technical aspects of the project through the analysis of ESG data and ratings using information platforms such as Bloomberg. Attention focuses on the interpretation of scores, possible divergences across indicators, and the integration of climate risks into valuation models and investment decisions.
Week 12
Week 12 is devoted to finalizing the projects: iterative revisions with instructor feedback and peer review, as well as the preparation of oral presentations and written reports. Groups discuss the consistency between the target company, the investor role, the ESG profile, relevant risks, and the actual sustainability of the proposed strategy.