Denmark – the EU’s largest oil producer – decided in early December 2020 to end its oil production. The example of Denmark can be added to a growing list of countries with specific climate targets, highlighting the mounting importance of climate change. But other sustainability aspects such as decent working conditions are also garnering greater public attention.
The issue of sustainability is rapidly taking hold in the capital markets, where many investors are incorporating it as a criterion in their investment decisions. The EU Sustainable Finance Action Plan likewise aims to promote sustainable capital markets. The underlying rationale is to mobilize private funds to make the transition towards a sustainable economy.
We have introduced courses on sustainability within various study programs in order to raise our students’ awareness of these issues. The courses entail three points that are essential to social sustainability management: 1. Constructing a shared language for sustainability. This point evolves from the concept’s complexity and ambiguity: Which criteria are relevant, and how can they be tested? 2. Investing in projects promoting sustainability. This requires an understanding of market participants such as rating agencies, for example, and an assessment of impacts on risk/return profiles. 3. Reflection on own behavior patterns, necessitating contemplation of ethical obligations.
To that end, our courses initially offer an introduction to ethical reasoning, addressing ethical issues based on philosophical theories of ethics. Student discussions figure prominently in these courses. For example, concerning the question: What responsibility do investors bear towards companies they finance? The concept is working extremely well and has spawned intensive discussions. A highly encouraging aspect was seeing the many differentiated analyses of ethical issues and development of logical arguments on the part of students.
Next, the courses turn to the topic of sustainability, with students investigating complex issues related to sustainable investments within the scope of project work. The results were compelling: one paper, for example, compared recent EU regulation requirements with currently established sustainability ratings. It was evidenced that the ratings provided only limited sustainability guidance within the meaning of the EU guidelines.
In embarking on its Green Deal, the EU has assumed a political leadership role and, through an array of regulations, is doing its part to ensure that Europe stays ahead of the curve relative to other regions in strengthening its commitment to sustainable capital markets.