Integrate ESG in Finance Education

The target picture of a comprehensive education should be on the understanding of the most important financial and non-financial interrelationships for entrepreneurial activity. ESG factors (sustainability factors) should be included in the finance education, as the consideration of non-financial issues (sustainability issues) in business is becoming increasingly important.
Non-financial reporting and financial obligations (taxonomy) are essential for companies to comply with legal requirements and to access financing in the near future. Therefore, the topic of sustainability should be included in the financial part of entrepreneurship training. ESG requires a rethink in the approach to employees and customers. Sustainability requires additional staff qualifications.

Estimated reading time: 6 minutes

ESG in finance eduction

Doing business sustainably means ensuring resource-efficient and fair value creation and adequately managing physical and transitory risks. The globally recognised sustainability goals consist of the 17 SDGs (Sustainable Development Goals) of the UN and the limitation of global warming to “well below 2°C” (Paris Climate Agreement). The EU has adopted the Green Deal and launched the EU Action Plan. This is intended to create the conditions for directing more capital flows towards sustainable investments.
• The “E” for environment stands here, for example, for the prevention of environmental pollution or hazards, greenhouse gas emissions or energy efficiency issues (environmental goals).
• Social (“S”) includes aspects such as occupational health and safety, diversity or social commitment (corporate social responsibility).
• Governance (“G”) is understood to mean sustainable corporate management. This includes, for example, topics such as corporate values or management and control processes (corporate governance).

Example of the consideration of ESG in financial education

The following topics (representing ESG factors) could be integrated in a financial seminar:

• EU requirements (taxonomy and reporting obligations)
• Environmental goals
• Social goals (employees)
• Governance
• Bribery and corruption
• Respect for human rights
• ESG factors for financing
• ESG factors in planning
• Sustainability indicators

Example of exam questions

Q1: Non Financial Reporting: Directive 2014/95/EU of the European Parliament and of the Council on disclosure of non-financial and diversity information by certain large undertakings and groups entered into force on 6 December 2014. Companies concerned will start applying the Directive as of 2018, on information relating to the 2017 financial year.
Greater transparency is expected to make companies more resilient and perform better, both in financial and non-financial terms. Over time this will lead to more robust growth and employment and increased trust among stakeholders, including investors and consumers. Transparent business management is also consistent with longer-term investment.
Material information on certain categories of issues explicitly reflected in the Directive should be disclosed as a minimum. These include:
• Environmental matters:
• Social matters:
• Employee matters:
• Respect of human rights:
• Anti-corruption and bribery matters:

Please elaborate for each of these matters for a Logistic Company
a) which policies could be described that are pursued by the undertaking in relation to those matters, including due diligence processes implemented
b) the principal risks related to those matters
c) non-financial key performance indicators relevant

Q2: Measuring Greenhouse Gas Emissions: The Greenhouse Gas Protocol distinguishes Scope 1, 2 and 3 according to the next chart:
Please explain the three scopes:
• Scope 1:
• Scope 2:
• Scope 3:
Your explanation should include:
a) what is measured (Examples),
b) how it is measured (Calculation method – give an example) and
c) if that scope is normally reported in a sustainability report.

Q3: Cost Benefit Analysis:
Please explain the difference between FNPV (Financial Net Present Value) and ENPV (Economic Net Present Value) in the “Guide to Cost-Benefit Analysis of Investment Projects” of the European Commission.
Please give four examples of the benefits and costs (each) to be included in an ENPV (Economic Net Present Value)-calculation for a new production facility of wood products (focusing on non-financial parameters, e.g. Co2, Waste, Water, etc).

Q4: Sustainability Project: You are responsible as Head of Sustainability for implementing new sustainable measures in your company (more than 500 employees, industry: heavy transport, trucks.) Your goal is to start with self-driving trucks with the next 3 years, as you think there are more benefits than caveats. However you are aware that there will be some severe discussion with the labour union.
You are still convinced that you want to start with driverless trucks and you are setting up a project plan.
A) First you identify the measures that are appropriate (please choose the measures based on the list of categories below (at least 5)) and then
B) Elaborate a) why you have chosen it and b) how you would implement it in the company (by giving some examples)

Q5: Your company is a Logistics Company, operating in Europe. Please identify measures you would like to implement in this company in order to improve the
• Case 1: Sustainability in the procurement department
• Case 2: Sustainability in the sales department
• Case 3: Sustainability in the Research & Development Department
Please link your measures to the Sustainable Development Goals of the United Nations (UN) and to the aspects and Key Performance Indicators of the Global Reporting Initiative (GRI) in the following table:

Q6: Your company is a regional food production facility, operating in Carinthia. Please identify five stakeholders for this company:
• 1st Stakeholder:
• 2nd Stakeholder
• 3rd Stakeholder
• 4th Stakeholder
• 5th Stakeholder

Please explain 1) Why do you approach these stakeholders? 2) Which means do use to engage with your stakeholders? And 3) What would be the main questions/topics you would like to know.

Q7: Compare the environmental impacts of High Speed Rails (HSRs) and flights within Europe. Which means of transport has the better environmental performance: use LCA where appropriate.

Q8: Aircraft technology environmental performance and labelling
For aircraft, an assessment of environmental impacts shall be carried out based on the life cycle and appropriate product categories to enable harmonised life cycle assessments of aircraft. Data sources for the assessment can be manufacturer data as well as Environmental Footprint-compliant data sets, which can be used as indicators, metrics and including a description of the methodology.
Which indicators do you use to measure the environmental impact? Describe at least 5 indicators in terms of: relevance for customers, measurement criteria and definition, data collection possibilities.

Wrap Up

Sustainability drives holistic thinking, as sustainability teaches the correlation of various academic disciplines through sustainability glasses. Sustainability has effects in nearly all company-related processes and even more it is not limited to a company, but pushes the boundaries to even beyond to social and environmental impacts. It is therefore crucial that we teach these correlations and improve the knowledge for the students. Contact us to set up the workshops for your students or employees.

Related Links:

• SFDR – CSRD – NFRD – What’s it about?
• Scope 1,2,3 emissions vs Co2 footprint
• Finance Department Organization in SME’s
• Increase the readability of your corporate reports
• The 17 SDG Goals and their 169 Targets

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