Teaching Sustainability to Future Finance Professionals

The term “corporate social responsibility” (CSR) has not been used extensively in university classrooms until recent years. Traditionally, finance students were being taught the conventional theories emphasizing that businesses’ only purpose is to make profit and therefore increase the value for their shareholders. Indeed, one of the most influential economists of all time, Milton Friedman, famously said: “The social responsibility of business is to increase its profits”. However, nowadays the idea of companies as simply wealth creating organizations with no obligations to the society and the environment is no longer acceptable.

CSR has arrived as a business practice and it is of utmost importance that entire finance industry helps in creating a good and fair society. Moreover, academic research has documented the impact of CSR on stock returns, profitability and growth (see Kempf and Osthoff (2007), Edmands (2012) and Lee et.al. (2017) among others). Therefore, universities have taken the matter of teaching CSR very seriously in recent years, as courses in CSR are being obligatory to most of the finance programs. Future finance professionals learn how corporate responsibility affects the key business processes and strategies of firms and in turn how firms and their business models affect the society and environment.

When teaching a course it is always a challenge to get students interested in the topic. When teaching a CSR course, that is not the case at all as students usually come very enthusiastic and highly motivated to learn about sustainability. One of the biggest challenges in teaching CSR is to keep the study materials updated with the newest trends and developments in the field. New sustainability innovations and initiatives are being created constantly. Laws and regulations are changing rapidly. Corporate scandals and environmental catastrophes are occurring regularly. Finally, investors are developing new ways of incorporating environmental, social and governance (ESG) factors into their investment decisions. Therefore, it is necessary for a teacher of a CSR course in finance to continuously be alert and keep updating the study materials in order to stay on the top of the things. Finally, to help students build connections between the topics discussed in the class and the real world, guest lecturers from major Finnish financial institutions are invited to give presentations and share their experiences.

 One CSR area of particular interest for students is the sustainable and responsible investments (SRI). These young investors show lot of interest towards solving the global issues in the world today (primarily regarding the climate change) and seem to be very enthusiastic to channel their investments in the sustainable direction. Therefore, class discussions in recent years have moved from talking about basic ethical investing and traditional negative screening techniques to more interesting and advanced SRI strategies (for example Best-in-Class, Sustainability Themed, Norms-Based Screening and Engagement & Voting among others).

 Graduates with background in CSR can help future employers in promoting sustainable practices and building the ethical and responsible organizations. In addition to the technical knowledge, finance students nowadays possess soft skills that are very useful in building the ethical culture and establishing trustful relationships within and outside companies. Sustainable way of doing business can create competitive advantages to companies and therefore Finnish financial sector should value graduates with CSR background. Employees that are able to combine the specific CSR knowledge and sustainability skills with business processes, practices and culture are highly valuable to any company.

 

Nebojsa Dimic

Assistant Professor in Finance

University of Vaasa