GRA 6568 Corporate Value Creation, Sustainability and Social Welfare
GRA 6568 Corporate Value Creation, Sustainability and Social Welfare
The issues of Corporate Social Responsibility (CSR), Environmental, Social and Governance (ESG) performance, Socially Responsible Investment (SRI), and the United Nations Sustainable Development Goals (SDGs) are at the forefront of the challenges corporations, investors and government are facing. To a large extent, the need for CSR stems from the externalities caused by firms, organizations and individual productive and consumption activities. We first examine these problems of externalities and review how market, non-market, and ethics based solutions can be used under different conditions. We investigate the practical steps firms and organizations need to undertake to incorporate sustainability in the management of their operations and their investment decisions. We discuss the alternative institutional mechanisms open to shareholders, institutional investors and stakeholders to effect CSR and sustainability focused management practices. We examine alternative ways through which finance innovations can help achieve individual returns and benefits, economic development and social impact or for social enterprises to gain financial sustainability. We analyze the role of fiduciary duty in helping align board and manager behavior to shareholders and stakeholders priorities.
The student will become familiar with the economic tools for analyzing the impact of externalities on economic activities, the alternative approaches (market based, non-market based and ethics based) to address externalities, the conditions under which each approach can be used, and the mechanisms through which they affect firm value and organization performance. She will develop an understanding of the different institutional arrangement that can be used to achieve jointly firm value creation and social welfare enhancements. She will acquire a broad familiarity with practical examples of the impact of the different approaches on value creation, profitability and sustainability. She will also develop an understanding of how the UN SDGs can used to frame the assessment of the positive or negative impact of economic activities.
The students will learn to identify and analyze both the private costs and benefits and the public costs and benefits of the firm’s activities, and learn to recognize the conditions under which market solutions, non-market or ethics based solutions are feasible and/or preferable to improve social welfare in practical business situations and investment decisions. In particular she will learn to "identify where the company creates or destroys value", with a definition of value including environmental or social value, identify the sustainability framework appropriate to measure impact, and be able to perform a “materiality analysis” to identify sustainability issues that really matters in different corporate environments. She will learn to apply this framework in various situations and develop an understanding of the investment instruments and institutional mechanisms appropriate for each set of circumstances. She will learn to recognize which SDG’s an organization’s economic activity may support or hinder.
The course provides a broad framework to analyze the social welfare and private benefits implications of economic activities and the extent and limits of the role of finance in addressing and balancing these competing objectives. The course should also enhance the student's ability to formulate and communicate clearly their analysis as well as to identify and disclose fully its advantages and limitations. The course should strengthen the students’ familiarity and understanding of the international voluntary or regulatory frameworks, like the GHG protocol, the EU taxonomy, the UN SDGs, used to assess, report and disclose the sustainability and impact of economic activities.
Topics:
- The basics of economic and financial valuation, and the extent and limits to which sustainability concerns can affect values.
- Which levers are available to investors, stakeholders, and civil society to ensure that sustainability concerns are significant drivers of values.
- Sustainability focused corporate investment and operating management
- Identification of the firms’ and organizations’ activities and operations that create or destroy value, in financial, environmental and social terms, using of the main sustainability frameworks to measure impact.
- Materiality analysis: which social and environmental dimension really matter for the firm’s operations
- Investment and operation action plan.
- How to develop financial sustainability plans for social enterprises with significant positive impact.
- Tools for engagement: institutional mechanisms for shareholders and stakeholders actions to enhance corporate sustainability focus
- UN Principles of Responsible Investing (UNPRI) and UN Sustainable Development Goals.
- Institutional Investors and Socially Responsible Investing
- Ethics, Fiduciary duty and social responsibility
- Alternative finance mechanism to sustain for profit economic activity with benefits to the individuals and social impact.
The learning activities will combine for 1/6 lectures, 1/6 corporate simulations, 1/2 case discussions, and 1/6 external guest speakers. Students are expected to prepare the lectures and guest speakers by reading assigned materials and participate actively in the discussions. The course will include the preparation and discussion of six in-depth case on managing for sustainability. Two cases will focus on corporate actions to enhance sustainability and climate change mitigation and strengthen corporate financial valuation.2 cases will focus on how investment managers can construct positive impact portfolios without scarifying returns. One case will focus on how to build financial viability of social enterprises in the Global South. And one case on estimating the monetary value of the social aspect of economic activities. Lastly the simulation will have the students devise strategies to effect sustainability focused policy changes in organizations. There will be various assignments throughout the course, including preparing reports for each of the cases, and in class presentations of the case reports. Most learning will take place through student discussions of papers, cases, and other assignments, and the experiential learning gained from the simulation.
Cases
There will be 6 cases discussed in the course, which will change and be determined at the start of the course. Previous cases include:
- Sustainable Product Management at Solvay, Harvard Case N9-120-081, G. Serafeim, V. Dessain, M. Hjortshoe, Feb. 19, 2020
- Summa Equity: Building Purpose-Driven Organizations, Harvard Case 9-118-028, G. Serafeim & D. Freiberg, Apr. 10, 2019,
The exam for this course has been changed starting academic year 2023/2024. The course now has two ordinary exams. It is not possible to retake the old version of the exam. For questions regarding previous results, please contact InfoHub.
It is the student’s own responsibility to obtain any information provided in class.
Honour code.
Academic honesty and trust are important to all of us as individuals, and are values that are integral to BI's honour code system. Students are responsible for familiarising themselves with the honour code system, to which the faculty is deeply committed. Any violation of the honour code will be dealt with in accordance with BI’s procedures for academic misconduct. Issues of academic integrity are taken seriously by everyone associated with the programmes at BI and are at the heart of the honour code. If you have any questions about your responsibilities under the honour code, please ask.
All courses in the Masters programme will assume that students have fulfilled the admission requirements for the programme. In addition, courses in second, third and/or fourth semester can have specific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.
Disclaimer
Deviations in teaching and exams may occur if external conditions or unforeseen events call for this.
GRA 6514 Corporate Finance, GRA 6556 Sustainable Finance, and GRA 6538 Applied Valuation - or equivalent courses.
| Assessments |
|---|
Exam category: Submission Form of assessment: Submission PDF Exam/hand-in semester: First Semester Weight: 45 Grouping: Group (3 - 4) Duration: 1 Semester(s) Comment: Submission due last day of class Exam code: GRA 65682 Grading scale: ECTS Resit: Examination when next scheduled course |
Exam category: School Exam Form of assessment: Written School Exam - digital Exam/hand-in semester: First Semester Weight: 55 Grouping: Individual Support materials:
Duration: 3 Hour(s) Exam code: GRA 65683 Grading scale: ECTS Resit: Examination when next scheduled course |
All exams must be passed to get a grade in this course.
| Activity | Duration | Comment |
|---|---|---|
Case teaching | 16 Hour(s) | |
Teaching | 8 Hour(s) | |
Feedback activities and counselling | 12 Hour(s) | |
Group work / Assignments | 48 Hour(s) | |
Student's own work with learning resources | 48 Hour(s) | |
Prepare for teaching | 36 Hour(s) | |
Examination | 3 Hour(s) |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 6 ECTS credits corresponds to a workload of at least 160 hours.