Sustainable Business & Finance (2235.YR.014088.1)

General information

Type:	OPT	Curs:	2	Period:	S semester
ECTS Credits:	3 ECTS

Teaching Staff:

Group	Teacher	Department	Language
Year 2	Natalia Luna Bujanda	Economía, Finanzas y Contabilidad	ENG

Having taken the core courses on Finance, Corporate Finance, Accounting, Strategy, Global Markets.

This is a block week course; therefore, it is an intensive course that requires a fair amount of effort on preparation (pre-reading list and cases), active class participation and agile teamwork. As there will be regular tests and quizzes, this will require that students digest and reflect on the materials seen and discussed in class on daily basis. Given the last day of the class is dedicated to group projects presentations, students will also be required to work considerably on the group project during the week.
Overall, the distribution of the workload will be similar to the evaluation system:
- Final group project: 50%
- Class participation: 25%
- Individual test/quiz: 25%

Today's business environment is arguably more disruptive and rapidly changing than ever, and no industry or country is immune to this trend. Organizations are facing a variety of challenges due to ?megatrends', including climate change, technological innovation, and societal pressures. In order to survive?and thrive?businesses are to adapt to climate change, respond to customer demands for more sustainable products and brands, deal with the tech disruption and financial innovation, and navigate through tightening regulations.
What we are looking to achieve in this course is to learn what these megatrends and sustainable issues are, how complex they are, how interrelated they are with other areas such as strategy, innovation, finance, how interdisciplinary they are with other fields such as science, regulation, policy, and how these issues bring real financial, operational, reputational and legal risks and opportunities that can have direct financial implications in the financial performance and valuation of a company.
MBAs need to appreciate these critical factors and their meaning for the future of business and finance. In particular, the course aims to convey how to best interpret and internalize the contemporary challenges in the business world so that MBAs could formulate their strategies and business models accordingly, exploit the ever-changing risks and opportunities, and appreciate the financial implications of turning a blind eye to such developments.
The course is designed to equip students with a solid understanding of key current developments in the business and finance world. Rather than deep diving into any specific issue, the course will help students develop a framework to identify risks and opportunities across sectors. This framework will also help students interpret the financial implications of these ESG issues and provide a roadmap to mitigate the pertinent risks or seize opportunities.
The course will serve as a bridge between the existing core portfolio and more specialized electives. The course will utilize, build on, and extend the concepts covered in the following MBA core curriculum:
The course will also serve as an effective introduction to a variety of electives. Specifically, the course will complement other electives such as Impact Investment, Social Entrepreneurship and Impact Investing, Entrepreneurial Finance, International Business Strategy.

Far reaching environmental and social problems are increasing in scope and severity, presenting challenges to existing activities, perspectives, and practices. Today's rapidly evolving environment is shaping the future of businesses and finance, bringing new risks as well as opportunities. For example:
- Regulations and policies are pushing governments and companies to assess climate risks in their operations as well as to allocate substantial capital to solutions that support the painstaking transition to a low carbon economy.
- Growing social inequality and new consumer habits are driving demand for more sustainable products/brands and breaking new grounds for unconventional investment practices, such as sustainable and impact investing.

The financial and corporate sectors need to adapt to survive and thrive. From coffee shops and local start-ups to multinational behemoths like Unilever, Coca-Cola, Amazon, and Barclays, businesses are immersed in a global transformation.
The goal of the course is to analyse the interplay of sustainability, business, and finance. The nexus of ESG (environmental, social, governance) and Financial issues generates new challenges and opportunities over longer risk horizons, which should be factored into company financial analysis and valuation frameworks. Understanding, measuring, and pricing these new sources of risk, and assessing the related opportunities, presents challenges for executives, investors, and governments alike due to the wide breadth of ESG-related issues.
The large scale and long-term nature of these developments render strategic and financial decision making particularly challenging. In the course, we will put ourselves in the shoes of organizations and ask ourselves questions like: What does climate change mean for the automotive sector? What are the most critical ESG issues affecting a given industry? How do ESG issues differ across sectors? What are the most reliable ways to measure these effects, and how do these issues translate into risks and opportunities (financial, operational, legal, and reputational)? What are the earnings and cash flows impact of these dynamics? What investment options become more/less attractive given these trends? What is the most effective way to help a company outline a strategic and financial plan to adapt to these challenges?
Accordingly, our course aims to achieve three key learning objectives:
(i) understand how uncertainty, climate change, and other current social issues and megatrends are affecting the evolution of finance and businesses
(ii) assess the impact, risks, and the opportunities from these topics across different sectors
(iii) learn how to translate these into economic and financial language

The course is aimed at students who aspire to work in the financial sector (investment banking, asset management, PE & VC), consulting, corporate sector, social enterprises, as well as those interested in pursuing an entrepreneurial path.
Upon successful completion of the course, we expect that MBAs will be able to:
- Understand the key global developments and trends that shape the future of businesses and finance.
- Reflect on critical economic, technological, environmental, societal, regulatory challenges.
- Assess the risks and opportunities that these key developments pose for different sectors and regions.
- Recognize corporate and financial challenges from an integrated perspective.
- Understand the link among finance, sustainability, business, and impact.
- Evaluate how ESG issues may alter the long-term value creation of a company.
- Elaborate informed opinions on the financial and economic implications of megatrends.
- Formulate business/financial recommendations based on systematic analysis and sound judgment.
- Understand the financing solutions to allocate capital to address environmental and societal issues
- Seize the opportunity to comprehensively evaluate a sector/company as a team of peers.
- Enhance their critical thinking and problem-solving capabilities.
- Deal with and take advantage of uncertainty and ambiguity, especially in a regulatory sense.
- Gain valuable insights from industry practitioners.

1. Course Agenda Day 1: Introduction to Sustainable Finance and Climate Change Sustainable finance is generally defined as the incorporation of environmental, social, and governance (ESG) considerations into business and financial decisions and investment strategies. In this session, we will introduce the topic of sustainable finance, i.e., what it means, key initiatives, its challenges, and its opportunities. One of the most important risks that organizations face today is climate change. In these discussions, global warming usually comes to mind; however, other pressing environmental issues, such as pollution, waste management, deforestation, are of paramount importance as well. Estimating the potential impact of these issues is inherently challenging. In this part of the session, we will discuss the climate-related risks from transition risks to a low-carbon economy, as well as the risks related to the physical impact of climate change. As we analyse the risks, we will also explore the opportunities for organizations; for example, resource efficiency to achieve cost savings or the adoption of renewable energy options. We will do this assessment through a real case study. Day 2: Social and Governance Considerations This session will be split in two parts, to analyse on one hand social factors and on the other hand governance issues affecting industries and companies. A. Social factors: Our focus in this part of the session will be to understand the social trends and issues that affect industries as well as companies. These will include inequality, globalization, gender empowerment, employee rights. Through pre-reading materials, recorded videos and quizzes, we will reflect on the different social themes affecting different industries and how they can become financial, operational or reputational risks. B. Governance factors: Our focus on the second part of the session will be to reflect on what are the corporate governance factors and corporate governance behaviour issues that affect companies¿ business models and financial performance. Good corporate governance and management quality is the backbone of a well performing company. Corporate governance problems are at the core of most of corporations¿ failures. The evolving environment and rapid speed of disruption coming from environmental and social issues require a change of culture and an outstanding management. In this session, we will discuss particularly the importance of the Board composition and its relationships with other stakeholders including suppliers, employees and investors. We will do that through pre-reading materials, recorded videos and quizzes. We will assess both topics through two case studies. Day 3: Finance & Sustainability In this session, we will reflect on the future of finance. Particularly, we will focus on the digital revolution in the financial sector, which is not only transforming the financial services landscape but also helping address financial inclusion and make the `pie¿ bigger: Cost-effective financial solutions like mobile banking and cashless payment alternatives offer an alternative to more expensive banking services and can facilitate access to finance to members of the society that had been under unserved or underserved by banks. We will explore these aspects of financial innovation through the case study of M-PESA. The M-PESA case illustrates the digital business transformation of an incumbent telecom operator through the offering of mobile financial services. The company has become a role model for mobile financial services and payment platforms, as well as inclusive business practices. Day 4: Sustainable Finance Solutions Academic evidence suggests that companies with proper environmental risk management, social policies, and strong governance can support stronger returns. Hence, there is growing recognition that investing in companies that `do good¿ does not mean sacrificing financial returns. Sustainable Finance has evolved exponentially in the last few years. The Paris Agreement and the UN Sustainable Development Goals (SDGs) agreed in late 2015 created a tipping point that prompted a notable shift in focus within the private sector, from understanding risks to financing solutions. In this session, we will explore the investing spectrum in this field: - from pure ESG integration¿investing in companies with good ESG profiles and excluding those fundamentally misaligned with ESG principles (e.g., tobacco, gambling) - to thematic investing¿investing in companies which core business and strategy are aligned to a sustainability theme (e.g., food security, energy transition, circular economy) - and to impact investing¿investments that are made with the intention of generating positive benefits for the society or the environment, in addition to the goal of delivering positive investment returns (e.g., investments in education providers or healthcare technologies in emerging countries) We will also explore the growth of sustainable investment solutions, such as green bonds, social bonds, transition bonds, SDGs-linked loans, and sustainable infrastructure. In the last day, students will also present in groups their group projects.

2.

The course will draw upon lectures, case studies, class discussions, guest speakers, and group work. This combination will provide a truly rewarding experience by responding to students' expectations and demands for a healthy balance between academic substance and practical applications.
Lectures are aimed to facilitate a rich dialogue between the professor and the students. The professor will be the director of the orchestra who will empower students to be active participants in their learning experience. This will be achieved by a heathy preparation of reading materials ahead of class and productive case studies discussions.
The reading list is intended to be practical and to ensure that students firmly comprehend the concepts that will be covered in class. In doing so, the readings will help students better recognize the challenges and difficulties that organizations face in dealing with key megatrends and sustainable issues.
The case studies will bring a wealth of relevant and diverse perspectives from different geographies and industries, as well as recent economic developments and real-life cases.
We will also be relying on the expertise of several industry professionals as guest speakers. While the professor's knowledge and analytical interpretation will render a coherent yet approachable structure, the day-to-day experience and expertise of guest speakers will help students better internalize and contextualize the subject matter.
Therefore, case studies and guest speakers will foster learning in the classroom and complement the lectures.
Finally, the group project will allow students to work on a real-life challenge/issue for a given company, where they will do a holistic analysis and assessment of the material ESG issues and its financial implications, and ultimately provide a recommendation of next steps and actions for the company. In this project, students will be able to apply their analytical and critical thinking as well as problem solving and sound judgement, presentations skills and put in practice teamwork and team building.

- UN Environmental Programme, Global Environment Outlook
- How companies are preparing for a net-zero future, Cambridge Institute for Sustainability Leadership
- Harvard Case study on Climate Change in 2020: Implications for
- FT Article: Energy's stranded assets are a cause of financial stability concern
- FT article: The case for a circular world
- Bank of England: Climate Change
- United Nations Climate Change: The Paris Agreement
- The Task Force for Climate Financial Disclosure
- Sustainability Accounting Standards Board (SASB) - TCFD Practice Handbook guide
- ECB: Climate Change and Financial Stability
- CFA ESG Investing Chapter Social Factors (from page 1-page 16)
- FT article: Coronavirus forces investor rethink on social issues
- CFA ESG Investing Chapter Governance Factors (from page 1-page 14)
- Harvard Case Study: Apple and its Suppliers
- Harvard Case Study Volkswagen and the Dieselgate scandal
- Global Financial Stability Report, Sustainable Finance-Chapter Six, IMF
- Clearing the Air: Responsible Investment, AQR

Group	Teacher	Department
Year 2	Natalia Luna Bujanda	Economía, Finanzas y Contabilidad