Sustainable Finance and Investments

Dr Caterina Santi

Lecture 01
Outline

• Introduction to the Course

• Investing for long-term value creation

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About the course

• Tuesday: 6.00pm - 9.00pm, Online

• Saturday 11/01, 1/02, 8/03, 5/04: 9.00am - 12.00pm

Contacts
• caterina.santi@uliege.be.
• Meeting by appointment.
• Check your student email.

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About the course

This course aims to provide students with the necessary theoretical

and conceptual tools used in sustainable investment analysis. The
course will cover, among others, the following topics:
• Investing for long-term value creation.
• Equilibrium models of sustainable investing without Environmental,
Social and Governance (ESG) uncertainty.
• Equilibrium models of sustainable investing with ESG uncertainty.
• Financing sustainability: equity, and bonds.
• Empirical evidence.

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Course Objectives
• Understand, explain, and synthetise the goals of sustainable finance.
• Understand the instruments to finance sustainable projects.
• Analyse firms’ ESG performance and understand how it can be included
in investment decisions.
• Understand equilibrium models of Sustainable Investing and explain these
concepts.
• Criticize and assess the empirical evidence on Sustainable investing.
• Read and understand cutting-edge scientific research on Sustainable
Finance.
• Apply theories to solve real-life case studies in Sustainable Finance.

Prerequisite knowledge and skills

• Fundamentals of Finance and Statistics.

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About the course

Readings
• Slides available on Lola
• Schoenmaker, D., and Schramade, W. (2018). Principles of
sustainable finance. Oxford University Press.
• Academic papers available on Lola

Assessment - Session I
• Group presentation (in-person) - 8/03/2025 (15%)
• Submission of final presentation - 21/03/2025 (25%)
• Written Exam (open book) - 5/04/2025 (60%)

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What is Sustainable Finance?

Sustainable finance is defined as investment decisions that consider

the environmental, social, and governance (ESG) factors of an
economic activity or project.
• Environmental factors include mitigation of the climate crisis or
use of sustainable resources.
• Social factors include human and animal rights, as well as
consumer protection and diverse hiring practices.
• Governance factors refer to the management, employee relations,
and compensation practices of both public and private
organizations.

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Sustainable Finance

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Sustainable Finance

• In the EU’s policy context, sustainable finance is understood as

finance to support economic growth while reducing pressures
on the environment and taking into account social and
governance aspects.
• Sustainable finance also encompasses transparency when it comes
to risks related to ESG factors that may have an impact on the
financial system, and the mitigation of such risks through the
appropriate governance of financial and corporate actors.

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Interest in Sustainable Finance over time

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Why should finance contribute to sustainable
development?

• The main task of the financial system is to allocate funding to its

most productive use.
• Sustainable finance looks at how finance (investing and lending)
interacts with economic, social, and environmental issues.
◦ In the allocation role finance can assist in making strategic decisions
on the trade-offs between sustainable goals.
◦ Investors can exert influence on the corporates in which they invest.
In this way, long-term investors can steer corporates towards
sustainable business practices.
◦ Finance is good at pricing risk for valuation purposes and can thus
help dealing with the inherent uncertainty about environmental issues,
such as the impact of carbon emissions on climate change.

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PG&E Climate Bankruptcy

https://www.youtube.com/watch?v=ny_-dA8H2p0

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Investing for Long-Term Value Creation

• The concept of long-term value creation means that a company

aims to optimise its financial, social and environmental value in the
long term, making it prepared for the transition to a more
sustainable economic model (Dyllick and Muff 2016; Tirole
2017; Schoenmaker 2018).
• Companies can anticipate and incorporate externalities by
connecting the relevant social and environmental dimensions to
their business model (Schramade 2016), making their business
model transition prepared.

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Investing for Long-Term Value Creation

• Institutional investors are increasingly using environmental, social

and governance (ESG) ratings to incorporate the social and
environmental dimensions in the investment process.
• But these external ratings rely on scanty and sometimes conflicting
data (Berg et al. 2022) and provide only limited information on
material ESG factors.
• Schramade (2016) argues that investing in sustainable companies
requires doing fundamental analysis of the business model and
the underlying value drivers of investee companies.
• In that way, fundamental analysts can assess companies’social and
environmental value, next to their financial value.

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A New Paradigm

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The Current Investment Paradigm

• The efficient markets hypothesis (EMH) and portfolio theory

have been so influential over the past five decades that they
pervade the language and thinking of asset management.
• These theories also established the separation of finance and
ethics.
• It is the task of the government to take care of social and
environmental concerns.
• This naturally affects the functions of pricing, allocation and
performance measurement in the investment process.
• It also affects how sustainability is integrated; what investment
approaches are favoured; the complexity of investment chains; and
the role of asset managers.

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Capital Asset Pricing Model

• The capital asset pricing model built on modern portfolio theory

(Markowitz 1952) stresses that risk is an inherent part of higher
reward.
µi = r0 + βi (µM − r0 )
• The only relevant variable to determine a stock’s return is its
sensitivity to the market (β), which is called systematic risk.
• The non-systematic or idiosyncratic risk is not priced.
• In equilibrium, all investors hold the market portfolio, which is
replicated in the market index.
• The problem is the narrow view on financial risk and return,
ignoring the social and environmental dimensions.

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Capital Asset Pricing Model

https://www.youtube.com/watch?v=fDz_DgDJD5g&list=PL_
KGEFWqEaTBbYDupRektHIMG0G9u-Ru-&index=58
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Single-Factor Models

• A single-factor model is a financial model that employs a factor in its

calculations to explain equilibrium asset prices.
• The single-factor model can be used to explain either an individual
security or a portfolio of securities.
• According to a single-factor model

Ri − r0 = αi + β1,i F1 + ϵi

where F1 is the return of factor 1. Note that σF1 ,ϵi = 0

• The CAPM is a single-factor model.
• The variance of an asset can be written as:

σi2 = β1,i
2
σF21 + σϵ2i .

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Multi-Factor Models

• A multi-factor model is a financial model that employs multiple factors in

its calculations to explain equilibrium asset prices.
• The multi-factor model can be used to explain either an individual
security or a portfolio of securities.
• According to a multi-factor model

Ri − r0 = αi + β1,i F1 + β2,i F2 + ... + βN,i FN + ϵi

where Fk is the return of factor k.

• Note that σFk ,ϵi = 0, and σFk ,Fj = 0 ∀k ̸= j
• The variance of an asset can be written as:
X
σi2 = 2
βk,i σF2k + σϵ2i .
k

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Multifactor Models

https://www.youtube.com/watch?v=lJCvxrj-YtA&list=PL_
KGEFWqEaTBbYDupRektHIMG0G9u-Ru-&index=70
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Measures of Market Performance

• The narrow financial risk-return thinking has led to a strong focus

on the stock price as central performance measure for executive
and investor performance.
• The traditional way of performance measurement is the
benchmarking of an investor’s returns to those of the
relevant market index, which is confined to the financial risk and
return dimension.
• Market benchmarks are indices, such as the MSCI World Index or
the MSCI All Country World Index, that consist of a basket of the
largest companies by market capitalisation in a certain market (i.e.
the global stock market, a regional market like Developed Asia or a
sector like Real Estate).
• The underlying idea is that the index represents ‘the market’.

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Measures of Market Performance

• When assessing a fund manager’s performance, his or her

performance will be measured against such a benchmark,
correcting for the amount of risk the fund manager took in
achieving that result.
• In this view, there is no need to analyse the companies in the
portfolio themselves; only the sensitivity of the portfolio’s return to
the market.
• The social and environmental dimensions are not included in these
performance measures.
• And how can markets maximise long term value if its major
components are not measured?

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The efficient markets hypothesis

• The efficient markets hypothesis assumes that all relevant

information of a company is incorporated in that company’s
stock or market price (Fama 1970).
• Investors cannot systematically beat the market.
• The market is supposed to be so efficient that it immediately
incorporates all relevant new information, making it impossible for
investors to benefit from superior insights or information.
• Arbitrage makes sure that prices stay correct: abnormally high
return assets immediately attract more fund flows, which drive up
prices and reset expected returns back to the market rate.

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Foundations of Market Efficiency

According to Andrei Shleifer (2000), there are three conditions for

which only one is needed for market efficiency. These are:

1. Investor rationality.
2. Independent deviations of investors from rationality.
3. Arbitrage.

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Passive Investment Approach
• The pervasiveness of efficient market thinking also affects the
choice of investment approaches.
• Since all information is supposedly incorporated in stock prices,
one could argue that everyone should do passive investing, as there
are no benefits from active investing.
• Why would one buy the more expensive active approach if it fails
to deliver what it should, namely better long-term value creation
and returns?
• The strength of passive investing is that it involves huge
amounts of capital that can be moved across types of passive
investing, i.e. across asset classes, and potentially also from
unsustainable to sustainable companies.
• However, its allocational role is ultimately limited as it cannot
really distinguish between sustainable and unsustainable business
models.
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The Role of Asset Management

• In the current setting, the role of asset management firms seems

limited to providing efficiency and aggregation, especially as
the belief in their alpha generating capabilities has faded.
• With efficient market thinking, people seem to have forgotten
about their social function.
• A much bigger role for asset management looms in a paradigm
aimed at long-term value creation, as its success depends on
services that need to be provided by asset managers, most notably
analysing companies’ transition preparedness

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Long and Complex Investment Chains
• In institutional investment, there is a long and complicated chain of
parties that sit between the provider of capital (i.e., someone investing
for their retirement) and the user of capital (i.e., a company or project).

• Long investment chains exacerbate the reliance on market metrics,

as each party wants to monitor the investment performance of the next
party in the chain.
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Long and Complex Investment Chains

• In an investment chain, there is a principal-agent relationship

between the parties at each link, with implications for allocation
and performance.
• The investment performance of the asset manager is, for example,
measured against a clearly articulated market benchmark.
• Investment decisions are often made across multi-layered asset
owner organisations supported by multiple consultants and ratings
agencies.
• Delegated investment management – with multiple parties in the
investment chain – causes agency problems between the asset
owner or principal on the one hand and the delegated asset
manager or agent responsible for making investment
decisions on the other hand.
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Market Anomalies and Behavioural Finance
• There is plenty of evidence that markets are not always efficient.
• A vast body of behavioural finance literature has shown since the
1970s that people (including investors) are far from rational (e.g.
the early work by Tversky and Kahneman, 1973 and the review
article by Barberis and Thaler, 2003).
• The efficiency of markets has also been questioned by strong
evidence on market anomalies.
• A market anomaly in a financial market is predictability that seems
to be inconsistent with (typically risk-based) theories of asset
prices.
• Academics have documented several anomalies including:
◦ Momentum
◦ Reversal
◦ Volatility clustering
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The Adaptive Market Hypothesis

• Behavioural finance indicates that lack of rationality has important

implications for financial markets, which can be seriously
overvalued or under-valued for extended periods of time.
• This indicates that pricing is a far from perfect signal, which
should not be followed blindly.
• The adaptive markets hypothesis reconciles market efficiency with
behavioral alternatives applies the principles of evolution -
competition, adaptation, and natural selection - to financial
interactions.
• The adaptive markets hypothesis suggests that financial markets
are often but not always efficient.

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A New Paradigm
• The backbone of a new paradigm that is geared towards long term
value creation is an active investment approach aimed at assessing
companies’ transition preparedness.
• The aim is to uncover and realise companies’ social and
environmental value next to their financial value.
• Such an approach needs to be fostered in a context of proper
governance, incentives and structures.
• That includes the other dimensions, like performance
measurement, allocation and pricing beyond near-term financials.
• The incorporation of ESG information into stock prices then
becomes an adaptive process, dependent on the number of
fundamental analysts, how they have their decisions determined by
ESG factors, and the quality of their learning.
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Sustainable Investment Solutions

• There is a wide range of products available to investors looking for

dedicated sustainable investment solutions.
• Strategies can be classified in
◦ “Avoid” strategies involve the elimination of certain companies or
sectors that are associated with increased ESG risk or which violate
the asset owner’s values.
◦ “Advance” strategies focus increasing exposure to positive ESG
characteristics to align capital with certain behaviours or target
specific positive social or environmental outcomes.

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ESG considerations

• Several efforts have been made to supplement the market metrics

with ESG ratings and ESG indices. But they only help to some
extent.
• ESG ratings consider ESG as an add-on to financials and
business models, instead of a driver of business models and
financials.
• That is also how most investment professionals have been using
ESG ratings and ESG indices: as yet another indicator that may
look good or bad, but which hardly affects their investment
decisions.

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ESG considerations

• ESG ratings have a number of limitations by design.

1. Ratings have little focus on material issues.This means that a
materially negative issue is easily cancelled out by high scores on
immaterial items.
2. Ratings are based on reported data and policies, which is only a
fraction of what is needed for a good assessment and
sometimes even conflicting (Tirole 2017).
3. Scores are ‘industry neutral’. This can result in ratings that are
intuitively wrong, as the least bad companies in very unsustainable
industries (say coal or tobacco) still get very high scores and can be
named sustainability leaders.

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ESG considerations

• It is not surprising to see a lack of correlation in scores between

ratings agencies.

• Investors should not accept ESG ratings as the conclusion on a

company’s sustainability quality, but rather as a starting point for
analysis.

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Pricing: From EMH to AMH
• The adaptive markets hypothesis (AMH) provides an evolutionary
model of individuals adapting to a changing environment.
• Prices reflect as much information as dictated by the
combination of environmental conditions and the number
and nature of distinct groups of market participants, each
behaving in a common manner and having a common
investment horizon.
• For example, retail investors, institutional investors, market makers
and hedge fund managers can be seen as distinct groups.
• If multiple groups (or the members of a single highly populous
group) are competing within a single market, that market is likely
to be highly efficient.
• If, on the other hand, a small number of groups are active in a
given market, that market will be less efficient.
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Pricing: From EMH to AMH

• The adaptive markets hypothesis can explain how new risks, such
as environmental risks, are not yet fully priced in, as not enough
investors are examining these new risks.
• Andersson, Bolton, and Samama (2016) find that carbon risk is
hardly priced by markets, which they attribute to limited awareness
of carbon risk among (institutional) investors.
• Hong, Li, and Xu (2019) find that markets that are inexperienced
with climate change tend to underreact to risks brought on or
exacerbated by climate change.

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Allocation for long-term value creation

• Indices are an attempt to insert ESG considerations, and they are a

moderate success in that they at least shift away capital from some of
the worst industries and companies.
• There is potential in dynamic indices that adapt portfolios according to
pre-set rules, but their effectiveness too depends on the availability of
better data.
• Private equity partly shows the way: private equity investors look into
companies and analyse future prospects, while taking a step away
from financial markets, short-term metrics and portfolios.
• This is a path taken not just by sustainability investors, but also by
several investors looking for better ‘alpha opportunities’ in less
well-known companies.
• Governance plays an important role here, long-term value creation should
be the main objective and enshrined in fiduciary duty, prospectuses,
employee incentives and performance measurement.
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Alternative measures of financial performance

• Investors face an information problem when judging the

performance of their fund manager.
• One way of mitigating that problem is by benchmarking fund
performance, either to others in the industry or to an
industry-wide index.
• The resulting problem is that funds are reduced to a few simple
backward looking metrics, which gives incentives for taking
shortcuts, without real accountability.
• Still, those metrics are not entirely without merit. So what to do
with them? A possible solution lies in using those same metrics in
a more flexible, slightly adapted way, while being cognisant of their
limitations (e.g. only measuring the financial dimension).

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Alternative measures of financial performance

• Instead of measuring performance against a single benchmark, one

could use, for example:
◦ A range of indices instead of a single one;
◦ A peer group of comparable competitor funds;
◦ An absolute return target, possibly corrected for an absolute risk
metric.
• An absolute return target is appealing as it is often more closely aligned
with the goals of the beneficiaries, which are typically in the realm of
building capital over the long run rather than beating indices.

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Extra financial performance

• It is crucial to also have non-financial performance

measurement, as we aim for optimisation of the financial, social
and environmental dimensions given risk.
• Ways to do that include:
◦ Performance on specific key performance indicators (KPIs);
◦ Contribution to global sustainability goals.

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Performance on Specific KPIs

• Investors increasingly consider company performance on specific

KPIs pertaining to components of E, S and G.
◦ On E, many companies now report their scope 1, 2, and 3 CO2
emissions following to the Greenhouse Gas Protocol (WRI 2015), and
to a lesser extent, they also report water and waste data.
◦ On S, there is increasing reporting of data points like employee
attrition, percentage women on the workforce, job creation and safety
data, like lost time injury frequency rates.
◦ On G, there is, for example, the number of independent directors,
gender balance and voting rules to consider.
• It is encouraging to see such data increasingly becoming available
and indeed analysed.

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Limitations to Analysing the Performance on KPIs
• Each one of the KPIs is too narrow individually. As they
pertain to specific components of performance, their meaning on a
standalone basis is inherently insufficient to obtain a holistic view
of sustainability performance.
• Sustainability is highly context specific, making KPIs very hard to
compare across companies and industries. Then ‘normal’ values
of these KPIs are very much affected by the nature of a firm’s
activities, and also by where the boundaries of the firm are drawn.
• The KPIs in question may not measure all that should be
measured.
• It is not clear if performance on certain KPIs means a sufficient
contribution to achieving a more sustainable model.
• Too often, companies produce sustainability reports with
data on immaterial issues that happen to be measurable.
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What is Transition Preparedness?

• Transition prepared means that a company’s business model

is either already fit for, or sufficiently flexible to successfully
adapt to, a more sustainable economy.
• A typical example of a transition prepared company is Novozymes
(https://www.novozymes.com/en). This enzyme maker helps its
clients to save energy and avoid 80 million tons of CO2.
• By contrast, most airlines are not transition prepared. They will
suffer massive losses in case of a significant CO2 price and seem to
lack the options to avoid such a scenario (see the Air France-KLM
case study with scenario analysis on Lola).
• The typical fast food chain is not ready for a world with high sugar
and salt prices (due to taxes on them to reduce intake).

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Assessing Transition Preparedness

• Assessing a company’s transition preparedness is not easy.

• The traditional tools are still needed, but do not suffice.
• The ultimate question is: can and will the company’s business
model be adapted to a sustainable economy?
• This means that one needs an expert, like a fundamental analyst,
to make a judgement call as to a company’s preparedness.
• As we lack objective and scalable metrics for preparedness, it is
very challenging to make an assessment at the portfolio or market
level.
• Improved metrics and classifications are needed.

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Assessing Transition Preparedness

• An analyst starts by identifying the company’s material ESG issues,

and subsequently assesses those issues in both qualitative and
quantitative ways to arrive at their financial impact.

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Assessing Transition Preparedness

• Transition preparedness analysis is impossible with a passive

investment approach and nearly impossible with a quant approach.
• There are several reasons for this.
1. Ratings are of limited use.
2. There is a lack of universally relevant indicators. For quant and passive
approaches to be meaningful in assessing transition preparedness, they
require indicators that ‘work’ at the market level, i.e. are relevant
across companies and sectors. But so far, these indicators are rare
because materiality is industry or even company specific.

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Concentrated Portfolios

• By its nature, thorough fundamental ESG analysis can be done for

a limited number of companies only, resulting in more concentrated
portfolios.
• In a large cross-country study of holdings of institutional investors,
Choi et al. (2017) find that concentrated investment strategies in
international markets result in positive risk-adjusted returns,
conditional on an information advantage.
• Institutional investors with higher learning capacity (i.e. skilled
investors) form more concentrated portfolios.
• These results suggest, in contrast to traditional asset pricing theory
and in support of information advantage theory, that
concentrated investment strategies can be optimal.

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Concentrated Portfolios

• A well-diversified stock portfolio needs to include just 50–100

stocks to eliminate idiosyncratic or unsystematic risk.
• There are smaller benefits of diversification beyond those 100
stocks.
• Risk management should monitor that the stocks are not overly
correlated (reducing their diversification potential) and are spread
over sectors and countries.
• Diversification gains are mainly driven by a well-balanced allocation
over different asset classes, like equities, bonds and alternative
investments.
• For diversification it is more important to have a concentrated
portfolio in each asset class than to have a very diversified portfolio
in a single asset class.
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Engagement
• Another element of an active investment approach is effective
engagement with investee companies on the long-term, both
behind the scenes by meeting with companies and in the annual
general meeting by voting (McCahery, Sautner, and Starks 2016).
• Investors need to become more active in communicating their
demands and preferences for information (Higgins et al. 2017).
• Such engagement is costly. It requires human resources, expertise
and time of the asset managers.
• This is only feasible in a concentrated and actively managed
portfolio.
• Engagement is typically done for a small percentage of the holdings
and by a team of engagement specialists that lack knowledge of
the firms’ investment cases and hence miss important points,
resulting in engagement on matters that are often not material.
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Engagement
• Large (passive) asset managers could have a strong impact on
promoting sustainable business practices by their size.
• US evidence on proxy voting (Bolton et al. 2020) indicates that
mutual funds, including the large passive asset managers
(Black-Rock, Vanguard and State Street), are more narrowly
‘money conscious’ investors that often vote with management,
while pensions funds support a more social and
environment-friendly orientation of the firm.
• Bebchuk and Hirst (2019) show that mutual funds have an
incentive to under-invest in stewardship, as they bear the full cost
but only get a tiny part of the benefit.
• For Europe, Dimson, Karakaş, and Li (2021) find that institutional
investors, in particular pension funds, are active in coordinated
engagement to influence firms on environmental and social issues.
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Investment Strategies
• A major question is whether it is better to invest in
companies that already do well or in laggards that look set
to improve.
◦ Investing in the leaders likely implies that the capital will be used in a
sustainable way, that risk is lower, and that good behaviour is
rewarded.
◦ Investing in the laggards means that the invested capital could make
more of a difference.
• The answer does not need to be binary, as one could also invest in
a mix of leaders and improving laggards.
• Investing in the laggards does raise additional questions.
◦ How to determine the size and likelihood of the improvement?
◦ Will that improvement be good enough to be consistent with global
sustainability development goals or is it perhaps better if the company
perishes?
◦ Where is the demarcation between laggards that really want to (and
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Investment Chains: Short and Simple
• All parts of the chain are expected to understand the important
aspects of sustainable finance and its nuances.
• The asset owner is a long-term investor, who cares about financial,
social and environmental returns.
◦ If it has sufficient scale, the asset owner can do its asset management
in house.
◦ If not, the asset owner appoints an asset manager, who invests on his
or her behalf.
• The asset owner asks the asset manager to report on financial and
ESG returns, and it actively engages with the company to promote
sustainable business practices.
• The investee company ideally has a board that has adopted a
sustainable business model, and applies integrated reporting which
provides the necessary information to the asset manager, who can
report back to the asset owner.
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Long term Investing in Practice
• Institutional investors are finding out that they can realise
long-term investment returns by investing in and engaging
with companies that are capable of adding value over the
long-term, thereby having a positive effect on the value of their
portfolios and on society.
• Asset owners can reduce the complexity of their investment
chains by relying less (or not at all) on external asset managers
and consultants.
• For example, many Canadian pension funds have in sourced much
of their asset management, achieving better returns and lower
overall costs.
• Their higher salary costs are more than compensated by lower
external fees, which is also known as the Canada effect
(Ambachtsheer 2016).
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Long term Investing in Practice: Alecta

• Alecta is a large Swedish pension fund (€ 100 billion assets under

management in 2022) has an investment strategy squarely aimed at
long-term value creation.
• The pension fund adopts a 15–20 year perspective on the asset side and
applies ESG integration in its investment process.
• Active management of a limited number of shareholdings is central
to Alecta’s asset management model.
• This active management is done through independent in-house
analysis, focusing on the absolute return and risks of investments
using a 5-year average.
• Each investment decision is preceded by a sustainability review of the
company being considered.
• When Alecta invests in a company, it often becomes one of the largest
shareholders, which enables it to engage in a close dialogue and
influence the company in the desired direction.
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Role for Asset Management
• The industry can add a lot of value and build trust by offering
active management aimed at long term value creation, truly
performing the social function of finance.
• For that potential to be met, the industry needs to step up its
efforts in terms of the depth and breadth of transition preparedness
analysis, its engagement, and the concentration of its portfolios.
• Ideally, this feeds into passive products as well, making the two
types of investment mutually reinforcing.
• Asset managers will have to make products available to the public
that not only do the above, but also do it in a way that is credible
and verifiable, which is quite a challenge indeed as even
professionals are confused by the current state of the field.
• This task is not merely hypothetical since client demand for
sustainable and impact investing products is strongly on the rise.
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Challenges of Sustainable Investing

1. Getting Reliable Data

◦ One of the biggest challenges for investors is that ESG information
takes on many forms and requires an assortment of sources that must
be continually updated.
2. Setting Internal ESG Investing Standards and Goals
◦ ESG investing means different things to different institutions and
financial professionals.
◦ The definition of environmental, social and governance will thus vary
to some extent between one financial institution or firm and another.
3. Keeping up with ESG Regulatory Changes
◦ Regulatory bodies have been working to achieve a global standard
definition of “environmental,” “social,” and “governance.”
◦ With that standardization comes a fresh wave of regulations and
compliance requirements.
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Next class

• Sustainable investing in equilibrium

• ESG-efficient frontier
• Empirical evidence

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References
• Ambachtsheer, K. 2016. The Future of Pension Management. New York: Wiley.
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