Finance Courses for an ESG-Oriented Future

Uncategorized | Feb 18, 2022 | Gabelli School of Business

Today’s companies are looking for new hires who grasp the environmental, social, and governance implications of business decision-making. Fordham students — who are naturally inclined to care about people and the planet — want the academic preparation that will allow them to fill that need.

The Gabelli School’s finance and business economics area implemented four new courses this term, seeking to meet employer needs and student demands alike. Each is unique in its objective, teaching style, and niche within the umbrella of ESG finance.

Steve Raymar, finance professor and area chair, said he is pleased with and proud of the faculty who teach these courses, noting that they are only the beginning. Next year, the finance faculty will debut a fifth graduate ESG class and two climate-oriented finance courses, alongside offerings at the undergraduate level. ESG will become a track in the new MS in finance program, too. “The finance and business economics area is happy to play an active and important role in advancing the social goals that Gabelli School and Fordham seek to achieve,” Raymar said.

Below, get to know this semester’s four finance courses:

ESG and Portfolio Management
Instructor: Walter Prahl

Master’s students who are new to ESG concepts are more than welcome in this course, which takes an applied approach to the subject as it’s practiced in the investment industry. To make sure everyone has the same strong foundation, Walter Prahl starts from the beginning and makes no assumptions. He encourages his students to do the same.

Students use the programming language Python to complete weekly assignments that draw on the same data that professionals use, such as MSCI ESG ratings and TruCost company climate performance data. Using that information, students do a mix of coding, quantitative analysis, and qualitative interpretation of their results. Prahl finds that MS in Quantitative Finance students are more than ready to take on these Python assignments, and he has put structures in place to help less coding-fluent students from the MS in Global Finance and other programs to participate and develop their ESG knowledge.

“My very deliberate goal is to equip students to actually perform in ESG-related professions using this content,” Prahl said. “I’d like students to come out of this course ready to interview for investment-related jobs involving ESG, and ready to hit the ground running in those roles.”

“My own view is that the enormous challenges ahead of us — the transition to a decarbonized economy, facilitating diversity and inclusiveness, progress on the sustainable development goals articulated by the UN, and so on — present both great risks and great opportunities for business,” he added. “Success in business in general, and investing in particular, is becoming unthinkable without knowledge and skills in this area.”

Sustainability and Finance: Issues and Challenges
Instructor: Sris Chatterjee

For close to three decades, organizational theorists have examined how purpose can influence financial performance. Purpose and profit: can we have them both? Sris Chatterjee’s course helps students to see how to achieve that magic combination by responding to emerging environmental and societal issues and by transforming them into new business opportunities.

Students in this course critically review the role that business plays in meeting the global challenges posed by climate change and social inequality. “This course provides a rigorous framework for the application of sustainability concepts for decision-making in corporate finance, corporate strategy, and investments,” Chatterjee said.

A primary goal is to raise the discussion above the loose talk about sustainability that prevails in some mass media. “There is a need for a rigorous discussion,” Chatterjee said, “especially in a Jesuit university that values critical thinking.” Students delve into how ESG is measured, how it pertains to corporate risk, and how ESG factors influence how investors construct portfolios, among other topics.

The course takes a broad view of ESG impact. “The emerging challenges in climate change and societal inequalities raise the question of whether purpose and profit are antithetical to each other or whether they can complement each other,” Chatterjee said. “We need a renewed focus on how all members of society — all stakeholders, including shareholders — can benefit from business and commerce.”

“It does not have to be a zero-sum game,” he added. “We can grow the pie.” In fact, the book Grow the Pie by Alex Edmans is recommended reading in Chatterjee’s class. Students also do a group project, analyze several cases, and hear from guest speakers from academia and industry.

Sustainable Investing and ESG Analysis
Instructor: Shahnawaz Malik

Shahnawaz Malik believes that students should walk away from his course with ideas they can apply to their personal lives as well as to their careers. Malik, who teaches the class in addition to his full-time role as head of ESG analytics at LTSE, said he was inspired by “Purpose of the Finance Professor,” a paper by Alex Edmans. “In it, he proposes ideas to make finance more relevant for students,” Malik said. “As students prepare for professional life, I want to ensure that they view a career in finance as more than a professional commitment. Rather, it influences how society is shaped and how it functions.”

Most of Malik’s students, taking their first-ever course on sustainable investing, are “united by the fact that they are sustainability-conscious,” he said. “They come to the classroom aware of the power of capital, and they are determined to allocate it toward a world they want to see.”

In the course’s centerpiece project, students come up with their own sustainable investment strategy. Malik sees this as a valuable alternative to textbook-based learning, especially as students prepare for an investing environment that changes from month to month, or even week to week. “It is more impactful for students to gain holistic investment analysis skills that include integrating ESG issues so that they can make more informed investment decisions in their future careers,” he said.

Student Managed Investment Fund: ESG Impact
Instructors: Greg Sivin, Edward Aw, and Konstantin Tcherepachenets

The Student Managed Investment Fund is a hallmark of the Gabelli School finance curriculum. The course simulates the experience that a student might get as an asset-management intern, working in teams of peers and guided by Fordham faculty experts. Now, there is a version of the course that incorporates sustainable and ESG-focused investing.

Students take the course for two semesters. In the first, they learn the analytical framework, filters, portfolio construction, and fundamental analysis needed to build a well-structured and diversified ESG portfolio. In the second, they actively participate in the management of the Gabelli School’s fund, pitching investment picks and submitting weekly trading tickets to an independent committee (which does not include any of the course’s students or instructors) that approves or declines the proposed trades. The committee members also serve as mentors to the student team, similar to the “phone a friend” lifeline in the popular TV program “Who Wants to Be a Millionaire.”

Student investors are trained to seek out companies that have an MSCI ESG AA rating or better and that are high-quality businesses with reasonable valuations, Sivin said. The ESG factors represent an intriguing overlay to the fund’s core value-investing approach — an additional source of opportunity and risk.

Mario DiFiore, a finance faculty member who heads the investment committee, said he and his colleagues are “excited to be working with students, faculty, administration, and the [university] CFO’s office to leverage an academic class and align it to our Jesuit identity and the Gabelli School’s business-with-purpose niche. We feel it gives our students real experience, managing real money while actively contributing to the good of society.”

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Learn more about finance course offerings in the Gabelli School course bulletin.