Financial Risk Management for ESG, Sustainability and Climate

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.

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.