SOAS University of London

Department of Economics

Sustainable Finance (Online)

Module Code:
15PECH035
Credits:
15
FHEQ Level:
7
Taught in:
Term 2

The module introduces students to the topic of sustainable finance and its potential contribution to a sustainable economy in the context of climate change and the transition to a low-carbon economy. Specifically, the module supports students in understanding how climate and other environmental risks create potential financial risks in banking and capital markets and analyses the role of financial actors in driving and potentially mitigating these risks. Students will be exposed to both traditional and alternative risk management approaches and investment theory frameworks used to process and quantify these risks, as well as a range of case studies on the role and impact of institutional investors, banks, financial supervisory authorities and governments in aligning financial markets with climate and environmental goals. Students will obtain a strong qualitative grounding building a fundamental understanding of the linkages between the real economy, environmental risk and financial markets. Moreover, students will be trained in quantitative research, getting hands-on experience in working with complex and varied climate and portfolio datasets drawing on real life analytical examples across thousands of equity and bond funds. The module will help students to obtain skills necessary to work and do research in a cutting-edge area of finance and environment that is increasingly becoming an important topic for both financial institutions and financial authorities

Objectives and learning outcomes of the module

On successful completion of this module a student will be able to:

  • LO1. Gain a thorough understanding of how capital markets work and their interface with the real economy, from both a theoretical and practitioners’ perspective;
  • LO2. Recognise the quality and challenges related to using climate scenarios and climate data in financial analysis, and be able to critically evaluate the caveats of different data sets, as well as apply them in practice;
  • LO3. Develop a fundamental understanding of what defines environmental trends and the potential risk and opportunity they present to financial markets, with a particular emphasis on climate risks;
  • LO4. Create overview of the range of approaches in environmental risk modelling at physical asset, company, equity, credit, portfolio, and financial market level;
  • LO5. Create an in-depth understanding of the range of financial policy instruments and initiatives and their potential with regard to integrating environmental constraints in financial policy and supervisory framework;
  • LO6. Critically evaluate the potential impact of financial markets on the real economy and the sustainable development challenge.

Method of assessment

Assessment weighting: Essay outline 10%, Essay 50%, Group Project 25%, Article Summary 15%

Suggested reading

Core Reading:

  • Bolton, P., et al. (2020), The Green Swan. Central Banking and Financial Stability in the Age of Climate Change, Basel and Paris: Bank for International Settlements and Banque de France. (https://www.bis.org/publ/othp31.pdf)
  • Buchner, B., et al. (2019), Global Landscape of Climate Finance 2018. London: Climate Policy Initiative. (Available online at: https://climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2019/)
  • Buhr, B., et al. (2018), Climate Change and the Cost of Capital in Developing Countries. London and Geneva: Imperial College London; SOAS University of London; UN Environment. (https://eprints.soas.ac.uk/26038/1/ClimateCostofCapital_FullReport_Final.pdf)
  • Dikau, S. and U. Volz (2019), “Central Banking, Climate Change and Green Finance”. In: Sachs, J., et al. (eds.), Springer Handbook of Green Finance: Energy Security and Sustainable Development. Heidelberg and New York: Springer, pp 81-102. (https://link.springer.com/content/pdf/10.1007%2F978-981-13-0227-5_17.pdf)
  • Dupré, S. and H. Chenet (2013), Connecting the Dots between Climate Goals, Portfolio Allocation and Financial Regulation. Paris: 2° Investing Initiative. (http://dx.doi.org/10.2139/ssrn.2223008)
  • McGlade, C. and P. Ekins (2015), “The Geographical Distribution of Fossil Fuels Unused When Limiting Global Warming to 2°C”, Nature 517, 187-190.
  • NGFS (2019), A Call for Action: Climate Change as a Source of Financial Risk. Paris: Network for Greening the Financial System. (https://www.banque-france.fr/sites/default/files/media/2019/04/17/synthese_ngfs-2019_-_17042019_0.pdf)
  • OECD (2017), Investing in Climate, Investing in Growth. A Synthesis. Paris: Organisation for Economic Cooperation and Development. (https://www.oecd.org/env/investing-in-climate-investing-in-growth-9789264273528-en.htm)
  • Robins, N. and S. Zadek (2016), The Financial System We Need: From Momentum to Transformation. Geneva: UNEP Inquiry into the Design of a Sustainable Financial System. (http://unepinquiry.org/wp-content/uploads/2016/09/The_Financial_System_We_Need_From_Momentum_to_Transformation.pdf)

Additional Reading:

  • Akenroye, T.O., et al. (2018), “Towards Implementation of Sustainable Development Goals in Developing Nations: A Useful Funding Framework”, International Area Studies Review 21(1), 3-8. (https://journals.sagepub.com/doi/pdf/10.1177/2233865917743357)
  • Atteridge, A. and N. Canales (2017), “Climate Finance in the Pacific: An Overview of Flows to the Region’s Small Island Developing States”, SEI Working Paper No. 2017-04, Stockholm: Stockholm Environment Institute. (https://mediamanager.sei.org/documents/Publications/Climate/SEI-WP-2017-04/SEI-WP-2017-04-Pacific-climate-finance-flows-FM.pdf)
  • Frisari, G., et al. (2020), Climate Risk and Financial Systems of Latin America: Regulatory, Supervisory and Industry Practices in the Region and Beyond, Washington, DC: Interamerican Development Bank. (http://dx.doi.org/10.18235/0002046)
  • Griffin, P.A., et al. (2015), “Science and the Stock Market: Investor’s Recognition of Unburnable Carbon”, Energy Economics 52(A), 1-12. (https://www.sciencedirect.com/science/article/pii/S0140988315002546)
  • Hall, N. (2017), “What is Adaptation to Climate Change? Epistemic Ambiguity in the Climate Finance System”, International Environmental Agreements: Politics, Law and Economics 17 (1), 37-53. (https://link.springer.com/article/10.1007/s10784-016-9345-6)
  • IISD and DRC (2015), Greening China’s Financial System. Winnipeg and Beijing: Institute for Sustainable Development and Development Research Center of the State Council. (https://www.iisd.org/sites/default/files/publications/greening-chinas-financial-system.pdf)
  • Kidney, S., et al. (2015), Shifting Private Finance towards Climate-Friendly Investments. Report for the European Commission DG Climate. (https://ec.europa.eu/clima/sites/clima/files/international/finance/docs/climate-friendly_investments_en.pdf)
  • Mawdsley, E. (2018), “‘From Billions to Trillions’: Financing the SDGs in a World ‘Beyond Aid”, Dialogues in Human Geography 8(2), 191-195. (https://journals.sagepub.com/doi/pdf/10.1177/2043820618780789)
  • Michel, A. and E. Espagne (2016), “Climate and Finance Systemic Risks, More Than an Analogy? The Climate Fragility Hypothesis”, CEPII Working Paper No. 2016-10, Paris: Centre d’Etudes Prospectives et d’Informations Internationales. (http://www.cepii.fr/PDF_PUB/wp/2016/wp2016-10.pdf)
  • Volz, U. (2019) “Fostering Green Finance for Sustainable Development in Asia”. In: U. Volz et al. (eds.), Routledge Handbook of Banking and Finance in Asia. London and New York: Routledge, pp 488-504.

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