GRA 6571 Financial Risk Management for ESG, Sustainability and Climate

GRA 6571 Financial Risk Management for ESG, Sustainability and Climate

Course code: 
GRA 6571
Department: 
Finance
Credits: 
6
Course coordinator: 
Bruno Gerard
Course name in Norwegian: 
Financial Risk Management for ESG, Sustainability and Climate
Product category: 
Master
Portfolio: 
MSc in Sustainable Finance
Semester: 
2023 Autumn
Active status: 
Active
Level of study: 
Master
Teaching language: 
English
Course type: 
One semester
Introduction

The objectives of this course are four fold:

  • Provide a solid understanding of enterprise risk management and its practical implementation.
  • Identify the activities/operations of the firm which create or destroy environmental and/or social value or are affected by environmental and societal risks (ESG, sustainability & climate risks)
  • Integrate ESG and sustainability risks in Enterprise Risk Management (ERM) and combine with other financial and operational risks to optimally enhance positive impact and minimize negative impacts, while enhancing value creation.
  • Understand how to use required disclosures and external ESG ratings to enhance an organization understating and management of its sustainability risks.

To help identify the sustainability risks affecting corporations, 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.

Learning outcomes - Knowledge

By the end of the course, the students will

  • 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.
Learning outcomes - Skills
  • Identify 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.
General Competence

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 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.

Course content
  • General introduction to the sources of sustainability Risk for corporations and investors
  • Introduction to Enterprise Risk Management (ERM)
    1. Traditional ERM
    2. Identifying operational risks and opportunities
    3. Inside‐out and outside‐in analysis.
    4. Assessing and ranking risks and opportunities
    5. Developing risk management responses
  • Assessing sustainability Risks and Opportunities
    1. Inside‐out: Identification of an organization main impacts: where the organization creates (positive impact) or destroys value (negative impact), in terms of financial, environmental and social performance
    2. Outside‐in: Identification of environmental, societal and regulatory risk and opportunities that impact the organization’s survival and value creation potential
    3. Measuring impact and identifying what really matters.
      • Measurement frameworks: UN SDG, TR, TCFD
      • Materiality determination: SASB, TCFD
      • Relative importance: ERM framework.
  • Managing sustainability Risks and Opportunities
    1. Controlling material ESG risks
    2. Optimizing profitable positive impact opportunities
  • An integrated approach sustainability risk management: the TCFD approach on governance, strategy risk management and performance indicators on climate related impact.
  • How future regulations (EU, SEC, …) can affect the risk and opportunity environment of organizations.
Teaching and learning activities

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 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.

Software tools
No specified computer-based tools are required.
Additional information

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.

Qualifications

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.

Exam categoryWeightInvigilationDurationSupport materialsGroupingComment exam
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA 65711
Grading scale:
ECTS
Grading rules:
Internal examiner
Resit:
Examination when next scheduled course
40No 8 Week(s)Group (3 - 4)Case and assignment (one submission)
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA 65712
Grading scale:
ECTS
Grading rules:
Internal examiner
Resit:
Examination when next scheduled course
60Yes3 Hour(s)
  • Bilingual dictionary
Individual Written examination under supervision
Exams:
Exam category:Submission
Form of assessment:Written submission
Weight:40
Invigilation:No
Grouping (size):Group (3-4)
Support materials:
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:Submission
Form of assessment:Written submission
Weight:60
Invigilation:Yes
Grouping (size):Individual
Support materials:
  • Bilingual dictionary
Duration:3 Hour(s)
Comment:Written examination under supervision
Exam code:GRA 65712
Grading scale:ECTS
Resit:Examination when next scheduled course
Type of Assessment: 
Ordinary examination
All exams must be passed to get a grade in this course.
Total weight: 
100
Student workload
ActivityDurationComment
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)
Sum workload: 
152

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.