SUSTAINABLE FINANCE
Claudio Boido, Marco Morelli
Claudio Boido
cboido@luiss.it
Marco Morelli
mmorelli@luiss.it
Instructional goals
This course explores the rapidly evolving field of sustainable finance, focusing on the integration of Environmental, Social, and Governance (ESG) criteria into investment decisions, financial analysis and corporate policies. It aims to provide students with the knowledge to assess ESG risks and opportunities, understand regulatory frameworks, integrate ESG factors in financial analysis and decision-making process and contribute to the transition towards sustainable global economies
Prerequisites
Understand the principles and concepts of sustainable finance, responsible investing and ESG.
Articulate the importance of sustainability, responsible investing, and ESG principles in the current economic and financial landscape.
Analyze the impact of ESG factors on financial markets, investment strategies and portfolios across asset classes.
Evaluate the performance of sustainable and responsible investments and the methodologies for ESG scoring.
Apply and integrate ESG criteria in financial analysis, corporate strategy and decision-making processes.
Assess the regulatory environment and policy developments related to ESG, climate related disclosures, and sustainability (SDGs, TCFD, GRI, SASB, SFDR, SDR etc.).
Intended learning outcomes
Students should have a foundational understanding of finance, financial markets and economics principles. Prior coursework in financial markets, corporate finance, asset management and microeconomics is recommended.
Course Contents
1. Introduction to ESG, Sustainable Finance and Responsible Investing
2. Policy Frameworks, Regulation and Key Actors
3. ESG Data, Scoring and Metrics
4. ESG in Corporate Strategy
5. Sustainable Finance Instruments
.
6. Overview of ESG Integration Strategies
7. Impact Investing and Socially Responsible Investing
8. Financial Performance and Sustainability
9. Climate Risk and Transition Finance
10. Equity Portfolio Management and ESG Integration
11. Fixed Income Portfolio Management and ESG Integration
12. Real Estate, Alternative Investments and ESG Integration
Reference Books
Thompson, S. (2023). Green and sustainable finance: Principles and practice in banking, investment and insurance (Vol. 9).
Schoenmaker-Schramade (2021). Principles of Sustainable Finance. Oxford University Press
Lehman- MacPherson- Ung (2022) ESG Investing and Analysis : A Practioner’s Guide Risk Books
Professors to guide students to specific chapters or sections of reference books as well as to the relevant academic papers for each lecture to complement teaching materials provided during the lectures, such as slides, report, and study
Teaching Methods
Front lectures with interactive discussions, case studies, guest lectures and homework.
Assessment Method
Attending students: intermediate written test with 16 multiple choice questions (45 minutes), final written exam with 16 multiple choice questions (45 minutes) – each question with a value of 1 point. Attendance will be recorded on a random basis during the lessons. Non-attending students: written exam with 31 multiple choice questions (75 minutes) – each question with a value of 1 point.
Thesis assignment criteria
None
Week 1
1. Introduction to ESG, Sustainable Finance and Responsible Investing
a. Understanding ESG Factors
b. Defining Sustainable Finance
c. Principles of Responsible Investing
d. Historical Development and Evolution
Week 2
2. Policy Frameworks, Regulation and Key Actors
a. Overview of the Regulatory Framework and ESG disclosure
b. Global and regional regulatory trends, key challenges and future directions
c. Key Actors (Regulators, Financial Institutions, Corporates and Rating Agencies)
Week 3
3. ESG Data, Scoring and Metrics
a. Understanding ESG Factors and Materiality
b. Sources of ESG Data: Providers, Indices, and Ratings Agencies
c. ESG Metrics and Key Performance Indicators (KPIs)
d. Challenges and Limitations of ESG Data and Measurement
Week 4
4. ESG in Corporate Strategy
a. Integrating ESG into Corporate Strategy
b. Corporate ESG Disclosure, Sustainability Reporting and Standards
c. Stakeholder Engagement and Social Responsibility
Week 5
5. Sustainable Finance Instruments
a. Green, Social, Blue and Sustainability Bonds
b. Sustainability-Linked Bonds, Loans and IPOs
c. Thematics Funds, Sustainable Funds, etc
Week 6
6. Overview of ESG Integration Strategies
a. Screening Methods: Exclusionary, Inclusionary and Norms-Based Screening
b. Best-in-Class Selection and Positive Screening
c. ESG Integration into Portfolio Management and Investment Analysis
d. Quantitative and Qualitative Approaches to ESG Integration
Week 7
7. Impact Investing and Socially Responsible Investing
a. Definition and Characteristics of Impact Investing
b. Measurement and Evaluation of Social and Environmental Impact
c. Aligning Investor Values with Investment Strategies
d.The insurance sector and climate-related risk
Week 8
8. Financial Performance and Sustainability
a. Relationship Between Sustainability and Financial Performance
b. Sustainable Investing Indices and Benchmarks
c. Risk-Return Trade-offs in Sustainable Investing
Week 9
9. Climate Risk and Transition Finance
a. Understanding Climate-related Financial Risks
b. Climate Scenario Analysis and Stress Testing
c. Transition Finance and Carbon Pricing Mechanisms
d. Climate Resilient Investing Strategies
Week 10
10. Equity Portfolio Management and ESG Integration
a. Strategy, ESG Integration and Performance
Week 11
11. Fixed Income Portfolio Management and ESG Integration
a. Strategy, ESG Integration and Performance
Week 12
12. Real Estate, Alternative Investments and ESG Integration
a. Strategy, ESG Integration and Performance
b. Sustainable Finance