In this month's interview, Laurent Deville, professor of Finance and director of EDHEC Business School’s Financial Economics track, discusses climate change, one of the most important issues we face today, and the role that the finance industry can and should play. He also explains how to better equip students to help them tackle business issues relating to climate change and sustainability, before providing more details about the new programmes dedicated to climate change, sustainability and finance due to be offered by the school as early as the next academic year.
Laurent Deville: Unfortunately, climate change is no longer hypothetical. The scientific evidence makes it clear that temperatures are rising at an unprecedented rate and this is most likely due to human activity since the mid-20th century. While the Paris Agreement's long-term goal is to limit the increase in global average temperatures to no more than 2°C above pre-industrial levels, limiting the increase to 1.5°C would substantially reduce the risks and effects of climate change, as documented in the Intergovernmental Panel on Climate Change Special Report  on the impacts of global warming of 1.5°C.
To be able to meet the Paris Agreement goals, all industries will have to take investment decisions that will alter the current path. Delaying emissions reductions will have long-lasting implications. The financial industry is not the one that generally first comes to mind when thinking about large contributors to global warming. Although its contribution may not be direct, it is nonetheless central to the solution. An urgent shift towards the funding of low-carbon activities is necessary and the financial industry, both through investment and intermediation, has a critical role to play. Many initiatives have emerged in recent years at institutional and professional as well as academic levels. To be fully functional, they rely on specific professional and technical skills.
Laurent Deville: EDHEC Business School offers programmes educating more than 800 finance students every year. It is our responsibility to ensure that these students, the future of the financial industry, have the resources to tackle the challenges they will face in their career. To do so, we are committed to expanding our coverage of climate change and sustainability topics in the curriculum, regardless of specialization. We will prepare our students to undertake the changes the planet needs.
Financial ethics, sustainability and responsible investing have been part of our programmes for many years but we need to do more. The development of specific research at EDHEC-Risk Institute and the recent addition to the faculty of professors with expertise in sustainability and sustainable finance have created favourable conditions for a significant increase in the exposure we give to these crucial questions. All our core courses will look at ways in which climate change and sustainability questions tangibly affect the field. Examples are plentiful. To cite only a few: Carbon futures markets are presented in the Introduction to derivatives course, Green bonds are introduced in the Introduction to Fixed Income, the disclosure of climate risks is discussed in Financial Analysis & Reporting, while the strategies for tackling them are addressed in the Strategic Management course.
Laurent Deville: This exposure will only be effective if students really understand the issues at stake from a scientific perspective.
This is why we are introducing a new mandatory core course dedicated to climate change, sustainability and finance in the first year of the Financial Economics track of the EDHEC Masters in Management. Focusing on climate science, climate policy and the economics of climate change, this course will lay the foundations for the development of solutions from a financial perspective. In an initial attempt to assess the consequences of incorporating environmental, social and governance perspectives into investment analysis, we will also put in place a workshop on ESG scoring.
This way, we will raise awareness among all students of the consequences of their professional decisions. Additional engagement through seminars and research supervised within EDHEC-Risk Institute and the development of a sustainable finance certificate in the second year of the Masters in Management will complete our plan for educating finance students who will have a positive impact on the world and society.
IPCC, 2018: Global warming of 1.5°C, accessible at https://www.ipcc.ch/sr15/.
About Laurent Deville
Since 2014, Laurent DEVILLE has been Associate Professor of Finance at EDHEC Business School and currently serves as director of the Financial Economics track. He previously held a position as Affiliate Professor at EDHEC Business School (from 2009 to 2014) and has been a research fellow at the CNRS since 2003.
Laurent’s research interests primarily lie in the field of market microstructure with an application to index products. His current research is mainly devoted to the analysis of Exchange Traded Funds with a focus on market efficiency, liquidity and competition. He also studies the creation and development of ETF markets from sociological and ethical viewpoints. He has received grants for his research from the Europlace Institute of Finance (2004–2005), the Agence Nationale de la Recherche (2007–2009) and the ETF research academy (2014–2015)..