GRA 6571 Financial Risk Management for ESG, Sustainability and Climate
GRA 6571 Financial Risk Management for ESG, Sustainability and Climate
This course teaches the fundamentals of modern corporate and financial risk management and shows how to integrate environmental, sustainability and climate risks into these approaches in order to recognize, understand and manage these risks systematically. Modern corporate risk management starts from the premise that firms invest in projects with positive net present value (NPV) and entails the management of the risks associated with the portfolio of positive NPV investments. Based on this premise, the course develops tools that corporate risk managers have available to manage those risks. Since risk management is complex in practice, the course studies diffferent frameworks that provide pragmatic enterprise risk management implementation approaches.
To help identify the sustainability risks that affect the firm’s portfolio of investments, the students will need to conduct both inside‐out analyses (how the organization’s activities affect the external environment in which they operate) and outside‐in assessments (how external sustainability risks, e.g. climate change, affect the organization’s operations). As frameworks for theses analyses, the students will use the UN Sustainable Development Goals (SDGs), the Task force for Climate‐related Financial Disclosure (TCFD) Risk Management Guidance and EU Taxonomy Regulation (TR) classifications of sustainability enhancing or damaging economic activities and of the disclosures firms make either in response to these regulations, or voluntarily. In the process of integrating ESG risks in ERM, the students will need to deepen their understanding ESG impact measurement standards, materiality determination, ESG reporting frameworks.
By the end of the course, the students will
- Understand the fundamentals of modern corporate and financial risk management.
- Have good knowledge of ERM, and understanding of how different risks, including ESG risk are incorporated in ERM;
- Become proficient with the different frameworks (UN SDGs, TCFD, EU Taxonomy) used to measure impact and assess materiality of sustainability, climate and ESG risk on the organization’s operations.
- Be cognizant of the methods used to assess and rank the relative importance, severity, speed of onset and impact of risks and opportunities affecting the organization, operational, financial, and economic as well as ESG.
- Be knowledgeable of the scope, extent and differences of voluntary (CFA, IIRC, GRI) and regulatory (EU, SEC, …) disclosure standards.
- Be familiar with the different sources of ESG performance and risk data, their history, weaknesses and strengths, and how they can be used.
- Identify when and how the standard tools of financial and corporate risk management can be used to management an organization ESG and other risks and when they need to be enhanced to deal with sustainability related risks.
- dentify the internal and external operating, regulatory and financial risk and opportunities affecting the activities/operations of the firm, and develop appropriate risk management responses to enhance firm value and positive contributions.
- Identify the activities/operations of the firm which create or destroy environmental and/or social value (ESG risks) – using the UN SDGs, the EU Taxonomy and the TCFD guidance as reference.
- Assess and measure the positive and negative impacts of ESG and sustainability risks on the organization’s operations, and rank them in terms of likelihood, severity and impact.
- Integrate ESG risks in enterprise risk management (ERM) and combine with other financial and operational risks to develop action plans to optimally enhance positive impact and minimize negative impacts, to enhance value creation both inside and outside the organization.
- Able to use the required reporting (e.g. from the TR) or the suggested disclosures (e.g. as suggested by the TCFD), or the various databases of corporate ESG performance to enhance the risk management and value creation, and assess both the quality and weaknesses of different measures and sources.
Since the field is in evolving change, the students will learn to identify the appropriate frameworks to help identify existing operational, financial and sustainability risk and recognize the emergence of potential new risks, specifically in the sustainability arena. In addition, they will also learn how integrate new sources of risks and opportunities within the scope of traditional financial and corporate risk management as well as of ERM, how to assess their materiality and how to adjust the firm’s optimal risk management, reporting, and compliance procedures accordingly. The course should strengthen the students’ familiarity and understanding of the international frameworks, like the TCFD, the EU taxonomy, the UN SDGs, used to assess sustainability risks and opportunities.
- Introduction to risk management and ESG.
- Risk management with perfect capital markets:
- Risk management with market imperfections and ESG
- Financial risk management with derivatives: Futures and Options
- Cosos’s Enterprise Risk Management (ERM) and ESG, sustainability and climate risk frameworks
- ESG, Sustainability and climate risk management.
The learning activities will combine lectures, case discussions, and external guest speakers. Students are expected to prepare the lectures and guest speakers by reading assigned materials and participate actively in the discussion of the lecture topics and guest speakers presentations. The course will include the preparation and discussion of one or two cases or applied assignments on sustainability risk management. There will be various assignments throughout the course, including preparing reports for each of the cases, and in class presentations of the case reports. A good share of learning will take place through student discussions of papers, cases, and other assignments.
The current reading list is preliminary and incomplete. Further articles and readings may be assigned at the start of and during the semester the class is taught.
It is the student’s own responsibility to obtain any information provided in class.
Honor 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 6534: Investments
| Assessments |
|---|
Exam category: Submission Form of assessment: Submission PDF Exam/hand-in semester: First Semester Weight: 40 Grouping: Group (3 - 4) Duration: 8 Week(s) Comment: Case and assignment (one submission) Exam code: GRA 65711 Grading scale: ECTS Resit: Examination when next scheduled course |
Exam category: School Exam Form of assessment: Written School Exam - pen and paper Exam/hand-in semester: First Semester Weight: 60 Grouping: Individual Support materials:
Duration: 3 Hour(s) Exam code: GRA 65712 Grading scale: ECTS Resit: Examination when next scheduled course |
All exams must be passed to get a grade in this course.
| Activity | Duration | Comment |
|---|---|---|
Teaching | 36 Hour(s) | |
Prepare for teaching | 48 Hour(s) | |
Group work / Assignments | 16 Hour(s) | |
Examination | 3 Hour(s) | |
Student's own work with learning resources | 49 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.