Unit 1: Introduction to Sustainable Finance (PSF Ch 1, GP Ch 1)

• Challenges to sustainability
• Purpose and importance of sustainable finance
• Limits to sustainable finance

Unit 2: Corporate Purpose (PSF Ch 2-3, GP Ch 2-3, 5, articles to be provided)

• Shareholder vs. stakeholder value
• Short-term vs. long-term value creation
• Empirical evidence (including discussions on ESG measurements and ratings)

Unit 3: Corporate Purpose: Empirical Evidence (PSF Ch 5, GP Ch 4, articles to be provided)

• Challenges to sustainable finance
• Overcoming barriers to sustainable finance
• Empirical evidence (determinants of CSR practices)

Unit 4: Investor Activism and Engagement (PSF Ch 4, GP 6, 9 articles to be provided)

• Role of institutional investors in sustainable finance
• Voice vs. exit
• Empirical evidence (investors’ impact on CSR performance)

Unit 5: Sustainable Investing (PSF Ch 7-8, articles to be provided)

• Typology of sustainable investing strategies
• Motivations to SRI
• Empirical evidence (investor preference to SRI)

Unit 6: Sustainable Investing Continued (PSF Ch 9, articles to be provided)

• Stages of sustainable finance and SRI
• ESG Integration and impact investing
• Empirical evidence

Unit 7: Climate Finance: Empirical studies (articles to be provided)

• Climate risk and implications
• Corporate response to climate change and environmental regulations

After completing the course, students will be able to:
•    Understand the context behind, and development, of sustainable finance
•    Understand the role and interplay between different stakeholders and opportunities for future development
•    Evaluate corporate sustainability risks and opportunities from both managerial and investment perspectives
•    Empirically examine the relationships between CSR practices and firm performance as well as between sustainable investing strategies and financial performance
•    Think critically with regards to applying sustainable finance in practice.

Attendance is compulsory for this class. It is also a necessary condition to receive participation marks.

The course induces learning in two ways. One takes the conventional class-room teaching approach and introduces course material through presentations by the lecturer. Such approach is used mainly in the teaching of theoretical and practical contents. The other focuses on the discussions of existing empirical research in the academic literature. To facilitate learning in this approach, students are strongly recommended to complete the assigned reading material prior to class and be ready to engage in class discussions with respect to the key findings, interpretations, and challenges to the studies, as well as how they fit into the literature and the context of sustainable finance.

The components for the grades are weighted as follows:
•    30% class participation
•    40% intermediate assignments (2)
•    30% final assignment and presentation

Class participation (30%): Participation is a central part of the learning process for you and your classmates. Your participation mark reflects your contribution to the classroom learning environment. This includes class attendance, arriving in class on time, staying for the class duration, and actively engaging in class debates. Please note that preparation before empirical classes is expected to effectively participate in those discussions.

Intermediate assignment 1 (20%): Students (one or two) are required to empirically address one of the two questions of their choice: (1) the impact of sustainable practices on firm performance; or (2) the determinants of firms' sustainable practices. The exercise entails (a) constructions of CSR score, performance measures, and other factor variables (e.g., executive compensation, competition, etc.) following common approaches in the literature; (b) regression analyses to address the question; and (c)  interpretation of the key findings. Detailed instructions will be given by the end of Unit 2, and it is due at the beginning of Unit 5.

Intermediate assignment 2 (20%): Students (one or two) are required to empirically examine whether socially responsible investing would affect the performance of such screened stock portfolios. The exercise entails (a) constructions of SRI and non-SRI portfolios of U.S. stocks following common approaches in the literature; (b) estimations of the abnormal returns for each of the investment strategies; and (c) interpretation of the key findings. Detailed instructions will be given by the end of Unit 5, and it is due at the beginning of Unit 7.

Final assignment and presentation (30%): In teams (two or three), students are required to replicate the main findings of an empirical study (any relevant paper of the group’s choice). They are also to deliver a 15- to 20-miniute presentation on the paper during exam time. The presentation should clearly convey the motivations, the main objectives, the contributions, the key findings (actual and replicated), the implications, and limitations of the paper.

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Basic knowledge of R or Stata, basics in Statistics