Perspective of the Course

There is broad scientific consensus that to avert the most catastrophic consequences from climate change we would need to limit global increase in temperature to less than 2 degrees Celsius (2DS). To achieve this scenario there are multiple future carbon pathways with most of them pointing to the need to reach net zero emissions across many geographies approximately in the middle of the 21^st century. This transition to net zero creates a host of risks and opportunities for organizations and their investors. Should this goal not be reached and inaction with respect to climate change prevail this will lead to increasing physical risks from natural disasters and changes in the natural environment.

The course examines holistically all these climate-related risks and opportunities, under different scenarios, with an emphasis on measuring, valuing, and designing data analytics, investment processes, products, and contracts through the lens of climate change.

Course Description

This is a field course where students apply newly learned skills on measuring climate-related risks and opportunities to make investments, valuing climate-related risk and growth, and designing contracts that incorporate climate metrics. The course covers major risks and opportunities arising from climate change, specifically transition risks and opportunities and physical risk.

The course draws from academic and practitioner research, focuses on data analytics and practical applications, and is non-case based. The course looks at various applications of climate-related risks and opportunities and is not focused narrowly on clean tech or energy.

Drawing from readings in the academic and practitioner literature and working actively with live cases and data, students will learn to:

1. Use climate scenarios to determine a science-based target estimating what should be the carbon emissions of a company aligned with a 2 degrees scenario.
• More than 1,000 companies have measured their science-based target in the last five years.
  
2. Use carbon footprint methodologies to construct portfolios and indices with lower exposure to transition risk using a variety of climate data.
• Dozens of low carbon products with hundreds of billions of dollars in assets under management have been launched in the last few years.
  
3. Design a turnaround strategy that identifies poorly managed and priced climate-related risks and opportunities and engage with a company as an active owner to change its business strategy.
• Dozens of business strategy turnarounds are underway across multiple sectors
  
4. Negotiate and structure a bond contract that makes the coupon rate contingent on climate metrics (i.e., sustainability-linked bonds).
• These sustainability-linked instruments have raised hundreds of billions of dollars.
  
5. Identify and price emerging transition opportunities in the transportation, infrastructure, real estate, agriculture, energy, and industrial sectors that are critical to achieve net zero.
• Trillions are required in investments in the next two decades.
  
6. Structure a financial product designed to protect natural ecosystems, such as coral reefs and forests.
• These novel products not only provide significant, direct benefits to surrounding communities but also help mitigate climate risk through carbon sequestration.

Career Focus

This course is aimed at all students who, at some point in their career, will need to measure and value risks and opportunities emerging from climate change and make investment decisions using climate change as a lens through which they assess the resilience, growth, and value of a business. This course will be particularly beneficial to students who are seeking a career in asset management (investment managers, hedge funds, private equity, and venture capital), investment banking, management consulting, and technology focused on data and analytics.

Course Format

The course has 13 2-hour in-class sessions in the afternoon allocated throughout the semester.

Grading Criteria

Your course grade will be comprised of 40% class participation and 60% performance on the applications.

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