Dean’s Desk

Showcasing reflections and commentary from Schulich’s thought leaders on the latest emerging trends in management and the world of business.

Schulich’s newest research chair helping shape a more sustainable future

The transition to a green economy is one of the biggest and most challenging issues our world faces today.

But that transition can only happen with widescale investment – and this is the critical space that sustainable finance occupies.

Last year, Schulich joined forces with CIBC to establish the CIBC Chair in Sustainable Finance. It’s mandate: to produce next-generation research in the emerging field of sustainable finance and provide actionable solutions to help guide businesses and policy makers in the shift to a low-carbon economy.

In this month’s column, Olaf Weber, the inaugural holder of the CIBC Chair and a pioneer in environmental risk assessment, talks about how sustainable finance research can help us achieve that goal.

I invite you to read how Schulich’s new chair – together with other faculty members at our School – are providing the insights and tools business and government need to navigate the transition to a world where sustainable development is the norm and not the exception.

Best,

Detlev Zwick, PhD
Dean, Tanna H. Schulich Chair in Digital Marketing Strategy
Schulich School of Business

Sustainable Finance  

Driven by the climate crisis and other trends, sustainable finance has been rapidly growing over the past several years.

But what exactly does sustainable finance mean – and why is it important?

Essentially, sustainable finance addresses the questions of how finance influences sustainable development and how sustainable development influences finance.

Consider, for example, how lending to different industries influences sustainable development. On the one hand, a lender can finance a commercial borrower with high greenhouse gas (GHG) emissions and consequently has an indirect impact on increased greenhouse emissions, or a lender can finance a green-energy company and consequently has a positive impact on climate change.

On the other hand, the financial bottom line of a bank or an insurance company can be influenced by climate change. For instance, a bank might experience higher credit default rates because their borrower has to pay higher costs for GHG emissions, or an insurance company might have to provide coverage for claims because more frequent extreme weather events cause more damage to insured buildings.

Sustainable finance analyzes the interaction between finance and sustainability. This matters because we need to manage the possible costs of climate change, and we need to understand how financing influences climate change positively or negatively.

As a result, there has been a large increase recently in research and business activities in sustainable finance. Banks, for example, address sustainable finance by developing sustainable finance products and services and by working on mechanisms to manage climate-related financial risk. Furthermore, there are new standards and regulations addressing various aspects of sustainable finance, such as sustainable reporting standards that have already been established or will soon be established in countries and regions such as the European Union, the United States, China, and Canada.

In the academic world, we’re also seeing an increase in programs addressing sustainable finance at the undergraduate and graduate levels, as well as in diplomas and certificates. These activities try to address the growing demand for expertise in the field. Schulich is at the leading edge of this development as a result of its pioneering focus on sustainability, its Centre of Excellence in Responsible Business (COERB), and the wide range of courses it offers addressing corporate sustainability and sustainable finance and reporting.

In addition, several Schulich scholars conduct research on sustainable finance, sustainability reporting, and corporate sustainability. This research has a high academic impact and practical relevance. Examples include research on green bonds, climate-related stress testing for banks, the impact of carbon prices on credit risks, corporate sustainability disclosures, and environmental investments in the real estate industry.

Sustainability has been a core strength of Schulich for several decades. The School has been conducting teaching and research related to sustainability longer than most other business schools.

As a result, Schulich has a strong and proven foundation on which to pursue pioneering research in sustainable finance – research that meets the growing sustainable investment needs of the financial sector.

Olaf Weber
Professor; CIBC Chair in Sustainable Finance
Schulich School of Business