ESG & Sustainable Finance

Beyond the greenwash

~25 min · 5 lessons

What you'll learn

✓Describe ESG scoring
✓Critique greenwashing

Lessons

🌿
Three Letters That Took Over Finance
The 2021 boom, the 2023 backlash
Start →
The Three Pillars
Finish the previous lesson to unlock
Why the Ratings Disagree
Finish the previous lesson to unlock
Greenwashing on Trial
Finish the previous lesson to unlock
Final Boss: Does ESG Actually Work?
Finish the previous lesson to unlock

Sources

All content is drawn from the sources below. We deliberately avoid unverified material.

Who Cares Wins: Connecting Financial Markets to a Changing World
UN Global Compact / IFC (2004) · institutional
The 2004 report widely credited with coining the ESG acronym. Source for lesson 1's origin story and lesson 2's three-pillar framing.
https://www.unepfi.org/fileadmin/events/2004/stocks/who_cares_wins_global_compact_2004.pdf
Aggregate Confusion: The Divergence of ESG Ratings
Berg, Koelbel and Rigobon, Review of Finance (2022) · academic
Central source for lesson 3's claim that ESG ratings correlate at roughly 0.54 across major providers, versus ~0.99 for credit ratings, and for the scope / measurement / weight decomposition.
https://academic.oup.com/rof/article/26/6/1315/6590670
Corporate Sustainability: First Evidence on Materiality
Khan, Serafeim and Yoon, The Accounting Review (2016) · academic
Key academic backing for lesson 5's distinction between material and immaterial ESG issues using the SASB framework.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575912
Responsible investing: The ESG-efficient frontier
Pedersen, Fitzgibbons and Pomorski, Journal of Financial Economics (2021) · academic
Used in lesson 5 to support the 'ESG can both help and hurt returns depending on pricing' framing.
https://doi.org/10.1016/j.jfineco.2020.11.001
Regulation (EU) 2019/2088 on sustainability-related disclosures (SFDR)
European Union · institutional
Primary text for lesson 4's coverage of SFDR, Article 6 / 8 / 9 categories and the March 10, 2021 application date.
https://eur-lex.europa.eu/eli/reg/2019/2088/oj
The Enhancement and Standardization of Climate-Related Disclosures for Investors
U.S. Securities and Exchange Commission (March 6, 2024) · institutional
Source for the SEC climate-disclosure rule referenced in lesson 4. The press release confirms the March 6, 2024 adoption date.
https://www.sec.gov/news/press-release/2024-31
MSCI ESG Ratings Methodology
MSCI · reference
Used for lesson 3's description of MSCI's industry-relative CCC to AAA framework.
https://www.msci.com/our-solutions/esg-investing/esg-ratings
Sustainalytics ESG Risk Ratings Methodology
Morningstar Sustainalytics · reference
Used in lesson 3 for the Sustainalytics 0 to 100 ESG-risk methodology, which contrasts directly with MSCI's letter-grade approach.
https://www.sustainalytics.com/esg-data
BaFin and Frankfurt prosecutors search DWS and Deutsche Bank offices
BaFin / Deutsche Presse-Agentur (2022) · institutional
Background for lesson 4's coverage of the DWS greenwashing investigation, including the May 2022 raids and the 2023 SEC settlement.
https://www.bafin.de/EN/PublikationenDaten/Jahresbericht/Jahresbericht2022/jahresbericht_2022_node_en.html
EPA Notice of Violation to Volkswagen (September 18, 2015)
U.S. Environmental Protection Agency · institutional
Primary regulatory source for the Dieselgate facts used in lesson 4 (around 11 million affected vehicles, defeat-device software, real-world emissions multiples).
https://www.epa.gov/vw/learn-about-volkswagen-violations
Global Sustainable Fund Flows and Assets quarterly reports
Morningstar · data
Backs lesson 1's headline numbers: roughly $2.7 trillion of global ESG fund AUM at the 2021 peak, and the first-ever year of global net outflows in 2023.
https://www.morningstar.com/lp/global-esg-flows