Miami Herbert School of Business adopts ESG approach

A new student organization, increased faculty engagement, and course content reflect the Patty and Ellen Herbert School of Business’ commitment to exploring and advancing environmental, social, and governance investment strategies.



Ten years ago, the notion of combining business investment strategy with assessing how companies use fossil fuels, manage water resources or seek to reduce pollution within their supply chains might have been seen as the ultimate “odd couple.”

However, over the past 10 years, and especially over the past few years, the combination of these motivations and strategies – known as environmental, social and governance (ESG) investing – has become one of the most entrenched in the investing world.

“Over the past two or three years, there has been a huge acceleration in ESG investing strategies,” said David Kelly, professor of economics and academic director of the Master of Science in Sustainable Business at the University of Miami’s Patty and Allen Herbert School of Business. “These trends and their impact on corporate behavior are on the rise significantly.”

Kelly recently hosted a webinar on the topic for an audience of potential business school students, which shows just how important ESG strategy has become. ESG investing is also part of the MSc in Sustainable Business and a career path for graduates of the program.

Adherence to these values ​​and mission-driven guidelines, which were virtually non-existent a decade ago, now cover 30% of all investment assets—a sum in trillions of dollars, he noted.

The first of the three ESG pillars – the environment – ​​is the easiest to understand. Such a view might assess a company’s use or dependence on fossil fuels, its use or management of water and other resources, and the level of pollution generated by production or supply chains.

The social pillar refers to the acceptance by employees, investors, customers and other stakeholders of a company’s commitment to fair labor standards, safety, diversity and workplace policies. Governance pillars depend on trust and are often assessed against transparency, board diversity, integrity and ethical operating practices.

Contrary to long-held beliefs, adherence to ESG practices can improve efficiency, employee satisfaction and reduce risk—often leading to higher productivity—is driving the incorporation of ESG principles and practices, Kelly said.

“As an investor, I want to make money, but probably only want to invest in companies that share my values. So part of the decision is based on preference, but part is a belief that these companies tend to run better many times over,” Kelly said, referencing Metrics such as better employee retention due to overall more satisfied employees, reduced litigation due to preventive efforts, and reduced costs due to increased efficiency and profitability.

There is currently no law requiring public companies to include ESG reporting in their SEC filings, but scoring practices as part of ESG checklists are becoming increasingly influential.

“For many potential investors, good scores related to social factors such as water use and recycling or workplace safety, diversity and gender equality – or in terms of governance, a record of transparency and not bribing foreign officials – are important indicators,” Kelly noted.

In another example of ESG’s rising influence at universities, last spring a group of business students launched the student organization Century Fund.

Jordan Sotomayor, a sophomore finance major, drove the impetus for the organization. He describes Century Fund as “a cutting-edge strategic group that facilitates investment in sustainable companies and advocates for an environmentally sustainable future.”

Members are spread across five industries — energy, transportation, fashion, technology and agriculture — and meet weekly to assess the ESG investing capabilities and commitments of those industries and the companies within those industries.

Sotomayor, who was president of his high school’s investment club for three years, approached Dean John Quelch shortly after his arrival at the university with the idea of ​​launching the initiative, and he received enthusiastic support.

Currently, the student organization is focused on publishing a quarterly investment newsletter, compiling its findings, and working to develop its expertise and grow its network.

The student team has about 30 active members and is advised by former Verizon executive Michael Giordano and Long Run Capital CEO and co-chief investment officer Daniel Mullen, listed on Forbes’ 30 Under 30 list.

“We’re not experts, but we’re a really dedicated team trying to become experts. It’s going to take time,” Sotomayor said.




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