In late January 2021, over seventy HBS MBA students gathered in a virtual classroom for four exciting days of a short intensive program (“SIP”) on Climate Finance, taught by professors George Serafeim and Vikram Gandhi. Through a series of conversations with leading practitioners, the SIP covered a wide range of critical topics emphasizing the roles of financial institutions in addressing the risks and opportunities of climate change. Topics included climate and the economy, incorporating climate developments into business analysis and valuation, financial stability and disclosure, managing climate risk as an asset owner, measuring climate risk and using metrics in portfolio construction, incorporating physical climate risk into portfolio analysis. The last day turned to financing innovation with a focus on early stage venture, catalytic, and tough tech finance, and bridges to scale finance for proven technologies and new business models.

Based on student feedback about interest in this topic area, Lynn Schenk, Associate Director of the Business & Environment Initiative, proposed the idea of a SIP that built upon the themes from the 2020 alumni conference, “Risks, Opportunities, and Investment in the Era of Climate Change”, to Professors Vikram Gandhi and George Serafeim. Both professors were eager to develop the course and expand climate change curricular offerings at the School, building on their current EC courses “Investing - Risk, Return, and Impact” and “Reimagining Capitalism: Business and Big Problems”.

Feedback from the students was very positive. Lauren Buchanan (MBA 2021) shared a key theme that she learned from taking the course: “Investors are really starting to pay attention to climate, which will have immense impact on how corporations approach sustainability. If they don't develop science based targets to approach emissions reductions they may face threats from activist investors or a higher cost of capital. Business leaders thus have been and will continue to be some of the leading voices and solutions to climate change.” Recognizing the urgency to educate leaders about the climate crisis, Buchanan notes that “any business leader whether a consultant, operator, or investor will need to interface with issues related to climate in the next 5-10 years of their career, so it's critical MBAs are well versed on the issue and solution set.”

Sofia Guerra (MBA 2021) learned that in order “to build a more resilient economy we need to be able to understand and measure the impact of climate change on businesses. Only when we quantify physical and transition risks will we be able to engage in debate and change our collective behavior.” She outlines how to make this change: “A successful transition plan leverages technological innovation and regulation. Many technologies are ready for deployment but require project financing to scale. Other earlier-stage and riskier scientific innovations will require catalytic capital to be further developed.” As an EC student, Sofia is acutely aware of how important solving this problem is for future business leaders: “No matter what type of investing you are doing or industry you are focused on, as a future leader you need to play a role in solving this problem. It’s not just an ethical responsibility but also where opportunities and returns will come in the future.”

To learn more, read coverage of SIPs by Shona Simkin in her piece “SIPs in 2020” and watch Professor Vikram Gandhi’s video summary of the key takeaways of the SIP. In his video, Gandhi outlines four things that must come together to solve this collection action problem: regulation, realization that this is a question of long-term survival for businesses, factoring climate into investment models, and focusing resources and manpower on this issue.