BUU44700 Sustainable Finance

(5 ECTS)

Lecturer:   

Benjamin Lynch

Email: blynch6@tcd.ie

Office Hours: To be advised at the start of term

Pre- Requisite: BUU22550 Introduction to Finance

Available to Exchange students

Module Description

The world faces many monumental challenges which will have a major impact on our lives and the lives of future generations such as climate change, the loss of biodiversity, inequality, political polarisation, etc. The finance system is integral to achieving a smooth transition to a sustainable future as an incredible reallocation of capital is required for it to be possible. For example, it’s estimated that the world needs to invest around 3.5 trillion a year in the energy sector up until 2050 to avert climate catastrophe. In order for this type of investment to materialise and be made in an efficient manner, the financial system needs to fulfil its functions of allocating capital to its most productive uses, correctly pricing risk and embedding them in valuation.

Finance is all about decision making and trade-offs so it is a powerful tool that can be wielded to direct the transition. However, mainstream finance first needs to evolve to become truly sustainable. Sustainable finance, an evolved form of finance, has emerged as a major new field for practitioners. It repurposes finance from a goal (short-term profit maximisation) in itself to finance as a means to support the transition to a sustainable economy.

In this course we will build an expanded finance tool kit that allows for the integration of sustainability issues into the decision-making process of corporate financial managers and investors. It will examine the measurement and integration of sustainability related issues into the investment and financing decisions of corporate financial manager. This will include tools to calculate a company’s sustainability risk exposure. It will also examine how sustainability can impact the portfolio construction of investors and the valuation of financial assets. Relatedly, the impact of various sustainability investment strategies, financial actors and products will be critically appraised. Finally, there exists a large funding gap between the amount of capital required to fund the transition to a sustainable economy and the amount currently on offer. We will examine the barriers to the flow of funds into funding the transition and the innovative financial products that are available to overcome them.

Learning And Teaching Approach

This module is structured around a series of lectures, tutorials and readings.  Tutorials will begin in week 2 of term and you will be assigned to a tutorial group on your portal.  Students will be expected to prepare homework in advance and to contribute to discussions in tutorials.  

Attendance is expected at all lectures and tutorials and attendance at tutorials will be recorded. As per college regulations, any student who attends less than two thirds of lectures and tutorials may be deemed non-satisfactory and may not be allowed to sit the final exam. 

https://www.tcd.ie/undergraduate-studies/academic-progress/attendance-course-work.php

Learning Outcomes

Having successfully completed this module, students should be able to:

• Analyse the sustainability performance of a corporation/investment fund with reference to appropriate regulatory framework.
• Critically appraise the impact of sustainability on corporate financial management decisions.
• Undertake sustainability enhanced fundamental equity analysis using the value driver adjustment approach.
• Compare the main sustainable investment strategies and their measurable impact on the real economy. 
• Evaluate the barriers to investments in sustainable projects and innovative financing mechanisms available to overcome them.
• Use scenario analysis to quantify the climate risk exposure of a company/project/investment funds.
• Critically evaluate the sustainability impact of different financial markets and institutions.

Relation to Degree

This course provides an understanding of the key concepts of the theories and practicalities of sustainable finance.  It is highly relevant for anyone considering a future career in sustainability, corporate management, the financial services industry or related career.

Workload

Textbooks And Required Resources

The textbooks for this module are:

1. Schoenmaker & Schramade, Corporate Finance for Long-Term Value, Springer.

This book is open access (free) and can be downloaded at https://link.springer.com/book/10.1007/978-3-031-35009-2

2. Schoenmaker & Schramade, Principles of Sustainable Finance, Oxford University Press

You can rent the ebook https://www.vitalsource.com/ie/products/principles-of-sustainable-finance-dirk-schoenmaker-willem-v9780192561244?term=9780192561244 or purchase a hard copy using the discount code in this attachment Principles of Sustainable Finance.pdf for Principles of Sustainable Finance by Schoenmaker and Schramade, this text is also available in ebook and hardcopy from the TCD library.

3. Vargas, Sustainable Finance Fundamentals, Routledge.

General Supplemental Readings

Additional readings will also be assigned throughout the course and will be posted on Blackboard.

To access the Financial Times app for free on your phone create an account using your tcd login: https://www-ft-com.elib.tcd.ie/join/licence/f36c268d-3e6d-4c28-b451-3a143c5b9660/details or access the FT website https://libguides.tcd.ie/az.php?q=financial%20times.  You can access the Economist at https://www-proquest-com.elib.tcd.ie/publication/publications_41716?accountid=14404.

Student Preparation for the Module

If you have not used Excel previously, I would strongly recommend that you complete this linked-in-learning course before the end of the first week of the module, https://www.linkedin.com/learning/excel-essential-training-office-365-microsoft-365/getting-started-with-excel-for-office-365?u=2217001.  You can access all linked in learning courses for free using your tcd login, you may want to do other or more advanced excel courses, or choose an alternative excel course for your version of excel.  You will be expected from the start of term to be able to use excel.

Course Communication

Lecture slides, readings, tutorial questions and answers, assignment descriptions and announcements will be posted on Blackboard.

Please only send emails from your tcd email address, and address both me and teaching assistants respectfully (no hi, hiya, with no name), please check your programme handbook and module outline first to check if your question can be answered there, and if you feel that the answer to your question might benefit the whole class, please consider asking the question during lectures/tutorials. 

Assessment for this course will be based as follows:

• 30% Group Assignment
• 70% Exam

Each group will have a maximum of four members.  You may choose your own group and self-enrol your group on blackboard.  Further details on the project will be available in the assignments folder on blackboard, and will be discussed in class.

A penalty for late submission will apply.  Students unable to submit an assignment for medical reasons must produce a medical certificate within three working days of the missed submission date. Certificates received after that time will not be accepted.

Students who fail the module will sit a supplemental exam.  The supplemental exam will count for 100% of the grade.

Biographical Note

Dr. Benjamin Lynch is Assistant Professor in Sustainable Finance at Trinity Business School. Benjamin completed a PhD in Sustainable Finance from Trinity Business School in 2022. His overarching research interests relates to investigating the incentives for investors and firms to alter the sustainability of their practices. His research portfolio encompasses a diverse range of topics within sustainable finance including the value and risk implications of varying levels of ESG (Environmental, Social, and Governance) performance, Carbon markets, and the importance of materiality in ESG integration investment strategies. Benjamin's research has been published in academic journals such as the European Journal of Finance and the International Journal of Finance & Economics. He regularly contributes to publications and events in the area of sustainable finance at national and international level in the academic and professional communities. He has lectured on courses in Sustainable Finance, ESG and Responsible Financial Management, Corporate Finance, International Finance, and Financial Markets & Institutions.