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ENVS 1545: The Theory and Practice of Sustainable Investing

Spring 2019 | UEL 106 (+ DSL at the Rock)


Course description:

21st century investors, and the companies they invest in, face a deepening array of
Environmental, Social, and Governance (ESG) challenges. Climate change, water scarcity, community
conflict and inequality, resource depletion, supply chain breakdowns, worker well-being and diversity
are all seen a s inc rea sin g ly material opportunities for successful corporations, investors and
countries to manage for.

This course will couple theory with the practice of Sustainable Investing. We will examine current
ESG investment and corporate strategies, industry and other trends, future scenarios, players in
the field and evolving frameworks, while integrating theory with practical investment performance
analysis, metrics, and studies of data, screens, asset classes and diversification. The course maximizes
student interaction with industry leaders and is taught through a mix of case studies, analyst reports,
lectures and interactive discussions. Previous iterations of this class allowed students to build their
understanding of sustainable investing and put this directly into practice, as students analyzed and
recommended strategies and fund managers for partnership with the new Brown University
Sustainable Investment Fund option for donors to the Brown Endowment, as well as developing stock
pitches for possible direct investment as concentrated positions.

During this class, students will have a chance to follow a similar path, reviewing the choices made to
date, providing updated recommendations and performing analysis on what Brown might otherwise
consider as an investing institution across asset class. Students of all disciplines interested in the fields
of investment and environmental/social policy are encouraged to attend the mandatory first day of
class. This course is designed to be accessible to those with varying levels of knowledge of financial
markets and economics backgrounds. Though there are high expectations for the quality of final stock
pitches, mentoring and resources are readily available from the instructors and teaching assistants. The
course will be capped at 36 students.

Course objectives:
The objective of the course is to provide students with a firm grounding in a full range of pressing ESG
concerns and a toolkit of investment solutions.

Specifically, The Theory and Practice of Sustainable Investing objectives are:


● Understand the theoretical relationship between finance and sustainability.
● Understand fiduciary duty of investors and how the Brown Investment Office and other
university endowments manage for this.
● Connect students with industry-specific resources, including industry experts, latest research, tools.
● Review and construct a real SI portfolio, the Brown University Sustainable Investment Fund.
● Consider and explore other possible investment action Brown might consider across asset class.

Lecturer: Cary Krosinsky; cary_krosinsky@brown.edu


TAs: Julia Benz, Devyn Collado-Nicol, Ben Winston
Guest speakers in 2018:

 Surya Kolluri, Bank of America Merrill Lynch


 Sophie Purdom ’16, Bain & Company/Kula Bio
 David Richardson ‘08, Vision Ridge
 Joshua Kennedy ’97 and Jane Dietze, Brown Investment Office
 Ophir Bruck and Carol Jeppesen, PRI
 Sarah Smith and Shannon Kelly, Sustainalytics
 Robby Klaber ’07, Parnassus Investments
 Helen Crowley, Kering
 Tim Dunn, Terra Alpha Investments
 Katherine Collins, Putnam
 Todd Cort, Yale School of Management
 Patrick Reed & Gabe Rissman, Real Impact Tracker & Stake
 Arthur Matuszewski ‘12, Wayfair.com, Fahrenheit 212, Bridgewater Associates
 Seth Magaziner ‘06, Treasurer of the State of Rhode Island

Potential 2019 Speakers include Kerry Kennedy, Dr. Ma Jun of the People’s Bank of China,
+ Kate Brandt ‘07/Google and others as above or as listed within individual classes as below,
subject to revision

Readings:

Required: Krosinsky/Purdom
● Krosinsky, Purdom, Sustainable Investing: Revolutions in Theory and Practice, Routledge 2017

Specific Chapters Required: Available online through Josiah:


● Krosinsky, Robins, and Viederman, Evolutions in Sustainable Investing: Strategies, Funds and
Thought Leadership, Wiley 2011.

Required: Available on reserve at the Rockefeller Library:


● Meadows, Thinking in Systems: A Primer, Sustainability Institute, 2008.
● Krosinsky, Cort, Sustainable Innovation and Impact, Routledge, 2018.

Required Case studies:


● Sucher, Beyersdorfer, and Jensen, “Generation Investment Management,”
HBS No. 9-609-057, 2009.

Optional Case studies:


● Bebb, Reichelstein, “Sustainable Investing at Generation Investment Management,”
Stanford Business No. SM-257, 2016.
● Eccles, Serafeim, Clay, “KKR: Leveraging Sustainability”,
HBS No. 9-112-032, Revised 2012

All other readings listed on the syllabus can be accessed online through hyperlinks or will be provided as
attachments.
Assignments:

● Investor compare and contrast: short response paper (due 2/4) – 10%
○ Select three investors from the Evolutions readings
○ Compare and contrast their approaches, successes, challenges, etc.
○ Which investor do you find the most effective and why?

● In-class writing assignments (2/14 and 4/18) - 5% each

● Midterm: Option #1 – Quantitative Option - ESG Fund Manager Project (due 3/15) – 25%
○ Select 6 Fund Managers, compare them qualitatively, choose 3 to provide more detailed
qualitative and quantitative profiles
○ Choose one or more hypothesis and test them out using ESG Analytics data and financial
criteria
○ Recommend specific funds based on your findings

● Midterm: Option #2 – Qualitative Options – Paper (due 3/15)


○ Suggest a solution to an unsolved ESG problem – options include corporate strategy,
investor strategy, policy – special request for 2018 involved performing a climate
risk/stranded assets analysis & TCFD preparation papers requested by the Brown
Investment Office, similar expected for 2019

(min. 10 page paper)

● Elevator pitch: 1-2 PowerPoint slides (due 3/21) – 5%


○ Analyze one publicly listed company of choice, and discuss why it is well-positioned for
success.
○ Why should a sustainable investor consider adding it to his/her portfolio?

● Sustainable Investment Fund pitch:


○ Progress pitch: ~8 PowerPoint draft slides (4/17)
■ Work in groups of 3 students, select one publicly listed company that would
make a strong addition to the Sustainable Investment Fund (these can be sourced
from the elevator pitch assignment.)
■ Outline the stock pitch presentation in “blank slide” format.

○ Final presentation: PowerPoint presentation (4/23-5/3) – 30%


■ Expand on the progress pitch to deliver a roughly 10 slide investment pitch
including working with your assigned industry mentor
■ Success will be determined by group’s presentation and Q&A performance in
achieving the company being potentially added to our Sustainable
Investment portfolio. Best 5 final presentations to be provided to the Brown
Endowment for their review and consideration.
Class participation – 20%
As an Engaged course, students are held to a high expectation of being active contributors to discussions,
particularly since there will be numerous guest speakers. Students should be prepared to answer questions
about assigned case studies and readings. Absences must be reported in advance. Your participation grade
will be affected beyond two excused absences. Students are expected to question one another and the
lecturers. This component of the grade will be based on a combination of the four weekly write ups and
on in class active participation.

Evaluation:
Final grades will be calculated based on the percentages above, across these three areas:
● Class participation
● Midterm Paper (Qualitative or Quantitative) and other writing assignments
● Final Stock Fund pitch and presentation

Time Expectations:

Over 14 weeks, students will spend 3 hours per week in class (42 hours total), an average of 7 hours per week
on assignments (98 hours/semester), and an average of 3 hours per week on readings (42 hours/semester)

Policy statements:
Syllabus subject to change: This syllabus is subject to change as the semester progresses, depending on the
learning styles and needs of the students, the needs of our guest speakers, or the status of the Brown
University Sustainable Investment Fund. Any time the syllabus is altered, a new copy will be emailed to
you and posted to the Canvas site in a timely fashion, in order to ensure that you have enough time to
complete the work.

Statement on Disability: Brown University is committed to full inclusion of all students. Students who, by
nature of a documented disability, require academic accommodations should contact us. Students may
also speak with Student and Employee Accessibility Services at 401-863-9588 to discuss the process for
requesting accommodations.
Date: Topic: Lecturer(s): Readings/Assignment:

Jan 24 What is Sustainable Investing? Cary Krosinsky/Purdom – Introduction, Chapters 1 and 2 (Jan 31)
● Environmental, Social, Governance as an
investment imperative
● Explanation of ESGFQ framework & increased
investor/consumer/regional interest

+ Introduction to the class structure


● Student Expectations

Jan 29 Generation Investment Management case study #1 Cary Required: Sucher, Beyersdorfer, Jensen, “Generation
● Discussion Investment Management,” HBS No. 9-609-057, Boston:
● Should GI add ABB to its focus list? Should GI Harvard Business School Publishing, 2009.
invest?
Optional: Bebb, Reichelstein, “Sustainable Investing at
+ Fund Manager Compare and Contrast Generation Investment Management,” Stanford 2016, SM-257

Jan 31 Sustainable Investment Practitioner Series #1 Sophie Purdom ‘16 Readings from chapters from Evolutions book, examples
include:
Ch 2: Jupiter Ecology, Ch 4: Highwater Global
Ch 8: The Story of Calvert, Ch 9: Winslow
Ch 10: Portfolio 21
Ch 11: Northwest and Ethical Investments
Ch 12: Looking for a Green Century
Ch 14: Inflection Point Capital
Feb 5 The Brown Endowment Joshua Kennedy
Brown Investment Office
+ Compare and Contrast project results discussion

Feb 7 Finance 101 Optional: separate online Quantitative Financial Metrics


TAs
● Capital structure & Capital budgeting Module
● Basic Financial Metrics Review
● Quantitative Portfolio Analysis using DCF (to be
announced, separate TA session on this)

Feb 12 Renewable Energy and the Future of Investing David Richardson (DR), Krosinsky/Purdom, Chapters 5 and 11 (a-g)
across Asset Class Vision Ridge

Sustainable Investment Practitioner Series #2 David Richardson Sr.,


Impax Asset Management

Feb 14 The Work of the PRI and other ongoing industry Peter Dixon, Krosinsky/Purdom Chapters 7 and 20 + latest papers to be
Trends Howland Capital distributed

Sustainable Investment Practitioners Series #3


Feb 19 No class (long weekend)

Feb 21 ESG Data Arabesque (Brace, Recent Reports on ESG & Financial Performance as posted on
Jennifer) Canvas
Discussion on ESG and financial performance

(+ 1st weekly write-up due end of week)

SASB/PRI – assign readings and basics offline

Feb 26 Environmental M etrics Cary


● Current situation Evolutions Ch. 15: Environmental Metrics
○ Methods & Standards
Kering Environmental P&L Report
● Challenges
● Kering Environmental Profit & Loss
Krosinsky/Purdom – Ch. 16 – Value Drivers
The Value Driver Model Sustainalytics ESG database access starts here

Feb 28 Systems Thinking


Discussion on the(towards
Midterma including
portfolio of
BIOnecessary
projectsstrategies) Cary Dana Meadows, Thinking in Systems: A Primer,
Sustainability Institute, 2008.
Sustainable Innovation & Impact – a system of solutions to (+ recent student
innovation challenges contributors to our books) Krosinsky/Purdom – Chapter 6

(+ 2nd weekly write-up) Optional: Sustainable Innovation & Impact,


posted on Canvas/Josiah

Mar 5 Sustainable Investment Practitioners Series #4 Robby Klaber, Parnassus


Investments
Mar 7 Social Entrepreneurship & Impact Investing TAs Krosinsky/Purdom Chapters 3, 17-18

● Conscious Capitalism, Impact Investing,


B Corporations/Benefit Corps, Gender Lens Investing

Mar 12
ESG Data Frameworks, Materiality and Green Bonds Todd Cort, Yale School Latest reports from the Climate Bonds Initiative
of Management
Greening China’s Financial System
https://www.cbd.int/financial/privatesector/china-
Green%20Task%20Force%20Report.pdf

Ceres and the Clean Trillion


https://www.ceres.org/resources/reports/investing-in-the-clean-
trillion-closing-the-clean-energy-investment-gap-executive-
summary
Mar 14 Special Guest Speaker #1 Kerry Kennedy, RFK
Human Rights or
Dr. Ma Jun, People’s Bank
of China
Mar 19 Active
ownership Gabe Rissman, Krosinsky/Purdom – Chapter 15
● Proxy voting Real Impact Tracker Shareholder Engagement
● Resolutions on ESG factors
● Shareholder engagement Todd Arthur Bridges, Real Impact Tracker website materials
○ INCR State Street
● Engaging corporations to improve global Evolutions Chapter 24 – Insight Investment Management + PRI
behavior ESG Integration Report, Sept.2016
https://www.unpri.org/download_report/22600
+ set up for Elevator Pitches
Mar 21 Elevator Stock Pitches
(+ 3rd weekly write-up – due by end of break)
+ Past Class Portfolios Update

No class (spring break)

No class (spring break)

Apr 2 On Innovation & Impact Arthur Matuszewski, Student Presentations on Sustainable Innovation & Impact
Wayfair.com, Bridgewater
Associates, Fahrenheit 212

Apr 4
Special Guest Speaker #2 Kate Brandt, Google Kelly Ramirez, Jonas Clark
(+ 4th weekly write-up to be completed by April 11)

Apr 9 Special Guest Speaker #3 Seth Magaziner, Rhode Island Infrastructure Bank case study: CBEY
Alec Stais and Kelly
Infrastructure, Green Rogers, Treasurer of
Banks and the Future of Rhode Island’s Office
Pension Fund Investing (move to Apr 4?)
Apr 11 Divestment Jane Dietze, Brown McKibben, Rolling Stone, Global Warming’s Terrifying New
● Should Brown University divest from its fossil Investment Office Math http://www.rollingstone.com/politics/news/global-
warmings-terrifying-new-math-20120719
fuel holdings?
● The Responsibility of University Endowments Cary
ACCRIP Coal Letter 10/18/2013
● State of the Taskforce Findings and Future Efforts
https://www.brown.edu/about/administration/advisory-
committee-corporate-responsibility-investment-
policies/sites/brown.edu.about.administration.advisory-
committee-corporate-responsibility-investment-
policies/files/uploads/ACCRIP%20Coal%20Letter%2020131018.p
df

Coal Divestment Update, President Chris Paxson


10/27/2013 https://www.brown.edu/about/administration/presid
ent/2013-10-27-coal-divestment-update

Carbon Tracker Synthesis Report December 2015 &


Gas Report June 2015
http://www.carbontracker.org/wp-
content/uploads/2015/11/CAR3817_Synthesis_Report_24.11.15
_WEB2.pdf http://www.carbontracker.org/wp-
content/uploads/2015/06/CTI-gas-report-Final-WEB.pdf

The Yale Endowment & Climate


Change http://news.yale.edu/2016/04/12/yale-investment-
managers-heed-call-consider-economic-impact-climate-change
Optional: The Ethical Investor, Yale
Press http://acir.yale.edu/pdf/EthicalInvestor.pdf

Apr 16 Presentation Skills/Final Presentation Workshop TAs


● Oral/Slides -----------------
-------- ----------------------- ------
Apr 18 Final wrap-up discussion Cary
+ final in-class writing assignment
Apr 23 Groups 1, 2, 3, 4
Apr 25 Final Student Presentations – portfolio building Groups 5, 6, 7
Apr 30 Groups 8, 9, 10, 11
May 3 Groups 12,13,14