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DRPS : Course Catalogue : Business School : Common Courses (Management School)

Postgraduate Course: Climate Risk and Investment Alignment (CMSE11488)

Course Outline
SchoolBusiness School CollegeCollege of Arts, Humanities and Social Sciences
Credit level (Normal year taken)SCQF Level 11 (Postgraduate) AvailabilityNot available to visiting students
SCQF Credits10 ECTS Credits5
SummaryThe course provide students with an understanding of emerging financial sector management practice related to climate change. Across both public and private sector financial actors, two principal areas of focus are the management of risks associated with climate change and the alignment of assets and portfolios with climate goals agreed by governments. The course will provide an overview of the concepts and initiatives related to these management approaches (e.g. the Taskforce for Climate-related Financial Disclosures), and the skills and techniques necessary to implement these practices.
Course description Academic Description

The course provide students with an understanding of principal concepts emerging within the financial sector to taken climate change into account in decision-making and portfolio management. Across both public and private sector financial actors, two principal areas of focus are the management of risks and opportunities associated with climate change and the alignment of assets and portfolios with climate goals agreed by governments. The application and implementation of these management strategies, in turn, is highly dependent different types of forward-looking assessments such as scenarios, forecasting and modelling.

The course develops practical knowledge for implementing these practices. Students will develop the critical thinking skills to evaluate whether emerging practices are fit for purpose for use by different financial actors (banking, asset management, institutional investors) as well as for different mandates (impact-driven versus maximising financial returns).

The course builds on the Carbon Accounting course, using concepts introduced in the first semester to assess the exposure to climate-related risks and/or the consistency with national and international climate goals. The course complements and applies in part the concepts from the Climate Policy & Investment and Carbon Pricing course as carbon pricing is one of the principal policies and drivers behind different forms of climate-related risks. It also builds upon the International Climate Finance course as it explores how mandated financial institutions, ie those seeking to have a positive contribution to achieving climate-related goals, integrate this into their decision making strategies. It provides a complementary perspective to the Baseline-and-Credit course by introducing alternative methods of integrating climate change in to decision making. Finally, it is complementary to the Sustainable Finance course is complementary to the Sustainable Finance course, bringing a forward-looking perspective to the broader discussion of portfolio allocation.

Outline Content

1. Overview of the climate change investment and finance challenge - roles of public and private sector actors
2. Overview of the dominant logics for public and private sector finance and investment decision making
3. Climate investment decision making: principal components of decision-making toolkit (scenarios, modelling, taxonomies, etc.)
4. Overview of the current state of trends on climate-related risk management and Paris Alignment
5. Climate-related risks and the integration into investment & finance decision making
6. Critique of methodologies and resulting management strategies (such as divestment and tilting portfolios) with a focus on linking outcomes with impacts in the real economy.
7. Impact and 'alignment'-focused and integration into investment & finance decision making
8. Analysis of current initiatives and trends, such as the EU Sustainable Finance Taxonomy, the Taskforce for Climate-related Financial Disclosure and the MDB Joint Paris Alignment methodology, among others.

Student Learning Experience

The course will be taught through weekly lectures and will generally include a case study, group exercise or other interactive discussion component. The course will also include a small number of guest speakers, either in person or via Skype for overseas speakers. This provides useful real-world insights alongside the more theoretical aspects of the course.
Entry Requirements (not applicable to Visiting Students)
Pre-requisites Co-requisites
Prohibited Combinations Other requirements None
Course Delivery Information
Academic year 2020/21, Not available to visiting students (SS1) Quota:  None
Course Start Block 3 (Sem 2)
Timetable Timetable
Learning and Teaching activities (Further Info) Total Hours: 100 ( Lecture Hours 10, Seminar/Tutorial Hours 5, Programme Level Learning and Teaching Hours 2, Directed Learning and Independent Learning Hours 83 )
Assessment (Further Info) Written Exam 0 %, Coursework 50 %, Practical Exam 50 %
Additional Information (Assessment) Report (Group) 50% - Assesses LO1, LO2, LO3
Presentation (Group) 50% - Assesses LO1, LO2, LO3

Each component is subject to 30% Peer Assessment Moderation
Feedback The Course Organiser will provide formative verbal feedback to the students each week during course sessions, based on the weekly in-class exercises or discussions. The course may include a small number of short quizzes to ensure student comprehension of key concepts and the literature. Feedback will be provided by the Course Organiser, and also by peers within the class. Detailed feedback will also be given on the summative assignments.
No Exam Information
Learning Outcomes
On completion of this course, the student will be able to:
  1. Describe and critically evaluate the challenges and opportunities in using climate risk and alignment approaches in low-carbon, resilient investment.
  2. Understand and critically discuss the different types of financial institutional and individual investors: their business models, institutional framework, incentive structures and the role of low carbon/green investment opportunities on their dashboards.
  3. Understand and apply best practice for developing an investment proposal taking into account climate change impact outcomes.
Reading List
Bodie Z. Investments and Portfolio Management. Global edition, Ninth edition.. (Kane A, Marcus AJ, eds.). New York, N.Y.: McGraw-Hill/Irwin; 2011.

Mercer (2015) Investing in a Time of Climate Change.

IRENA (2017) Perspectives for the energy transition: Investment needs for a low-carbon energy system. [Online]. Available from:

TCFD (2017) Recommendations of the Task Force on Climate-related Financial Disclosures.

I4CE (2019) Understanding transition scenarios - Eight steps for reading and interpreting these scenarios.

IIGCC (2020) Paris Aligned Investing Report. (Forthcoming)

De Bruin et al. (2020) Physical Climate Risks and the Financial Sector - Synthesis of Investors' Climate Information Needs. Handbook of Climate Services.

Cochran et al. (2019) A Framework for Aligning with the Paris Agreement: Why, What and How for Financial Institutions. I4CE.

Additional Information
Graduate Attributes and Skills Knowledge and Understanding
After completing this course, students should have:
- An in-depth understanding of the scale and timing of investment required for a low carbon transition
- Overview of the uptake of climate-related risks by the financial sector
- Detailed knowledge and understanding of the key players, stages of investment, and types of finance associated with low carbon investment
- Detailed understanding of the role of policy in low carbon investment decisions
- Snapshot of current discussions on climate-related risks and alignment

Practice: Applied Knowledge, Skills and Understanding
After completing this course, students should be able to:
- Calculate the key financial (such as risk premium, annualized average returns, dispersion and volatility of returns, Sharpe Ratios, etc.) and non-financial metrics (carbon foot printing, taxonomy applications, 'alignment' and consistency metrics) used in the assessment of climate-related investment and finance decisions
- Write and present an investment proposal (such as project or portfolio)
- Evaluate the risks and opportunities associated with low-carbon/green investments

Cognitive Skills
After completing this course, students should be able to:
- Critically appraise investment proposals from a range of perspectives
- Make informed judgements based on the analysis of risks and returns
- Understand, speak and write in the language of low-carbon/green investment

Communication, ICT, and Numeracy Skills
After completing this course, students should be able to:
- Calculate and apply a selection of standard investment financial and climate-related non-financial appraisal metrics

Autonomy, Accountability and Working with Others
After completing this course, students should be able to
- Provide and receive peer-feedback
- Work with others from different professional, educational and cultural backgrounds to produce group analysis and present the results of group work.
KeywordsNot entered
Course organiserDr Ian Cochran
Tel: (0131 6)50 9295
Course secretaryMs Rhiannon Pilkington
Tel: (0131 6)50 8072
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