F1IP 5000 - Introduction to Green Finance

This seminar course aims at providing students with the required analytical framework and scientific references to develop a critical understanding of major issues associated with the rise of so-called “green finance”. The thematic chapters will convey the key elements of the institutional background (e.g., actors of green finance and their voluntary initiatives for the climate, labels of green financial instruments, key regulations in Europe and globally). However, the main objective of the course is to emphasize the new trade-offs and key economic mechanisms associated with green finance as compared to standard finance, and to document them using recent academic research from the booming fields of sustainable finance and climate finance.

We will therefore discuss issues such as: Do retail investors have green preferences, and does it matter? Should we expect higher returns for “green” stocks and why? Do responsible institutional investors foster firms’ ESG performance? Can divestment policies have an impact on the cost of capital of brown firms? Do green bonds really spur green investment? Should we mandate firms and investors to disclose on climate-related issues? Are ESG labels useful? Do we need banks to finance the green transition and how to get there? What can central banks do to support the greening of the financial system? Etc.

Outline: I. Introduction to ESG investment and green finance, II. Measuring ESG performance of firmsAsset pricing and sustainability, III. Sustainable investment strategies and their impact, IV. Green and sustainable bonds, V. Information and financial decision-making, VI. Sustainable banking, VII. Central banks and green finance.

A sound background in economics, as well as good notions of statistics and econometrics (i.e., mastering OLS regression basics) are a prerequisite. Earlier exposure to the basics of finance (i.e., an introductory finance course) is useful but not mandatory as the course will include short presentations of the standard textbook toolkit.

Students are expected to do the required readings and actively participate in the discussions in class. For lectures exploiting empirical research papers (circulated in advance), students will have to prepare short paper presentations to the class. Each student must also write a review essay on one of the key topics discussed during the course, due two weeks after the last lecture.

• In Class Presence: 2 hours a week / 24 hours a semester