Session 1: Conceptual Foundations of Sustainable Finance
This addresses a fundamental question often overlooked in discussions of ESG and green finance: what exactly is sustainable finance, and how does it operate within the broader financial system?
You will learn about building blocks that shape sustainable finance systems, including:
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How sustainability considerations influence portfolio allocation and investment decision mechanisms
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The distinction between value-aligned investing, ESG risk integration, and impact investing
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The institutional and product-level meaning of sustainability labels and claims
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The role of taxonomies as classification systems defining what qualifies as environmentally sustainable activity
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The boundaries between sustainable finance, green finance, and climate finance
The session also introduces critical conceptual frameworks such as double materiality, which recognizes that financial systems must assess not only how environmental and social issues affect financial performance, but also how financial activities affect society and the environment.
Environmental change and the transition toward a low-carbon economy are already reshaping risk profiles across industries and financial markets. This examines how these risks manifest through several key channels:
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Physical risks, arising from climate-related hazards such as floods, droughts, and extreme weather events that damage assets and disrupt economic activity
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Transition risks, driven by policy shifts, technological change, evolving market demand, and investor expectations during the shift toward a low-carbon economy
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Liability risks, including legal claims related to environmental harm, inadequate climate disclosure, or failure to mitigate climate impacts
Participants explore how these dynamics can translate into familiar financial exposures—including credit risk, market risk, operational risk, and reputational risk—affecting asset valuation, investment performance, and institutional resilience.
The session also introduces emerging analytical tools used by financial institutions and regulators, including climate scenario analysis, environmental stress testing, and institutional capability frameworks that support alignment with net-zero transition pathways.
