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Long term asset owners and managers, while seeking high risk-adjusted returns and efficiently allocating scarce financial capital to the highest value economic activities, have the essential and formidable role of ensuring the sustainability of return. But generally accepted financial accounting methods are ill-equipped to provide clear signals of the risks and opportunities created by scarce natural and human capital. Hence many investment managers in global financial markets, while performing due diligence on portfolio companies, examine metrics of non-financial performance, especially environmental, social and governance (ESG) indicators.Broken into three sections, this book outlines the rationale for and methods used in six areas where financial acumen has been harnessed to the goal of combining monetary return with long run sustainability. The first section offers an introduction to the role of finance in achieving sustainability, and includes an overview of the six areassustainable investing, impact investing, energy efficiency finance, conservation finance, and cleantech finance. The methods section of the book illustrates analytical tools and specialized data sources essential to those interested in increasing the level of social responsibility embedded in economic activity. The applications section describes and differentiates each of the six areas and their roles in advancing specific measures of sustainability.
About the Author
Guo Dong is the Director of the Earth Institute China Initiative at Columbia University. Dr. Guo also serves as the Associate Director of the Research Program on Sustainability Policy and Management at Columbia University’s Earth Institute, where he is an Associate Research
Scholar. Dr. Guo teaches courses on Microeconomics and Quantitative Methods for masters students in Columbia’s School of International and Public Affairs. Dr. Guo’s expertise lies in impact and evaluation methods and his research interests include sustainability metrics, sustainable development, environmental policy and Chinese education.
Anne Simpson is Investment Director, Sustainability at CalPERS. She oversees CalPERS' sustainability strategy across the total fund. This includes CalPERS' work on advocacy, engagement, and integration, and working through partnerships. Her strategic priorities include issues framed by CalPERS Investment Beliefs and include data and corporate reporting; manager expectations with a focus on climate change, diversity, and inclusion; and alignment of interest.
Table of Contents
1. The Role of Finance in Achieving Sustainability.- 2. The Value and Limits of Financial Accounting.- 3. Financial Markets and Pricing.- 4. Discounting and Cost-Benefit Analysis.- 5. The Value of Environmental Accounting in Public Decision Making.- 6. The Monetization of Natural Capital in Corporate Investment.- 7. The Returns to Good Stakeholder Relations.- 8. Sustainable investing in public markets.- 9. Impact investing in private markets.- 10.Conservation finance and payments for ecosystem services.- 11.Clean-tech finance and the transition to renewable energy.- 12.Social entrepreneurship and distributed poverty alleviation.- 13.Financing innovation in sustainability.