BE103/512

THE UNIVERSITY OF HONG KONG

FACULTY OF BUSINESS AND ECONOMICS

MFIN7052 Green Finance and ESG

GENERAL INFORMATION

Instructor: Dr. Frank Packer

Email: TBD
Office: TBD
Phone: TBD
Consultation times:

Tutor: TBD
Pre-requisites: N/A
Co-requisites: N/A
Mutually exclusive:

Course Website: TBD

Other important details:

COURSE DESCRIPTION
The Greening of Finance: An overview of markets and institutions
Overview. Green finance can play a key role in achieving one of the main goals of the Paris Accord, namely, “making
finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”.” The
course will provide a brief overview of the major issues in green finance. One of the main texts will be a recent report by
the Network for Greening the Financial System (NGFS, April 2022) entitled “Enhancing Market transparency to Scale Up
Green and Transition Finance” (in bold font, below). The report covers taxonomies, green external review and assessment,
and climate transition metrics and frameworks as well as market products.
COURSE OBJECTIVES
1. To provide students with basic knowledge of the key concepts of green finance, or finance with the purpose of
environmental objectives.

2. To train students to differentiate between various forms of financial instruments with sustainability labels, to provide
students with knowledge of what current disclosure regimes are currently prominent and might emerge going forward,
what are they key institutions of green certification and verification to ensure that promised benefits are achieved.

3. To provide students with knowledge of how taxonomies and green classification frameworks differ across jurisdictions
and how they can be made interoperable; how future green rating system might be best designed.

4. To provide students with knowledge of what new technologies have the promise to boost ease of data collection and
market transparency.

5. To provide students with regional expertise on the challenges specific to mainland China and Asia more generally.
Programme Learning Outcomes
PLO1. Acquisition of techniques and advanced knowledge in interdisciplinary fields between finance and other appropriate
disciplines including but not limited to engineering, law and mathematics

PLO2. Application and integration of knowledge and skills in finance and relevant interdisciplinary fields to identify and tackle
practical problems, and design innovative products and systems with international standards and global vision
PLO3. Inculcating leadership, professional ethics and competence in finance and relevant interdisciplinary fields

PLO4. Mastering communication skills

COURSE LEARNING OUTCOMES

Aligned Programme
Course Learning Outcomes
Learning Outcomes

CLO1. Describe and explain the creation and verification of green securities PLO1

CLO2 Use relevant information for making a decision about the alignment of investment PLO2
opportunities with sustainability objectives.
PLO3
CLO3 Understand the importance of principles of sustainable finance as applied to
corporate governance and policy-making
PLO4
CLO4. Demonstrate effective communications skiils in describing the pluses and minuses
of various forms and instruments of green finance

Expected Study Load

Course Teaching and Learning Activities
contact hour (% of study)

T&L1. Lecture with interactive presentation (including final exam) 36 hours 30 %

T&L2. Preparation of team presentation and group report 24 hours 20%

T&L3. Self-study 60 hours 50%

Total 120 hours 100%

Aligned Course
Assessment Methods Brief Description (Optional) Weight
Learning Outcomes
Essay to explain a green taxonomy.
A1. Written assignment 15% CLO1, CLO2

Presentation and submitted essay on a

A2. Team Project & presentation case study on greenwashing and what
35% CLO3, CLO4
could be done to discourage going forward

A3. Class participation

10% CLO1,CLO2, CLO3,
CLO4

A4. Final examination Close-book examination enables students

to demonstrate most of the stated CLOs 40%
CLO1,CLO2, CLO3,
CLO4

Total 100%
STANDARDS FOR ASSESSMENT
Course Grade Descriptors

Candidate has consistently demonstrated a thorough grasp of the subject as evidenced by original or
A+, A, A- exceptionally astute analysis and synthesis of course material as evidenced in projects and exam
results.

Candidate has frequently demonstrated substantial grasp of the subjects as evidenced by analysis
B+, B, B-
and synthesis of course material as evidence in projects and exam results.

Some of the analysis in projects and exams is well organized, clear but with insufficient elaboration.
C+, C, C-
Solutions to questions and problems containing unstructured but relevant observations, and are
D+, D
marginally interesting

Little evidence of basic familiarity with the subject

F

Assessment Rubrics for Each Assessment (Please provide us the details in a separate file if the space here is not
enough)

In-Class Performance
A+, A, A-: Extremely well prepared for class discussion, very active in sharing views and attended almost all lectures.
B+, B, B-: Partially prepared for class discussion, quite active in sharing views and attended most of the lectures.
C+, C, C-: Not well prepared for class discussion, limited active in sharing views and attended many of the lectures.
D+, D: Not well prepared for class discussion, no sharing of views and attended some of the lectures.
F: Poorly prepared for class discussion and no sharing of views and experience and rarely attended lectures.

Group Project: Presentation

A+, A, A-: Professional presentation style, comprehensive content coverage, well-articulated on critical issues, effective use
of management concepts, and quality interaction with audience.
B+, B, B-: Decent presentation style, appropriate content coverage, clear discussion of critical issues, moderately effective
use of management concepts, and acceptable interaction with audience.
C+, C, C-: Mediocre presentation style, limited content coverage, marginally acceptable discussion of critical issues,
infrequent use of management concepts, and limited interaction with audience.
D+, D: Weak presentation style, key content omitted, unclear focus on critical issues, very limited use of management
concepts, and poor interaction with audience.
F: Unacceptable presentation style, questionable content coverage, omitting critical issues, zero use of management
concepts, and no interaction with audience.

Group Project: Group Report

A+, A, A-: The motivation is extremely well presented and the writing and argument extremely logical and clear.
B+, B, B-: The motivation is very well presented and the writing and argument very logical and clear.
C+, C, C-: The motivation is presented in a mediocre way and the writing and argument is moderately logical and clear.
D+, D: The motivation is not presented well and the writing and argument is not logical or clear.
F: The motivation is nonsensical, the argument is wrong.

Examination
Examination will be multiple choice, short answer and essay. The following describes grading for the essay part of the
exam. .
A+, A, A-: Idea development is insightful and sophisticated; Supporting evidence is convincing, accurate and detailed. Well
written with clear focus.
B+, B, B-: Idea development is clear and thoughtful; Supporting evidence is sufficient and accurate. Well written.
C+, C, C-: Idea development is simplistic and lacking in relevance; Supporting evidence insufficient but accurate.
Somewhat well written.
D+, D: Idea development is superficial and ineffective; Supporting evidence is insufficient and inaccurate. Writing is unclear.
F: Idea development is absent; Supporting evidence is vague or missing. Poorly written.
COURSE CONTENT AND TENTATIVE TEACHING SCHEDULE
Classes 1-2. Overview of Issues in green finance. Green finance is motivated by global climate goals. The
course will provide a overview of the motivation for climate finance from the recent IPCC report, the explosive
growth of green financial markets, documenting which type of issuers (sovereign, supranational, corporate)
emerged first in bonds and in which jurisdictions. It will also review ESG in equity markets, as well as green
investment mandates.

- Climate Change 2022: Mitigation of Climate Change. Working Group III Contribution to the IPCC
(Intergovernmental Panel on Climate Change) Sixth Assessment Report.
- Carney, M (2015): “Breaking the tragedy of the horizon – climate change and financial stability”,
speech given at Lloyd’s of London, 29 September.
- Michela Scatigna, Dora Xia, Anna Zabai and Omar Zulaica (2021), “Achievements and Challenges in
ESG Markets,” BIS Quarterly Review, December.
- Sirio Aramonte and Anna Zabai (2021), “Sustainable finance: trends, valuations and exposures”, BIS
Quarterly Review, September.
- Ehlers, T, B Mojon and F Packer (2020): “Green bonds and carbon emissions: exploring the case of a
rating system at the firm level” BIS Quarterly Review, September.
- Berg, F, J Kölbel and R Rigobon, “Aggregate Confusion: The Divergence of ESG Ratings” (August 15,
2019). Forthcoming Review of Finance, Available at SSRN: https://ssrn.com/abstract=3438533 or
http://dx.doi.org/10.2139/ssrn.3438533

Classes 2-3. Green and Transition Taxonomies. What does it mean to be green? Different national regimes,
and even different institutions or regions within nations can have different definitions of what it means to be
green. To promote green financial markets, these taxonomies must have integrity. The European Union has
made efforts to increase harmonization within member states, and emerging markets are looking to the EU
model as a template. Beyond the EU, however, jurisdictional differences persist globally, reflecting divergent
development priorities, as well as distinct jurisdictional properties. The EU-China initiative to improve the
consistency of definitions and methodologies for determining eligibility of green projects—a “common-ground”
taxonomy—that represents one of the most significant global efforts to date.

- NGFS Report on Enhancing Market Transparency to Scale Up Green and Transition Finance, April
2022. Chapter 1, Taxonomies.
- Ehlers, T, D Gao and F Packer (2021). “A Taxonomy of Sustainable Finance Taxonomies”, Bank for
International Settlements, BIS Paper 118, October.
- Common Ground for Europe and China. IPSF (2021): “Common Ground Taxonomy – Climate Change
Mitigation”, Instruction Report.

Class 4. Disclosure regimes and measurement. Investors and financial intermediaries must be able to identify
tangible physical outcomes and climate-related benefits from firm and country-level activity. Indeed, global
initiatives such as the FSB’s Task Force on Climate-Related Financial Disclosures aim to make better
environmental information readily available. The unit will review the changing disclosure environment and the
reliability and quality of the key carbon emissions disclosure items.

- Christiansen, H, L Hail and C Leuz (2019) “Mandatory CSR and Sustainability Reporting: Economic
Analysis and Literature Review, “ Working Paper 26169, National Bureau of Economic Research.
- Krueger, P and Z Sautner, D Tang, and R Zhong (2021) “The Effects of Mandatory ESG Disclosure
Around the World”. European Corporate Governance Institute – Finance Working Paper No.
754/2021, Swiss Finance Institute Research Paper No. 21-44.
 - Task Force on Climate Disclosure (2021): “Task Force on Climate-related Financial Disclosures-
Guidance on Metrics, Target and Transition Plans”.
- IFRS (2022), Exposure Draft, IFRS Sustainability Disclosure Standard, IFRS S2, “Climate-related
Disclosures”, March.
Note: Between classes 4 and 5, June 1 deadline for homework assignment on taxonomies.

Classes 5-6. Institutions of green certification and verification. For investment in green securities to materially
affect climate objectives, their environmental or climate-related benefits must be verifiable. This class will
review the various type of institutions of certification available to investors and issuers These can includes
approved external verifications, as well as green bond and stock indices that identify specific financial assets as
green via a stated methodology. A limitation of indices is their binary nature: a financial asset is either green or
it is not. Some providers have arisen that make more granular assessments. This unit will examine the attributes
of various well-known certifiers.

- NGFS Report on Enhancing Market Transparency to Scale Up Green and Transition Finance, April
2022. Chapter 2, Green External Review and Assessment.
- Ehlers, T and F Packer (2017): “Green bond finance and certification”, BIS Quarterly Review,
September, pp 89–104.

Class 7. New green technologies: data collection and beyond. This unit will focus on the new technologies’
promise to boost ease of data collection and market transparency in green finance. For example, technological
advances in measuring carbon emissions in real time—utilising the so-called “internet of things”—will reduce
data collection costs and increase data availability. The lecture will review examples of real-time verification
of compliance with carbon emissions targets that are currently under development in Hong Kong (BIS
Innovation Hub, 2021).

- A Vision for Technology-Driven Green Finance, Project Genesis (Report 1), BIS Innovation Hub, Hong
Kong Centre, November 2021.
- Will Technology Enhance Data Collection for External Review? in NGFS Report on Enhancing Market
Transparency for Scaling up Green and Transition Finance (2022), pp. 43-44.
Note: The second half of Class 7 and the first half of Class 8 will be devoted to presentations of group reports.

Classes 8-9. Trends in innovative financial instruments: SLBs and ESG, Transition Finance Metrics and
Frameworks. In this unit we provide an overview of green financial instruments, distinguishing the many
various forms, emphasizing their key defining characteristics. Instruments can be equity versus debt, bank
loans versus bonds, and can have payoffs contingent on varying outcomes at the project, firm or country level.
Some shortcomings of existing labels related to ESG will be reviewed. We also will discuss how future green
ratings systems might be best designed to align the incentives of firms, investors and other stakeholders,
depending on the institutional setting, rated instruments and entities, and system objectives. The second half
of Class 8 will be devoted to presentation of group reports.

- NGFS Report on Enhancing Market Transparency to Scale Up Green and Transition Finance, April
2022. Chapter 3, Climate Transition Metrics, Frameworks, and Market Products.
- OECD (2021), ESG Investing and Climate Transition: Market Practices, Issues and Policy Considerations,
OECD Paris.

Class 10. The Experience in Emerging Asia and Japan. Asia both suffers most the consequences of climate
change and will be the largest emitter of greenhouse gases going forward. Its experience will be of critical
importance to the global combat to mitigate climate change.
 - “The ASEAN taxonomy”, and “the Singapore Green Finance Industry Taxonomy” in NGFS,
Enhancing Market Transparency to Scale Up Green and Transition Finance, Annex 1, 2022.
- “Climate Transition Finance in Japan,” in NGFS, Enhancing Market Transparency to Scale Up Green
and Transition Finance, Annex 1, 2022.
- Michela Scatigna, Dora Xia, Anna Zabai and Omar Zulaica (2021), “Public support for ESG markets: an
Asian perspective”, in Achievements and Challenges in ESG Markets, BIS Quarterly Review, December.
- IEA (2021): “Financing clean energy transitions in emerging and developing economies”.

Class 11: The experience in China. China has been a leader among emerging markets in both unifying its own
regulatory framework to classify green finance activities and work towards achieving common ground in these
classifications with the European Union. The features of the rapid growth of green financial markets in China
will be reviewed and assessed.

- Macaire, C. and A Naef (2021): “Greening Monetary Policy: Evidence from the People's Bank of
China“. Banque de France Working Paper 812. https://publications.banque-
france.fr/sites/default/files/medias/documents/wp812_0.pdf

- People’s Bank of China, NDRC and CSRC. The Green Bond Endorsed Bond Catalogue (2021 edition).

Class 12: Final examination.

REQUIRED/RECOMMENDED READINGS & ONLINE MATERIALS (e.g. journals, textbooks, website addresses etc.)

In addition to above-mentioned, the following is a selection of recommended articles or reports that may be
referred to in the course.

Overview

Ehlers, Torsten, F Packer and K de Greiff, Kathrin, “The Pricing of Carbon Risk in Syndicated Loans: Which Risks Are
Priced and Why?” Journal of Banking & Finance, Volume 136, 2022.

Nordhaus, W. D. (2007): To tax or not to tax: Alternative approaches to slowing global warming. Review of Environmental
Economics and Policy 1 (1), 26-44.

United Nations (2015): “Paris Agreement”, December, Article 2.

Bolton, P., & Kacperczyk, M. (2021): Do investors care about carbon risk? Journal of Financial Economics.

Flammer, C. (2021): Corporate green bonds. Journal of Financial Economics. Volume 142, Issue 2, November 2021,
Pages 499-516.

OECD (2021): “Financial Markets and Climate Transition: Opportunities, Challenges and Policy Implications,” OECD Paris.

NGFS (2020): “A Status Report on Financial Institutions’ Experiences from working with green, non green and brown
financial assets and a potential risk differential”, May.

Taxonomies

UN-DESA and IPSF (2021): “Improving compatibility of approaches to identity, verify and align investments to sustainability
goals”, input paper for the G20 Sustainable Finance Working Group (SFWG), September.

Platform on Sustainable Finance (2021): Transition Finance Report.

Disclosure.

Technical Readiness Working Group (TRWG) (2021): “Climate-related Disclosures Prototype”.

CBI (2021): “Post-Issuance reporting in the green market”.

IOSCO (2021): “Report on Sustainability-Related Issuer Disclosures”, June.

NGFS (2021): “Progress report on bridging data gaps”, NGFS technical document, May 2021.

NGFS (2020): “Guide for Supervisors Integrating climate-related and environmental risks into prudential supervision “,
NGFS technical document”, May 2020.

Certification and Verification

The Climate Bonds Standard and Certification Scheme (2021), https://www.climatebonds.net/certification/approved-verifiers

Ferreira, C., D. L. Rozumek, R. Singh and F. Suntheim (2021): “Strengthening the Climate Information Architecture”, Staff
Climate Note 2021/003.

IOSCO (2021): “Environmental, Social and Governance (ESG) Ratings and Data Products Providers”, November.

Transition Pathway Initiative. https://www.transitionpathwayinitiative.org/

Belloni, M., M. Giuzio, S. Kordel, P. Radulova, D. Salakhova, & F. Wicknig, The performance and resilience of green
finance instruments: ESG funds and green bonds, ECB Financial Stability Review, November 2020.

Trends in innovative financial instruments: SLBs and ESG, Transition Finance Metrics and Frameworks.

Giglio S. et al. (2020). “Climate Finance.” NYU Stern School of Business.

ICMA (2020). Sustainability-Linked Bond Principles, Voluntary Process, June.

BNP Paribas, 2020, “The ascent of sustainability-linked bonds”.

MSCI (2021), “Breaking Down Corporate Net-Zero Climate Targets”.

Emerging Asia and Japan

Durrani, A., U. Volz, and M. Rosmin (2020): “The Role of Central Banks in Scaling Up Sustainable Finance: What Do
Monetary Authorities in Asia and the Pacific Think?” ADBI Working Paper 1099. Tokyo: Asian Development Bank Institute.

China

Larsen, M. L. “Green Finance Info: Introduction to Green Finance”, International Institute of Green Finance.

MEANS/PROCESSES FOR STUDENT FEEDBACK ON COURSE

o conducting mid-term survey in additional to SETL around the end of the semester

o Online response via Moodle site

✔ Others: ___SFTL____________ (please specify)

COURSE POLICY (e.g. plagiarism, academic honesty, attendance, etc.)
Plagiarism and copying of copyright materials are serious offences and may lead to disciplinary actions.
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Handbook for details. Students are strongly advised to read the booklet entitled “What is Plagiarism?” which
was distributed upon students’ admission into the University, a copy of which can be found at
www.hku.hk/plagiarism. A booklet entitled “Plagiarism and How to Avoid it” is also available from the Main
Library.
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ADDITIONAL COURSE INFORMATION (e.g. e-learning platforms & materials, penalty for late assignments, etc.)