How do asset managers, bankers and investors incorporate environmental, social and governance issues into their investment cycle? That was the central question during the two-day program on Sustainable Finance at Amsterdam Institute of Finance.

The topic is currently probably the most pressing in finance: sustainability. During a two-day program at the Double Tree Hilton Amsterdam on March 7 and 8, Professor Zacharias Sautner captivated a group of banking, finance, and investment professionals with his take on sustainable finance, all rooted in the latest research, insights and business cases.  

Linking ESG and returns

The class was immediately thrown into the deep end with an assignment: “Advise your Chief Investment Officer whether to incorporate environmental, social, and governance (ESG) issues in the investment process. What are the pros and cons?” It was one of the many mini-cases the participants had to solve during the program. In groups, they drew up two lists to present to the class.

Some of the more obvious benefits included: lowering risk, dealing with increasing regulatory pressure, meeting a growing demand from society, and becoming a more attractive employer. The most obvious ‘con’ revolves around the question of whether it leads to better financial outcomes. There are circumstances in which this can be achieved, but the business case is not that straightforward. However, sustainable finance goes beyond the traditional focus on profits and losses to consider wider issues such as how companies respond to the climate and biodiversity crisis.

“There are two motives for incorporating ESG: value and values”, said Professor Sautner. “Value is about risk-return and values is about ethics and morality; we have a role to fulfill in addressing various crises.”

The dominant story in the world of finance is still purely financial though. This is illustrated by the backlash against ESG in the US, which many Republicans view as wokism. “This is because they only think about the values part”, comments Sautner. “They believe you leave your fiduciary duties on the table when you implement ESG. This is a misunderstanding.”

Realizing true impact

Measuring impact is a crucial part of sustainable finance, and a massive challenge. There is no benchmark yet, so how do you convince your clients to put their money into green bonds? During the discussion, the potential drawbacks of ESG ratings were examined, highlighting their inherent complexities. Professor Sautner illustrated this by showcasing how different rating agencies often have different views on which companies are sustainable. One could make a strong case for a universal ESG rating.

Another topic under discussion was impact. “Often, investors buy an expensive ESG product and are disappointed when they find out it has no real impact”, said Sautner. At this point, he introduced two more important definitions of sustainable finance: impact generation and impact alignment. In the case of impact generation, you are actually working with companies to decarbonize and become more sustainable. You are realizing impact. With impact alignment, you are merely purchasing ESG products. This can still be a necessary move to prove to the regulator that a bond or another product meets ESG standards. Plus, this is still how ESG is viewed within many firms: as a risk or compliance issue that has to be dealt with. “Impact investing currently accounts for only a small percentage of the assets of most investors”, said Sautner. “And quite often, this is done by a financial institution solely in an attempt to improve their reputation.” This is likely to change, though. As more physical risks – such as floods or wildfires -materialize, valuations will be adjusted and investors will need to act.

To get a better handle on these matters, the participants worked on an ESG case on the second day, focused on integrating biodiversity into the decision-making of a financial institution. “This topic is now rapidly becoming the second most important ESG risk after climate change”, said Sautner. “There is already a task force in place (The Taskforce on Nature-related Financial Disclosures, ed.) that made proposals on nature-related disclosures. Regulators learn from the other ‘E’ – climate change -, so the movement on biodiversity issues is coming with great speed.”


During these discussions on ESG in finance, one cannot help but wonder how much impact this has on the transition to a sustainable economy. The magic word is ‘engagement’, according to Professor Sautner. He deeply believes that engagement can help solve the climate and biodiversity crisis. “It is companies that are polluting. They are owned by investors and financed by banks.” To the participants: “It is my hope that you go back to your firms and start engaging with these companies.”


Sustainable finance is an intricate topic, and navigating its complexities can be challenging. However, Professor Sautner and the many business cases discussed during the program provided the participants with much needed clarity. There are no easy answers, but at the end of the course, the participants left with a conceptual framework on how to implement sustainable finance, and some key takeaways for the many complex discussions they are likely to face in the future. Value versus values is such a takeaway. As is impact generation versus impact alignment. The evolving nature of the topic underscores that this journey is ongoing for participants. Far from being at its end, this program marks just the beginning of their exploration. But armed with the new tools in their toolbox and a fresh perspective on ESG, these participants are better prepared to confront the sustainability challenges that lie ahead in the years and decades to come.

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