Unit 1

Sustainable Investment and Finance
Unit-1
Introduction and overview
What is sustainability? The importance of sustainability,
the transition challenge, externalities – international
negotiations, role of UN, the economics of sustainable
development, evolution of socially responsible finance
MISSION VISION CORE VALUES

CHRIST is a nurturing ground for an individual’s Excellence and Service Faith in God | Moral Uprightness
holistic development to make effective contribution to Love of Fellow Beings
the society in a dynamic environment Social Responsibility | Pursuit of Excellence
Unit-1
Introduction and overview
What is sustainability? The importance of sustainability,
the transition challenge, externalities – international
negotiations, role of UN, the economics of sustainable
development, evolution of socially responsible finance
MISSION VISION CORE VALUES

CHRIST is a nurturing ground for an individual’s Excellence and Service Faith in God | Moral Uprightness
holistic development to make effective contribution to Love of Fellow Beings
the society in a dynamic environment Social Responsibility | Pursuit of Excellence
CHRIST
Deemed to be University

Unit-2
Sustainability and Corporate Sector
Corporate argument for sustainability as a strategy, implications for risk,
performance, governance and value of companies, changing business
models, social enterprises, integrated reporting – metrics and data,
coalitions for sustainable finance.
Unit-3
Financing Sustainability
Investing in long-term value creation, different ways of raising capital for
sustainability – national level (carbon tax) and company level – carbon
credit, crowd funding, equity instruments – impact funds; bond
instruments – social investment bonds, green bonds, impact bonds, blue
bonds; alternative financial instruments – VC with an impact, banking –
new forms of lending, insurance – to manage long-term risk.
Excellence and Service
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Unit-4
Impact Investment
Defining impact investment, the role of evolving public policy, building a
multi-asset class sustainability portfolio, aligning investors to specific
benefits, ESG, embedding ESG into CAPM model (‘alpha’ and ‘beta’).
Unit-5
Future Outlook
Transition management, integrated thinking, introducing PRME –
principle of responsible management education, ethics and sustainability.
Evolving regulatory environment and international policies. Creating a
corporate action plan and rewiring businesses for sustainability.

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Text Books and Reference Books:
1. Schoenmaker, D., &Schramade, W. (2018). Principles of

Sustainable Finance. Oxford University Press.
2. Labatt, S., & White, R. R. (2003). Environmental finance: a guide
to environmental risk assessment and financial products (Vol. 200). John
Wiley & Sons.

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Unit 1
Sustainable finance: Process of taking environmental, social and

governance (ESG) considerations into account when making investment
decisions in the financial sector, leading to more long-term investments
in sustainable economic activities and projects.
Sustainable finance involves making investment decisions that consider

not only financial returns but also environmental, social and governance
factors.
Sustainable investing refers to a range of practices where investors aim to

achieve financial returns while promoting long-term environmental or
social value.
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Unit 1
Clients
Environmental, Social
Sustainable and Governance (ESG)
Finance refers to parameters into
any form of business or investment
financial service actions for the
that integrates sustainable advantage Society
including

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Unit 1

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Unit 1
“Finance to support economic growth while reducing pressures on the

environment and taking into account social and [corporate] governance
aspects,” such as inequality, human rights, management structures and
executive remuneration. It gives several examples of environmental
considerations, including climate mitigation and adaptation, the
conservation of biodiversity and the circular economy.
European Union
https://www.youtube.com/watch?v=U9E-t57akWU

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Key providers of Sustainable Finance

Corporations
Banks
International Financial Institutions
International Organisations
National Governments
Central banks and regulatory authorities
Institutional Investors
Stock exchanges

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SDG Goals
Sustainable Development Goals are a collection of 17 interlinked global

goals to transform world. They were designed to be a “blueprint to
achieve a better and more sustainable future for all” and part of the
United Nations 2030 Agenda for Sustainable Development. They were
agreed by 193 countries in 2015.

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SDG Goals in India
1.No Poverty
2.Zero Hunger
3.Good health and well being
4.Quality education
5.Gender Equality
6.Clean water and sanitation
7. Affordable and Clean Energy
8. Decent Work and Economic Growth

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SDG Goals in India
9.Industry, Innovation and Infrastructure

10.Reduced Inequality
11. Sustainable Cities and Communities
12. Responsible Consumption and Production
13. Climate Action
14. Life Below Water
15. Life on Land
16. Peace and Justice Strong Institutions
17. Partnerships to achieve the Goal
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Unit 1
Importance of sustainable finance
 With sustainable finance and ESG investing, the decision-making

process has changed, with more investors looking to put their funds
into an organization that will leave the world a better place while
enjoying even better returns.
 The motivation for a company to invest millions or even billions of
dollars to become more sustainable is customer base.
 Investors are making more investment decisions using a values-based
set of criteria. it makes sense to look into an investment that can not
only provide a healthy return but also aligns with core values.

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Unit 1
Importance of sustainable finance

 Larry Fink, Chairman and CEO of BlackRock, a worldwide
investment and advisory firm states in his annual letter to CEOs in
2022, that sustainable investments have now reached $4 trillion, while
during the height of the pandemic in 2020. He also notes that eight
out of ten sustainable investment funds performed better than those
that did not include ESG investing.
 Addressing climate change
 Mitigating environmental risks
 Enhancing corporate responsibility
 Meeting investor demands
 Improving transparency and accountability

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Trends in Sustainable Finance
Net Zero
Impact Investing
Strategies to Impact Climate Change
Transparent Reporting
Boosting Sustainable Growth in Developing Nations
Electric Vehicles

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Current trends in sustainable finance
 Sustainability reporting is moving from discussion to implementation.

 Focus on ESG impact in supply chains will become key
 Carbon markets will become more important than ever
 Biodiversity topics are gaining pace
 The number of companies reporting ESG data has risen steadily
 Bloomberg estimates global ESG assets will exceed $53 trillion by
2025, representing more than a third of total assets under management
 66% of surveyed European institutional investors say they plan
to stop investing in non ESG-funds in the future according to a PwC
survey Excellence and Service
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ESG reporting
Sustainability report is a report published by a company or organization

about environmental, social and governance (ESG) impacts. It enables
the company to be more transparent about the risks and opportunities it
faces.
Sustainability reporting is the disclosure and communication of

environmental, social, and governance (ESG) goals—as well as a
company’s progress towards them. The benefits of sustainability
reporting include improved corporate reputation, building consumer
confidence, increased innovation, and even improvement of risk
management.

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ESG reporting
A sustainability report is the tool available to an organisation or

company to voluntarily communicate its performance and impact —
positive or negative — in environmental, social and governance (ESG)
matters. The information in the report should be relevant to stakeholders.
ESG reports should include both qualitative disclosures including the

ESG elements that the company has adapted, as well as qualitative data
regarding how well the company is meeting established goals.

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ESG reporting -Importance
Trust
Voluntarily releasing ESG reports allows customers to view what values
your business holds and what you consider important. By connecting to
your customers through ESG reporting, you connect with others who
share the same values.
Accountability
ESG reporting gives companies a way to share ESG initiatives and
results with all of their stakeholders.
Transparency
Investors in particular are looking for ESG reporting that includes
quantitative data. While it’s important to share goals with investors, they
also want to see what progress has been made towards reaching those
goals.
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Mode of ESG reporting
The ESG reports or sustainability reporting done by the companies is

through publication of annual sustainability reports which form part and
parcel of the annual financial statements. The ESG reporting is based on
the Global Reporting Initiatives (GRI) standards and the integrated
reporting framework respectively.
Examples:UltraTech Cement, Maruti-Suzuki, Wipro Ltd, Dr. Reddy’s

Laboratories India, Infosys Technologies India and Tata Motors.

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Advantages of ESG reporting
Ensure regulation compliance

Become more attractive to customers
Attract talent
Build employee pride and loyalty
Become more attractive to investors
Increase transparency, credibility, and accountability
Better Understanding of Opportunities and Risks

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ESG Companies Returns

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Difference between Financial reporting and
Sustainability reporting
Metrics Financial reporting Sustainability reporting
Time-scale The reported year Future orientation
Focus Issues that organization directly controls Wider sustainability impacts
Economic view Material Intangible
Data Financial Non-financial
Materiality Financial significance Any information that is

significant to readers
Users Shareholders and investors Stakeholders

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Challenges of Sustainable Finance
To ensure investors support and finance companies that act on

sustainability issues, a new valuation framework would be needed to help
investors recognize the link between corporate and societal value.
ESG issues into valuations must be done quantitatively and qualitatively

to arrive at better investment decisions, and the valuation framework
must be redesigned to incorporate responsible investing practices in such
a way that there is minimal or no conflict with fiduciary duty.
Significant challenge arises from the fact that ESG data reported by
companies is of low quality, and no consistent standards or methods of
reporting exist.

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SRI effect –Comparison
APPLE
The share price of Apple has performed strongly for many years but
company often achieves a low score on ESG criteria. Apple has been
besieged by allegations of tax aviodance,consumer privacy
breaches,poor working conditions in supplier plants ,water and soil
pollution among other things.
These areas breach all four areas of the UN global compact and if
confirmed could be financially and reputationaly damaging for apple.

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APPLE
For some SRI investors these social risks are too high and the
company is deemed investable. For others the corrective measures
apple has taken to address these concerns signal sufficient
commitment to corporate reposnsibility.Furthermore ,the positive
global impact that such as large player can have by executing
improvements is significant and some investors see their stake as an
opportunity to engage and influence this positive change.

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MICROSOFT
Microsoft is awarded as the highest ESG rating by data provider

MSCI. With annualised returns of 25% since listing in 1986,the
stocks credentials as long term compounding investment are
unquestionable. Of equal importance to the responsible investor, the
company is a leader in its class across the three pillars of ESG. From
an environmental perspetcive,Microsoft carbon emissions are
relatively low, and the firm invests heavily in developing energy
efficient IT infrastructure and services.

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MICROSOFT
Best in class privacy and data security mechanisms and clear

policies regarding government data requests, all help mitigate the
risk of reputational damage in the social and governance spheres.
Microsoft ‘s tax transparency and labour management,MSCI rank

Microsoft higher in ESG standards than peers such as
IBM,oracle,google or Facebook.

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Value of sustainable investment assets worldwide from 2014-2020, by

region(in billion U.S. dollars)
Country 2014 2016 2018 2020
Europe 10,775 12,040 14,075 12,071
United states 6,572 8,723 11,995 17,081
Canada 729 1,086 1,699 2,423
Australia 149 516 734 906
Japan 7 474 2,180 2,874

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Value of sustainable investment assets worldwide from 2014-2020, by

region(in billion U.S. dollars)
18,000 17,081
16,000
14,075
14,000
12,040 12,071 11,995
12,000
10,775
10,000
8,723
8,000
6,572
6,000
4,000
2,874
2,423 2,180
2,000 1,699
1,086 906
729 516 734 474
149 7
0
Europe United states Canada Australia Japan

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Value of sustainable investment assets worldwide from 2014-2020
Sl.No Finance Allocation Percentage
1 Public equity 51%
2 Fixed income 36%
3 Real estate/property 3%
4 PE/VC 3%
5 Other 7%

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Concept of Socially responsible Investment
Socially responsible investing (SRI) is an investing strategy that

aims to generate both social change and financial returns for an
investor.
Socially responsible investments can include companies making a

positive sustainable or social impact, such as a solar energy
company, and exclude those making a negative impact.

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Concept of Socially responsible Investment
Socially responsible investing is an investment strategy that

chooses securities to invest in based on how socially responsible its
business practices are. The goal of SRI is to create positive social
and environmental change while still generating financial returns.

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Evolution of Socially responsible Finance
The socially responsible investing approach may have started with the Quakers,
a group of individuals who were part of the Religious Society of Friends in the
1700s. At that time, the Quakers refused to participate in the slave trade or the
business of buying and selling humans.
Prominent proponent of the SRI strategy was John Wesley. Wesley, a man of the
cloth, proclaimed that earning money at the expense of another individual’s
welfare was a sin. He also asked his congregants to avoid participating in
gambling and supporting industries, which utilized toxic materials.
For a long time, socially responsible investors avoided investing in the so-called
“sin industries” – tobacco, liquor, and gambling. However, the investment trend
evolved in the 1960s when people began investing in projects that fostered civil
rights as well.

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Evolution of Socially responsible Finance
The protest disinvestment that happened in South Africa in the 1980s is a good
case in point. During that time, individual investors and companies decided to
withdraw their investments from South Africa due to the apartheid policy that
caused discrimination against specific races.
Changing societal norms has led to a massive increase in the amount of money
invested in socially responsible investing (SRI) strategies.
https://youtu.be/5I8l7qIogEk

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Evolution of Socially Responsible Finance
SRI investors typically evaluate companies under the 3-pronged

environmental, social and governance (ESG) approach. Table 1 outlines
examples of the business factors that might be considered.
These criteria can have a significant impact on economic performance.

For example, high carbon emissions or poor waste management may
result in costly fines, while weak labour standards and poor employee
engagement will likely result in expenses from staff turnover.

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Evolution of Socially Responsible Finance
Companies that invest in energy efficiency will reduce long-term costs

and investing in staff training can drive innovation and competitive
advantage. At the governance level, history has taught us that board
composition and accounting practices are huge factors in corporate
bankruptcies. Taking stock of these factors may help us avoid scenarios
such as the collapse of Enron or Anglo Irish Bank.

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Ways to make Socially responsible Investments
1. Negative Screening
This technique involves screening a company’s practices and products
and/or services before deciding to invest in it. So, if a potential investor
discovers that a particular company produces harmful products – such as
cigarettes – or engages in unethical practices, then they won’t put their
money into it.

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2. Positive Screening
An investor chooses to invest in companies whose practices they approve
of. For example, let’s say that an individual really cares about the
environment. Then, their portfolio will probably comprise investments
they’ve made in green energy.
Examples of such green practices include:

● Developing a recycling program at the workplace
● Conserving water
● Purchasing energy-efficient equipment
● Enforcing eco-friendly work policies, such as asking individuals to
switch off lights in rooms that are not in use.

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3.Community Investing
If an investor wants to try their hand at SRI, community investing is one

of the best approaches. It entails putting money in projects that boost
local communities economically. For example, projects that utilize
readily available resources from the community and create opportunities
for the disadvantaged.

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Traditional Finance and Sustainable Finance
1. Traditional finance focuses solely on financial return and risk.
Sustainable finance considers financial, social and environmental returns

in combination.
2.Traditional investing delivers value by translating investor capital into

investment opportunities that carry risks commensurate with expected
returns.
Sustainable investing balances traditional investing with environmental,

social, and governance-related (ESG) insights to improve long-term
outcomes.
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Traditional Finance and Sustainable Finance
3.Traditional investing uses profitability as the primary factor in selecting

the investments.
When someone wants to implement the strategy of socially responsible

investing (SRI) they apply their beliefs and values in the selection
process and avoid companies and industries they disapprove of and select
companies and industries they think match their values.

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How does sustainable development work in India
Pillar 1: Social Development to have a sustainable future, the needs of

people must be met equally, like access to food, suitable housing,
medical care, and sanitation. People want a high standard of living, and
this must be achieved in a way that does not harm or exploit others.
Pillar 2: Environmental Protection: Earth has a limited amount of

resources. Humans need fresh air, water and land to live. Earth is
productive enough to provide good quality food for all. Sustainable use
of resources tries to protect Earth’s environment to make sure it is not
damaged for future generations.

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How does sustainable development work in India
Pillar 3: Economic Development: People deserve the best standard of

living that is sustainable. Improving medical care, sanitation, education,
and a suitable living standard requires wealth through economic activity.

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Future of Sustainable Finance
 From India’s perspective, it is important to balance all of the above

mentioned aspects, with regard to its capital market, culture,
environment and climate change and from an economic point of view.
 Securities and Exchange Board of India & Reserve Bank of India

have already been performed and took an action towards green
finance, such policies & guidelines and action plans were issued the
regulatory for a better stability for both financial market &
environment.

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Future of Sustainable Finance
 In certain regions, instead of petrol, India have adopted CNG; this

could be advantageous for environmental & financial investment.
There is a urgent need for awareness of green investment in India, and
because of a lack of awareness, small and existing investors are still
not looking at green investment.
 India should learn from the developed nations, like Sweden has quite
a strong history of good governance that, along with knowledge-based
regulations, manages multifunctional landscapes and forests

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Current trends in sustainable finance
Despite the market volatility, due to Covid 19 the sustainable finance

market has seen rapid growth in the last two years.
Sl .No. Year Annual Sustainable Debt Issuance
2013-2021 (US$Billion )
1 2013 28.7
2 2014 68.2
3 2015 88.2
4 2016 144.7
5 2017 241.6
6 2018 314.8
7 2019 577.0
8 2020 762.7
9 2021 1643.7

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Top performing ESG Companies in India
Havells India
Godrej
P&G
UltraTech
Asian Paints
HUL
Dabur India

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India’s progress towards SDG’s
● India has slipped spots from last year’s 117 to rank 121 on the 17
Sustainable Development Goals adopted as a part of the 2030 agenda
by 192 United Nations member states.
● India’s recent overall Sustainable Development Goals (SDG) score was

66 out of 100.
● India’s rank dropped primarily because of major challenges in 11

SDGs including zero hunger, good health and wellbeing, gender
equality and sustainable cities and communities.
● Jharkhand and Bihar are the least prepared to meet the SDGs by the
target year 2030. Kerala ranked first, followed by Tamil Nadu and
Himachal Pradesh in the second position
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Reasons causing the poor performance on the SDGs
COVID-19: Pandemic put a severe brake on the progress. It pushed the

countries to impose lockdowns that brought all progressive work towards
SDG attainment to a standstill.
Climate Change: As per SDG 2022 report, global temperatures have

been rising unabated. The world is facing a major climate catastrophe due
to increased heatwaves, drought and apocalyptic wildfires and floods
which are affecting billions of people around the globe.
Geopolitical Conflicts: Russia-Ukraine crisis has caused food, fuel and

fertilizer prices to skyrocket. It also disturbed global trade supplies and
caused the financial markets to tumble.

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Volume of Indian Green Bond Issuance (US$B)
Volume of Indian Green Bond Issuance (US$B) from 2017 to 2021
Year Amount in (US $ Billions)
2017 4.28
2018 0.70
2019 3.14
2020 1.09
2021 6.11

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Volume of Indian Green Bond Issuance (US$B) from 2017 to 2021
Amount in (US $ Billions)

7
6.11
6
5
4.28
4
3.14
3
2
0.7000000000000 1.09
1 01
0
1 2 3 4 5

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Issuers of Indian Green Bond from 2017 to 2021
Issuer 2017 2018 2019 2020 2021
Financial Corporate and 0.10 0 0 0 0

local Government
Government Backed entity 2.00 0.70 0.12 0.43 0.35
Non financial corporate 2.18 0 3.02 0.67 7.73

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Issuers of Indian Green Bond from 2017 to 2021
7.73
Financial Corporate and local Government
Government Backed entity

3.02
Non financial corporate
2.18
2
0.700000000000001 0.670000000000001
0.43 0.35
0 0.12
1 2 3 4 5

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Sustainable Financing Challenges
India does not have substantial access to multilateral finance or grant

funding for plugging the fiscal gap in sustainable development-related
expenditure.
Participation of the private sector.
ESG data reported by companies is of low quality, and no consistent

standards or methods of reporting exist.
ESG reporting is voluntary in most other countries and there are no

specific standards for reporting that are enforced.

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Sustainable Financing Challenges
Even if sustainability disclosures have been mandated, the process

towards increased disclosure of ESG factors has been met with
resistance.
To ensure investors support and finance companies that act on

sustainability issues, a new valuation framework would be needed to
help investors recognize the link between corporate and societal value.
Incorporating ESG issues into valuations must be done quantitatively

and qualitatively to arrive at better investment decisions, and the
valuation framework must be redesigned to incorporate responsible
investing practices .

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Institutional Set-up for Sustainable Finance
NITI Aayog:
The NITI Aayog has been overseeing the implementation of SDGs at the
national level. As part of this implementation process, the NITI Aayog
has carried out a mapping of all SDGs, Central Ministries and the
Centrally-sponsored Schemes.
It is also undertaking national and regional level consultations with other

stakeholders including States and Union Territories. Besides other
documents, NITI Aayog has brought out the SDG India Index

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Institutional Set-up for Sustainable Finance
MoSPI:
The Ministry of Statistics and Programme Implementation (MoSPI) is

one of the key player in the implementation of SDGs. As indicators are
key to measure the progress and the extent of achievement of the targets
and Goals in India, MoSPI has developed 306 national indicators in line
with the 169 SDG targets and the Global Indicators Framework.

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Questions
1 ) State the ESG Goals ?
2) Green Bond and its Issuers in India and Types of Green Bonds?
3)Top 10 ESG Companies performing well at the International level?
4)ESG reporting started in India in --------------

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Sustainable Investment and Finance

MISSION VISION CORE VALUES

MISSION VISION CORE VALUES

Sustainable Investment and Finance

Sustainable Investment and Finance

Excellence and Service

Sustainable Investment and Finance

Text Books and Reference Books:

1. Schoenmaker, D., &Schramade, W. (2018). Principles of

Excellence and Service

Sustainable finance: Process of taking environmental, social and

Sustainable finance involves making investment decisions that consider

Sustainable investing refers to a range of practices where investors aim to

Excellence and Service

Excellence and Service

“Finance to support economic growth while reducing pressures on the

Excellence and Service

Excellence and Service

Key providers of Sustainable Finance

Excellence and Service

Sustainable Development Goals are a collection of 17 interlinked global

Excellence and Service

SDG Goals in India

Excellence and Service

SDG Goals in India

9.Industry, Innovation and Infrastructure

Importance of sustainable finance

 With sustainable finance and ESG investing, the decision-making

Excellence and Service

Importance of sustainable finance

Excellence and Service

Trends in Sustainable Finance

Excellence and Service

Current trends in sustainable finance

 Sustainability reporting is moving from discussion to implementation.

Sustainability report is a report published by a company or organization

Sustainability reporting is the disclosure and communication of

Excellence and Service

A sustainability report is the tool available to an organisation or

ESG reports should include both qualitative disclosures including the

Excellence and Service

ESG reporting -Importance

Mode of ESG reporting

The ESG reports or sustainability reporting done by the companies is

Examples:UltraTech Cement, Maruti-Suzuki, Wipro Ltd, Dr. Reddy’s

Excellence and Service

Advantages of ESG reporting

Ensure regulation compliance

Excellence and Service

ESG Companies Returns

Excellence and Service

Metrics Financial reporting Sustainability reporting

Time-scale The reported year Future orientation

Focus Issues that organization directly controls Wider sustainability impacts

Economic view Material Intangible

Data Financial Non-financial

Materiality Financial significance Any information that is

Users Shareholders and investors Stakeholders