SYLLABUS AND CLASS OVERVIEW

FINA 2385: ESG in Business and Finance, Thursdays 1:30-4:20 pm

Hong Kong University

Fall 2023

Frederick J. Long Course Instructor

[Co-Founder and Managing Director, Olympus Capital Asia]

852 9261 6035 mobile

Email: dirklong878@gmail.com

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Course Description

This course is designed to introduce environmental, social and governance (ESG) topics to students of
business, finance and policy.
Students will consider the relationship of corporates to societal objectives such as environmental
protection and equitable working opportunities, which may not be within their direct operational
mandates. Students will be introduced to key environmental and social challenges, such as climate
change, pollution, and social inequality, and evaluate the “value” that preserving nature brings to
society and to corporates. We will also cover the Sustainable Development Goals (SDGs).
We will assess the key elements of an ESG system at the corporate level. What are a private company’s
societal obligations beyond profit maximization? What is required, at a minimum, and what kinds of
advanced investments (beyond compliance) would serve both societal and corporate objectives?
Students will apply these lessons to analyze specific company ESG programs via case studies, assessing
strengths and suggesting areas of improvement.
The course will address the sustainable finance marketplace, including concessionary finance and
private market products such as green bonds, sustainability-linked loans, ESG mutual funds, and
sustainable infrastructure and private equity. We explore how ESG and sustainability issues impact
financial institutions, including banks, insurance companies, and asset managers. How must banks
evolve their lending practices to address ESG risks and opportunities? Is a strategy that employs
advanced ESG metrics likely to outperform traditional investment benchmarks? What are the pitfalls of
employing a sustainability-focused public or private market investment plan?
ESG experts from corporates and financial and investment platforms will be invited as guest speakers to
inform and interact with students. They will help students to understand the current trends/practices in
ESG and evaluate potential career paths involving sustainability topics. [Speaker scheduling will be
subject to availability and may be modified.] Four essential questions we will seek to answer:
1) How serious are sustainability problems, and what are creative solutions for these problems?
2) What are the social responsibilities of the corporate and finance sectors? What are the essential
ESG priorities for corporations?
3) How will regulations drive sustainable finance? What are the essential components of, and best
practices for, sustainable finance products?
4) How can investors influence and support sustainability goals?

Course Structure

THURSDAYS 1:20-4:15 pm; Lecture and Discussion, including in class exercises

Evaluation Tools

Midterm: 25%

Case Study Presentations: 30%

Final Paper: 35%

Class Participation 10%

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Book Purchases

Environmental Social Governance. Spitz, Trudinger, and Orr. CRC Press, 2022.

Principles of Sustainable Finance. Schoenmaker and Schramade. Oxford University Press, 2021.

Remainder of reading assignments per class session will be accessible via internet or posted on Moodle,
including excerpt from Values: Building a Better World for All, Mark Carney. 2021.

Office Hours: Friday afternoons 4-5 pm by Zoom appointment (10 minute blocks)

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CLASS 1: September 7, 2023

Topic: Defining ESG. What are the SDGs?

Readings:

“Does ESG Really Matter—and Why? McKinsey & Co, August 2022.

United Nations Sustainable Development Goals (SDGs)

Guest Speaker: None

OUTLINE:

1) Course Objectives and Instructor Background

2) Context for Corporate ESG and Sustainable Finance: What are society’s great challenges?
E: Climate Change; Biodiversity; Oceans; Pollution, Water, Waste (Plastics); Resource Efficiency
S: Equitable distribution of resources on the planet; Supply chain issues
G: Appropriate oversight, including representation of constituencies in decision making:
women, minorities, workers, community (“stakeholders” concept)
3) Sustainable Development Goals (SDGs)
4) Key principles: Relevance, Materiality and the Precautionary Principle

Short Case Study: Housing

CLASS 2: September 14, 2023

Topic: Ecosystem Services and Sustainability Challenges

Readings:

Schoenmaker and Schramade, Chapter 1

Garrett Hardin, The Tragedy of the Commons. Nature Magazine, December 1968.

“Climate Change Science.” US EPA, 2022.

Herring, “Isn’t There a Lot of Disagreement Among Climate Scientists about Global Warming?”
Climate.gov, February 2020.

Guest Speaker #1: Dr. Carmen Or, Environmental Scientist, WWF

OUTLINE:

1) What are the “commons”?

2) What are our most serious ecological and social problems?

3) What are market mechanisms for addressing sustainability: EU ETS

4) What are the opportunities to support underserved communities?

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CLASS 3: September 21, 2023

Topic: What is the purpose of the corporation? Elements of Corporate ESG Programs

Readings:

Milton Friedman, The Social Responsibility of Business is to Increase its Profits. New York Times,
September 1970.

Spitz et al. Chapters 1-3

Schoenmaker and Schramade, Chapter 3

Swire Annual Report 2022 and ESG Report 2022

Guest Speaker #2: Suzanne Cheung and colleague, Swire, Corporate ESG Leadership Team

OUTLINE:

1) Traditional Corporate Vision: Friedman on corporates’ social responsibilities?

2) 1980s Vision: Corporate Social Responsibility (CSR) became a concept: Why?
3) Evolving Vision: Mark Carney, “Values”
4) Critiques of Capitalism and its Flaws (Piketty, Reich, Harvey)

CORPORATE ESG COMPONENTS:

• Policy
• Oversight
• Personnel
• Measurement
• Data Assurance
• Validation

Questions:

1) What is the responsibility of the corporate in Asia to the issues raised previously?
2) Start with regulations: pertaining to pollution, emissions, worker health and safety, oversight
processes including board of directors and disclosures to public
3) Review circumstances where corporates choose to exceed requirements

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CLASS 4: September 28, 2023

Topic: Regulations, Global Agreements, and Market Mechanisms Addressing Sustainability

Readings:

Kyoto Protocol, COP 27 Reports and UNFCCC Charter Documents

Bayer and Aklin, “The European Union Emissions Trading System Reduced Emissions Despite Low
Prices.” Proceedings of the National Academy of Sciences (PNAS), April 2020.

Michael Porter, Serafeim and Kramer, “Where ESG Fails.” Institutional Investor, October 2019.

McKinsey Sustainability, Climate Risk and Response in Asia, McKinsey Global Institute, November 2020.

Maizland, China’s Fight Against Climate Change and Environmental Degradation. Council on Foreign
Relations, May 19, 2021.

Case Study and in-class negotiation exercise: The EU Emission Trading Scheme (EU ETS)

Guest Speaker: None

OUTLINE:

1) Shortcomings of economic principles at macro level: GDP measurement, valuation and

depreciation of natural resource asserts; Discount Rate challenge
2) Cross-border challenges for natural resource values
3) Corporate level pricing of key resource inputs
4) What would make EU carbon system function on a global basis; what are the impediments to
implementing such a system; what are the problems with global agreements broadly?
5) Early thoughts on restructuring global finance systems

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Class 5: October 5, 2023

Topic: Corporate ESG Performance and Reporting

Readings:

Spitz et al, chapters 5,7, 11-13

Schoenmaker and Schramade, Chapters 4-6.

Rios, Chong, and Grau, Design for Disassembly and Deconstruction-Challenges and Opportunities.
Science Direct (Elsevier) 2015.

Principles for Responsible Investment (PRI), Managing ESG Risk in the Supply Chains of Private
Companies and Assets. 2017

Wilkins, More Recycling Won’t Solve Plastic Pollution. Scientific American, July 6, 2018.

Guest Speaker #3: Christine Lau, HKEX Representative

OUTLINE:

1) What are ESG reporting requirements for a private or public company in Hong Kong

2) What are the major choices that a company faces when performing ESG reporting; What is
greenwashing? How do companies promote or avoid greenwashing? Examples

3) Case Study: Starbucks

Class 6: October 12, 2023

Midterm Exam:

Covers ESG, SDGs, Corporate Approaches and Regulation

You can bring any written class notes from your readings up to this point of class, as well as assigned
textbooks.

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Class 7: October 26, 2023

Topic: Current State of Sustainable Finance

Readings:

Reuters, “Global Green Finance Rises over 100 Fold in the Past Decade—Study.” April 2022.

EU Proposed Standards for Green Finance (2022)

International Capital Market Association (ICMA), Overview and Recommendations for Sustainable
Finance Taxonomies. May 2021.

“The Green’s Dilemma: Building Tomorrow’s Climate Infrastructure Today.” Ruhl and Salzman, 2023.

Guest Speaker: None

OUTLINE:

1) Size of Capital Raising: Loans, Bonds, Equity

2) History of Sustainable Finance
3) Linkages to Sustainability/SDG Targets
4) Project Qualification Process
5) Ringfencing of Proceeds
6) Reporting
7) Transparency and Accountability
8) Special Issues/Incentives and Penalties
9) Greenwashing

Questions:

1) Emerging “Standards” for sustainable finance? Which system seems most effective?
2) Who decides whether a financial product/instrument serves key sustainability goals?
3) Applicable regulations: pertaining to pollution, emissions, worker health and safety, oversight
processes including board of directors and disclosures to public
4) Does sustainable finance merit a “greenium”?
5) Reporting: How to ensure Accuracy and Accountability?
6) Special Issues: Greenwashing and its Consequences?

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Class 8: November 2, 2023

Topics: Green Bonds and Sustainability-Linked Loans

Readings:

Schoenmaker and Schramade, Chapter 7, 9, 10

Johnstone and Long, “Progress and Notions of Progress in Sustainable Finance.” Journal of Sustainable
Finance & Investment, August 2022.

Principles for Responsible Investing, “Sustainability Linked Loans: A strong ESG Commitment or a Vehicle
for Greenwashing?” PRI, July 2022.

Bank of England: Mandate for Banks 50 Year Climate Risk Assessment (2020)

Guest Speaker #4: Jonathan Drew, HSBC ESG representative

OUTLINE:

1) Nomenclature for Green and Social Bonds

2) Corporate objectives in green finance
3) Investor objectives in green finance
4) Bank objectives in green finance
5) Project commitments versus holistic corporate commitments
6) Creative approaches: Malaysia’s law on climate mitigation and management judgment
7) Paths Forward: China and its GB government review process

Case Study: Paths Forward on Banks’ Fossil Fuel Lending

Class 9: November 9, 2023

Topic: ESG Mutual Funds, Private Equity, and M&A

Readings:

Schoenmaker and Schramade, Chapter 8, 11, 12

Shepard, “If Global Warming is a Risk, Will Larry Fink Ration?” RealClearMarkets, August 19, 2022.

Simonson, “State AGs Take Aim at $10 trillion Investment Giant over Woke Investments.” Washington
Free Beacon, August 2022.

Malkiel, “Does ESG Investing Deliver on its Promises?” Advisor Perspectives, 2022.

Perez et al, How to Make ESG Real. McKinsey Quarterly, August 2022.

Long and Johnstone, “Applying Deep ESG to Asian Private Equity.” Journal of Sustainable Finance &
Investment, February 2021.

Bain & Company, How ESG Drives Value in Private Equity Sectors.

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Guest Speaker #5: Bain & Company, ESG Approaches in Private Equity

OUTLINE:

1) Registration requirements for green public market funds

2) Fund ESG reporting requirements
3) Roles played by ratings agencies
4) How does greenwashing play into Mutual Funds, and how can it be avoided?
5) Risks and Opportunities for Money Managers in Promoting Green Products

Class 10: November 16, 2023

Student Case Study Presentations: Analyze a Hong Kong Listed Company (top 20 market cap) and
evaluate its organization structure and tools for addressing ESG issues and risks. Assess its use of
Sustainable Finance products, if any. Present a view on whether this company is “investable” for
HKMA green program initiatives; for a public market Green ETF; for a specialized sustainability
program for a family office. If “no”, what changes would company need to make to qualify? If “yes”,
what improvements would be required over 2-3 year horizon to maintain a position in the portfolio?

Groups of 3: 10 minutes each (10 powerpoint slides per group presentation)

Class 11: November 23, 2023

Topic: Sustainability Strategies in Insurance and Asset Management Sectors

Readings:

Swiss Re Case Study Material Package

Prudential Asia Foundation Annual Report 2022

Blackrock 2022 Annual Report and ESG Report

TPG Rise Investment Funds Annual Report and ESG Assessment Tools

Guest Speaker #6: Marc Fancy, Prudential Asia Insurance Foundation

OUTLINE:

1) What is the motivation for developing sustainability-oriented strategies?

2) How should banks, insurance companies and asset managers incorporate these issues into their
enterprise risk management systems, and how will ESG and sustainable finance opportunities
impact the competitive position of companies in these sectors?
3) Is a strategy that employs advanced ESG metrics likely to outperform traditional investment
benchmarks?
4) What are the pitfalls of employing a sustainability-focused public market or private market
investment plan?

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Class 12: November 30, 2023

Topic: Rethinking Global Financial Structures to support Sustainability and Sustainable Finance

Readings:

[To be Provided]

OUTLINE:

1) How does the global financial system support or inhibit sustainability today?
2) What changes should be implemented in systems of global financial oversight?

Final Paper Assignment Potential topics:

[To be Provided]

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