Sustainability is slowly but surely gaining a foothold in the financial world. Investors are growing more critical; banks and pension funds are increasingly investing in green energy and companies that take social responsibility seriously. The Maastricht University School of Business and Economics is responding to these developments with its new Master in Sustainable Finance. We sit down with Jaap Bos, one of the programme initiators (together with Jeroen Derwall).
Bos immediately makes one point clear: the new programme in Sustainable Finance is about finance. “I wouldn’t recommend it to students with no economics or financial background. We want to train people who will work at financial institutions, pension funds or large consultancies. People who are well versed in the areas of investment and risk management, who will work as financial analysts or money managers. In short, financial experts – but ones who view their field through the lens of sustainability.”
Businesses and financial institutions are just beginning to engage with sustainability, as well they should. “Pension funds and investors are struggling. One the one hand, obviously they want good interest rates. On the other hand, the pressure to make sustainable investments is increasing”, Bos explains. “The concerns of stakeholders are carrying more weight, and they are questioning investments in weapons manufacturers and certain food producers. A good example is PGGM. It manages the pensions of Greenpeace employees, who expect their pension contributions to be invested in environmentally friendly companies. Then there’s APG in Heerlen, the second largest pension fund manager in the world. Its portfolio is regularly dissected by the media, and it gets involved with debates on responsible investing. These organisations urgently need specialists who can help make their portfolios more sustainable.”
The idea for the new programme arose during the annual ‘brainstorm’ last summer. “We have a reputation to uphold as a Department of Finance. The department is world renowned, particularly for its high-impact research on responsible investing. We’ve landed international awards with ECCE, our research institute, and we collaborate with major institutions like APG, ABN AMRO and ING. This enables us to attract students from around the world. But of course, it’s important to keep innovating. You can study Finance at hundreds of universities. If you want to lead the pack, you have to continue to stand out. One way of doing that is with special master’s programmes.”
The economists observed that UM’s existing finance programmes paid little attention to sustainability. “One solution would be to insert this theme into the different curricula. Instead, we decided to design a whole master’s programme revolving around sustainability. The new programme links numbers with sustainability. It’s not just a minor; the entire programme is infused with sustainability.”
Since the financial crisis, banks have been under the magnifying glass. “A banking crisis threatens our whole financial system and creates unrest. So banks have become much more cautious. They’re demanding more collateral, want nothing to do with risky mortgages and now consider loan applications very critically.” The master’s programme will train professionals capable of dealing with this development. “Banks need specialists who can find the balance between good returns and a safe investment; they’re after long-term certainty. That, too, is a form of sustainable banking. What’s more, they’re under pressure to invest in sustainable energies and the environment. And they want to help entrepreneurs in poor countries with micro-loans. But how do you assess the reliability of the borrower? How do you make sure the money isn’t going to a loan shark? In our programme, students learn to benchmark and seek sustainable alternatives. It’s not easy; the Triodos bank, for example, is having trouble finding certified funds and projects. They’re looking for new alternatives to invest in.”
Bos and Derwall are also trying to bring about a new mind set. “Investors still mainly look at the short term. They want to be able to sell their shares or bonds at any time. But investing by definition means looking at the long term. Consider an investment in energy-efficient, green buildings. The returns will only follow later, once you’ve covered the cost of the initial investment. You’ll then probably get a higher return than you would with an investment in traditional real estate. So over time, it’s worth more, and you’ve made both your stakeholders and your shareholders happy. We have to get used to the idea that sustainable investing can be not just socially but also financially attractive. This of course needs to be substantiated with rock-solid figures and research; that’s the basis of this master’s programme.”
Interest is high in the very practical Sustainable Finance programme. “So far we’ve done next to no recruitment, and yet the applications are rolling in. We’re also approached regularly by businesses and pension funds who want to know when we’ll be starting an executive version. They’re keen to sign up their own employees. That shows the level of demand that’s out there. We’ll certainly think about it, but we’re focusing on the regular programme for now.”
So will the new programme contribute to a more ethical financial world? Bos thinks carefully. “Maybe. Sustainability is no longer a niche or an afterthought; it’s penetrating right down to the bones of the business world. Having more skilled finance specialists will certainly accelerate the push towards sustainable alternatives.”
Jaap Bos (1973) completed his undergraduate and graduates studies at Maastricht University. He has been associate professor of Finance at the School of Business and Economics since 2010.
This article originally appeared in Maastricht University Magazine.
Find out more about Jaap Bos on the UM Expert Guide.