Sustainable Finance

Ethics and Sustainability in Finance

This course is part of the new competency development pathway in sustainability organized by HEC Liège. It is integrated with the course "Sustainable Business Models: A Serious Game.

The course structure follows partially the "Handbook of Sustainable Finance" (2024), by Thierry Roncalli (henceforth HoSF). The exact course content is subject to changes as sustainable finance is one of the most dynamic and rapidly evolving fields in finance.

The goal of this course is to provide the students with an understanding of the potential contribution of Sustainable Finance to achieving the Sustainable Development Goals and the goals of the Paris Agreement on Climate Change. Students will understand the consequences of financial decisions from an environmental and social perspective.

Detailed course plan: 

A - What is sustainable finance?

  1. Definition of finance and its functions

  2. Definition and history of sustainable finance

  3. Motivation: Why do we need sustainable finance?

Reading: HoSF Ch 1. Introduction.

 B - Role of private and institutional investors

  1. Motivation for sustainable investments & the attitude-behavior gap

  2. Sustainable investment strategies - Impact Investing, Active ownership & ESG voting policy

Readings:

Amel-Zadeh, A., & Serafeim, G. (2018). Why and how investors use ESG information: Evidence from a global survey. Financial Analysts Journal, 74(3), 87-103.

Bauer, R., Ruof, T., & Smeets, P. (2021). Get real! Individuals prefer more sustainable investments. Review of Financial Studies, 34(8), 3976-4043.

Hartzmark, S. M., & Sussman, A. B. (2019). Do investors value sustainability? A natural experiment examining ranking and fund flows. Journal of Finance, 74(6), 2789-2837.

HoSF Ch 5. Impact Investing
HoSF Ch 6. Engagement & Voting Policy.

  C - Sustainable financial products

  1. Banks

  2. ESG mutual funds

  3. Green and social bonds

  4. Sustainable alternative assets
 
Reading: HoSF Ch 4. Sustainable Financial Products.

 D - Sustainability ratings or the need for relevant information

  1. Sustainable Finance Disclosure Regulation (SFDR) & Corporate Sustainability Reporting Directive (CSRD)

  2. Rating agencies

  3. ESG ratings, SDG ratings & the role of data vendors 

Readings:

Berg, F., J. Kölbel, and R. Rigobon (2022). Aggregate confusion: The divergence of esg ratings. Review of Finance, 26(6), 1315-1344.

Dimson, E., Marsh, P., & Staunton, M. (2020). Divergent ESG ratings. Journal of Portfolio Management, 47(1), 75-87.

HoSF Ch 2. ESG Scoring.

 E - Impact of ESG investing of asset prices and portfolio returns

  1. Theoretical models

  2. Empirical results

  3. Examining research in the field of sustainable finance - a case of sin stocks

Readings:

Boustanifar, H. & Schwarz, P. (2024). Measuring Business Social Irresponsibility: The Case of Sin Stocks. Working Paper. Available at SSRN.

HoSF Ch 3. Impact og ESG Investing on Asset Prices.

H - Special topics

based on guest lectures (specific material, attendance is compulsory)   

Sustainable Business Models : a Serious Game

This course involves a simulation based on a business case where a company must transform its business model to enhance sustainability. It allows students to experience the trade-offs that companies face and will continue to face in transforming their business models and practices to achieve genuine sustainability.

The serious game scenario presents a Belgian SME in the agri-food sector confronted with various ethical dilemmas and trade-offs in defining and operationalizing its ecological and social transition strategy. The scenario is based on a decision-making game responding to real or potential crises that the company is or will be facing. These decisions encompass both the business model (such as mission, legal form, ownership, financial model, governance, etc.) and management choices (including strategy, supply chain, logistics, marketing, production processes, monitoring and reporting tools, HR management, stakeholder integration, profit allocation, etc.).

Participants in the simulation must make these decisions while evaluating their positive and negative consequences through a multi-stakeholder lens-taking into account the needs and expectations of both internal and external stakeholders of the company-and identifying the impacts of their decisions on all stakeholders, including the global environment.

Participants in the simulation must make decisions while assessing their positive and negative consequences through a multi-stakeholder lens-considering the needs and expectations of both internal and external stakeholders. Additionally, they must evaluate the impacts of their decisions on all stakeholders, ensuring that they remain within Earth system boundaries.

Ethics and Sustainability in Finance

At the end of this course students will be able to:
 
- Understand, explain, and synthesize the planet's social and environmental challenges;

- Understand the role of Finance to achieve the UN sustainable development goals;

- Explain the principles for responsible investment and the various sustainable financial products;

- Understand, explain, and synthesize the sustainability challenges to corporates;

- Understand how ESG scores are built and discuss them critically;

- Be able to research and understand a scientific article related to sustainable finance.
 
Specific skills and competences trained during this course.

At the end of this course students will have:

- Developed their ability to speak English; 

- Developed team work abilities;

- Strengthened their capacity for creative conception of solutions;

- Strengthened their professional capacity for oral communication.

Sustainable Business Models : a Serious Game

Understanding of Sustainability Concepts:

Gain a thorough understanding of sustainability principles, including ecological, social, and economic dimensions.

Learn how these principles can be integrated into business models and strategies.

Strategic Decision-Making:

Develop skills in making strategic decisions that balance various trade-offs and stakeholder interests.

Learn to evaluate the long-term implications of business decisions on sustainability.

Practical Application of Theoretical Knowledge:

Apply theoretical concepts from thematic courses to real-world scenarios through simulation.

Experience how to translate sustainability theories into practical actions and decisions.

Problem-Solving and Critical Thinking:

Enhance problem-solving abilities by addressing ethical dilemmas and operational challenges in a simulated environment.

Strengthen critical thinking skills by analyzing complex situations and making informed decisions.

Stakeholder Analysis and Engagement:

Understand the needs and expectations of different stakeholders, both internal and external.

Learn to integrate stakeholder perspectives into business strategy and decision-making processes.

Impact Assessment:

Develop the ability to assess the potential impacts of business decisions on various stakeholders and the environment.

Gain insights into measuring and reporting on sustainability outcomes.

Teamwork and Communication:

Enhance teamwork and collaboration skills by working in teams to navigate the simulation.

Improve communication skills by presenting and justifying decisions within the team and to stakeholders.

Adaptability and Resilience:

Learn to adapt strategies and business models in response to changing conditions and crises.

Build resilience by managing and overcoming challenges in the simulation.

Overall, the course aims to equip students with the skills and knowledge needed to lead and manage sustainable business practices effectively.

Ethics and Sustainability in Finance

Prerequistes are:

- Fundamentals in finance (notion of arbitrage, net present values, financial markets) are a good prerequisite.

A good level of English is also required. 

Sustainable Business Models : a Serious Game

This course is part of the new competency development pathway in sustainability organized by HEC Liège. It is one of several courses and is integrated with the course "Sustainable Business Models: A Serious Game."

For the first block of the master's program, students are required to select and complete only one of the following three thematic courses, all of which are taught concurrently:

• Sustainable Finance
• Reporting and Metrics for Sustainability
• Life Cycle Management

Ethics and Sustainability in Finance

The main course consists of a series of lectures (5 sessions of 3 hours each). The lecture is a mixture of theoretical concepts, illustrative examples, exercises and open discussions on the various concepts thaught. The lecture is complemented by an exercise (1 session of 3 hours) in which real-life applications of sustainable finance in the investment process are explored in depth. Students are expected to prepare for the lectures and tutorials in order to actively participate in class.

Sustainable Business Models : a Serious Game

The simulation is part of a "platform" course, where students must complete a learning pathway consisting of videos, readings, exercises, and other resources. This pathway will gradually equip them with the skills and knowledge required for the simulation. The simulation, designed as a "serious game," is conducted in teams of management students from various specializations. This approach simulates a typical management team, incorporating diverse areas such as finance, marketing, supply chain, human resources, production management, procurement, and R&D.

Ethics and Sustainability in Finance

Face-to-face course


Further information:

see above

Sustainable Business Models : a Serious Game

Blended learning

Ethics and Sustainability in Finance

Platform(s) used for course materials:
- LOL@
- Microsoft Teams


Further information:

The required textbook that will be predominately used throughout the course is:

- Roncalli, T. (2024). Handbook of Sustainable Finance.

Recommended books are:

- Schoenmaker, D., & Schramade, W. (2018). Principles of sustainable finance. Oxford University Press.

Recommended scientific articles are:

- Berg, F., J. Kölbel, and R. Rigobon (2022). Aggregate confusion: The divergence of esg ratings. Review of Finance, 26(6), 1315-1344.

- Dimson, E., Marsh, P., & Staunton, M. (2020). Divergent ESG ratings. Journal of Portfolio Management, 47(1), 75-87.

- Amel-Zadeh, A., & Serafeim, G. (2018). Why and how investors use ESG information: Evidence from a global survey. Financial Analysts Journal, 74(3), 87-103.

- Bauer, R., Ruof, T., & Smeets, P. (2021). Get real! Individuals prefer more sustainable investments. Review of Financial Studies, 34(8), 3976-4043.

- Hartzmark, S. M., & Sussman, A. B. (2019). Do investors value sustainability? A natural experiment examining ranking and fund flows. Journal of Finance, 74(6), 2789-2837.

- Boustanifar, H. & Schwarz, P. (2024). Measuring Business Social Irresponsibility: The Case of Sin Stocks. Working Paper. Available at SSRN.

The books and articles will be complemented by a slide deck.

Ethics and Sustainability in Finance

Exam(s) in session

Any session

- In-person

written exam ( multiple-choice questionnaire, open-ended questions )


Further information:

As this is a new course, which is integrated with the course "Sustainable Business Models: A Serious Game" detailed information regarding the evaluation process and criteria will be provided in due course.

Sustainable Business Models : a Serious Game

Exam(s) in session

Any session

- Remote

written exam

Continuous assessment

Other : peer evaluation


Further information:

Assessment will be based on peer evaluation. Detailed information regarding the evaluation process and criteria will be provided in due course.Les modalités pratiques

Ethics and Sustainability in Finance

none

Ethics and Sustainability in Finance

Attendance to the lectures and tutorials is not required, however, it is strongly recommended. Part of the exam questions may be specifically based on the oral communication/presentation of the lectures or the tutorials. Attendance to the invited guest lectures is compulsory.

Sustainable Business Models : a Serious Game

As the serious game is currently under development, practical details will be communicated to students at a later date. The game is scheduled to take place in April (or early May) and will be conducted in a hybrid format. Students will be notified by email once the practical arrangements have been finalized.

Ethics and Sustainability in Finance

Prof. Dr. Patrick Schwarz

email : patrick.schwarz[at]uliege.be 

 

Teaching assistant: TBA

Ethics and Sustainability in Finance

There is no MOOC associated with this course.