ChE/CEE 686 – Sustainability Finance:
How Economics, Finance, and Markets drive Sustainability Strategies
WINTER 2012
Instructor: Prof. Peter Adriaens 174 EWRE Building. phone: 763-8032
email: [email protected]
Lectures: T,Th 10:30-12:00; 1200 EECS
Office Hours: T,Th 9:00-10:30 (and/or by appointment)
Catalog Description: Case studies focusing on how design, financing vehicles, and market drivers
interact to accelerate the adoption of sustainable technologies, processes and business models.
Development of environmental finance literacy through the study of public, private, and corporate
environmental initiatives and projects.
Course Objectives:
1. To give students a working knowledge of sustainability stakeholder issues.
2. To show students how to use life cycle, economic, and finance metrics to assess the viability of
solutions for sustainability.
3. To familiarize students with current trends in engineering for sustainability.
4. To help students appreciate the interconnectedness between the adoption of solutions for
sustainability and economic development.
Text: There is no single book that contains all of the material covered in this course. Throughout the
semester, I plan to draw material from several different books, from journal articles, and from my own
experience. We will also have some guest lectures throughout the semester. Many articles will be placed
on the course CTools site. I suggest students purchase the two books below (both available from
Amazon.com for reasonable prices). Several of the course readings will come from these books.
Daniel C. Esty and Andrew S. Winston, Green to Gold: How Smart Companies Use Environmental
Strategy to Innovate, Create Value, and Build Competitive Advantage, John Wiley, 2009.
Sonia Labatt and Rodney S. White. 2002. Environmental Finance*, Wiley Finance.
*Additional updated information is available at the Environmental Finance website
(http://www.environmental-finance.com/)
Grading: The final grade for this course will be based largely on a semester-long project. The completed
projects will consist of a report presented during class. There will also be a few homeworks that will
influence your final grade. Your participation and preparation for class will also be important.
Course Web Site: The CTools site will contain class notes, assignments, and articles to read.
Honor Code: This course will operate under the College of Engineering Honor Code. See
http://honor.personal.engin.umich.edu/ for an explanation of the honor code. Suspected violations of the
Honor Code will be submitted to the Honor Council for resolution.
Project: You will work in teams to complete a sustainability project this term. The topic of the project
can be one of your own choosing. You will report on your project in class near the end of the term and
you will submit a written project report as well. This written report should be of similar quality and
scholarship to a manuscript that would be submitted for publication in an archival research journal.
Course Description
“In a very fundamental way, sustainability depends on long-term economic success. It is the only way to
fund whatever degree of environmental commitment a company chooses to make” (Green to Gold, p. 251)
Modern capitalist World economies are characterized by business cycles over long time frames as the
result of social shifts and changes in the public mood (e.g. Figure describing Kondratieff waves), that
consist of alternating periods between high sectoral growth and periods of relatively slow growth. You
will note the coinciding engineering revolutions associated with the steam engine, railway steel, electrical
engineering, automotive, information technology, and….technology/processes for sustainability.
Starting in the 1800s, concerns about the environmental and social impacts of industry were reincarnated
many times before they were defined as ‘environmental sustainability’ by the Brundtland Commission in
1989. They were largely aspirations, despite the metrics of the UN Millenium Goals. Since then, we
have codified life cycle assessment (LCA) of product design, to identify the bottlenecks associated with
all the stages of a process from cradle-to-grave, moved sustainability practice in business to address the
triple bottom line, and even started a movement focusing on the needs of the ‘bottom of the pyramid’.
Both engineering and business schools are increasingly including social ventures as part of the
curriculum. In addition, from global warming to water constraints and the availability of raw materials, a
growing impetus exists for businesses to develop green strategies, governments to compete for and
develop green jobs, and the public to start holding businesses to account.
In the first decade of this century, sustainability has firmly positined itself into the next wave: CleanTech.
Indeed, since 2003, private and public investment in clean technologies (or green technologies) have skyrocketed globally, and the financial crisis of 2008-2009 has prompted a global move to greening the
economy. The US and China are competing for green economy leadership and CleanTech innovations.
“Throughout most of the 20th century, it ws assumed there ws an implicit tradeoff between economic
growth and an attractive environment. [Environmental Finance] demonstrates how to manage
environmental risk by utlizig a variety of environmental products and services.”
This course will discuss how the financial services industry, corporations, and policy makers are
executing on the practical implementation of sustainability, by not just considering energy and materials
use but also by constraining sustainability designs by financial and economic considerations. Public and
corporate investment, for profit and social venture funds are seeking economically viable models for
sustainable development. Thus, sustainability and solutions for climate change are not only bounded by
the life cycle of systems, but by cost-benefit analysis, financial needs, and busines models that make the
implementation of technologies and processes feasible and scalable. This course is intended for students
interested to develop solutions for sustainability as researchers, through the private sector as entrepreneurs
and in corporate R&D, by engagement with non-governmental organizations (NGOs) or as an investor.
Course Schedule CEE/ChE 686
DRAFT
Date
Lecture topic
Readings
Part I. Setting the Stage: Sustainability 2.0
Thurs
01/05
Tues 01/10
Thurs
01/12
Tues 01/17
Thurs
01/19
Tues 01/24
Course introduction
From idea to design to market
adoption of solutions for
sustainability
Stakeholders of Sustainability
and the Green Economy: 1.
Government
Stakeholders of Sustainability:
2. Corporations
Stakeholders of Sustainability:
3. Non-Governmental
Organizations
Stakeholders of Sustainability:
4. The Financial Services
Industry
GTG, Ch 2: Natural Drivers of the Green Wave
GTG, Ch 3: Who’s Behind the Green Wave?
Social Cost of Carbon
GTG, Ch 1
HBR, Sustainability Strategy
CERES report: Climate Risk Disclosure in SEC
Filings
Half Full or Half Empty: Water Risk and Financial
Institutions; The Equator Principles
(http://www.equator-principles.com/)
Part 2. Financing Sustainability: What Does the Money Want?
Thurs
01/26
Tues 01/31
Thurs
02/02
Tues 02/07
Tools of environmental
finance: Helping to Answer
the ‘How to Pay’ Question
Financing Sustainability: 1.
Carbon Finance
Carbon Finance Example:
Methane Emissions
Management
Financing Sustainability: 2.
Center for Environmental Finance
(http://www.epa.gov/efinpage/efinfin.htm)
CleanTech 2011 Report
HBR, The Carbon Market
John Morton, World Bank, Washington, DC
Adriaens (2010): Investment, CleanTech. In The
CleanTech Venture Finance
Thurs 02/9
CleanTech Venture Finance
Example: TBD
Tues 02/14
Financing Sustainability: 3.
Social Ventures
Financing Sustainability: 4.
Nutrient Markets
Microfinance Example:
Biodigesters in China
Financing Sustainability: 5.
Public Finance and EcoCities
Example
Thurs
02/16
Tues 02/21
No class
Thurs
02/23
Business of Sustainability, Vol 2. Berkshire. Pub.
Ryan Waddington, President, Huron River Ventures,
Ann Arbor
Investability analysis – how does risk capital work?
How does it create value? Environmental Finance
Paper
Seth Greenberg and Jamie Shea, Social Venture Fund,
Ross School of Business;
Cy Jones, World Resources Institute
Gabrielle Harris, Planet Finance (China)
Tim Dekker, Vice President, LimnoTech, and Adjunct
Lecturer, Landscape Design Institute, Harvard
University.
Winter Break (02/25-03/05)
Part 3. Design of Solutions for Sustainability: Tools and Applications
Tues 03/06
Thurs
03/08
Tues 03/13
Thurs
03/15
Tues 03/20
Thurs
03/22
Tues 03/27
Thurs
03/29
Tues 04/03
Thurs
04/05
Tues 04/10
Thurs
04/12
Tues 04/17
Metrics of Sustainability
Corporate Sustainability
Reporting
Tools of Sustainability: Life
Cycle Assessment
Business Case Study 1.
Herman Miller
Tools of Sustainability: 2. EIOLCA
Business Case Study 2. The
Paper Industry
Tools of Sustainability: 3. Costbenefit analysis
Business Case Study 3. Green
Roofs
Lessons from Failures in
Sustainability 1. Consumer
Products
Lessons from Failures in
Sustainability 2. Energy
Presentations I (remote)
Presentations II (remote)
Putting it all together: Design,
Economics, and Finance
*GTG: Green to Gold
GRI, WRR, WBCSD, etc…
CERES: Corporate Governance and Climate Change
Consumer and Technology Companies
McDonough et al (2003), Cradle-to-Cradle Design,
ES&T reprint.
Cradle-to-Cradle Design at Herman Miller: Moving
Toward Environmental Sustainability
Handouts from EIA
(http://www.eia.doe.gov/forecasts/aeo/index.cfm)
The Making of a Paper Cup, ES&T feature
Boardman et al., (2011), Introduction to CostBenefit Analysis. In Cost-Benefit Analysis: Concepts
and Practice.
Cost-Benefit Analysis of Green Roofs (Clark et al.,
2008; Niu et al., 2010)
HBR 2009: FIJI Water and Corporate Social
Responsibility - Green Makeover or
"Greenwashing"? (McMaster & Nowak)
HBR 2008: Politics, Institutions and Project
Finance: The Dabhol Power Project (Loo et al.)
Course Review