AC458      Half Unit
Sustainability Reporting and Analytics

This information is for the 2025/26 session.

Course Convenor

Availability

In the past decade, environmental, social and governance (ESG) issues have attracted a lot of attention from investors, regulators, and other stakeholders. This is evidenced by the exponential growth of sustainable investing in global capital markets and the mandating of ESG-related disclosures across the world. In response to the increasing demand for ESG/non-financial information, many firms now publish sustainability reports and provide disclosures beyond what is required by regulation. This raises concerns about greenwashing and data credibility. To enhance transparency and accountability, governments and regulatory bodies around the world are implementing stricter environmental and social disclosure requirements. For example, the European Union's Non-Financial Reporting Directive and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations are pushing companies to report their environmental and social performance more transparently. In this rapidly changing information environment, understanding firm's non-financial disclosures and the different regulatory requirements has become essential for professionals in various industries.

The proposed course provides an in-depth knowledge of issues related to sustainability reporting and measurement. It takes the perspective of both preparers and users of ESG/non-financial data. The course is divided in three parts:

• Part I: General introduction to ESG and ESG disclosures. This part of the course: (i) discusses the evolution of corporate social responsibility (ESG) and the objective of the firm; (ii) provides an overview of the potential users of ESG information (e.g., internal and external stakeholders); and (iii) introduces the role of ESG disclosures, evaluating the potential benefits and costs of mandatory ESG reporting and emphasizing its real effects.
• Part II: ESG regulatory frameworks and reporting requirements. This part of the course: (i) explores existing and emerging ESG regulatory frameworks as well as ESG reporting requirements for issues such as greenhouse emissions, diversity, social impact, etc; (ii) discusses the concept of materiality within sustainability reporting and measurement challenges; and (iii) explores internal and external monitoring and assurance mechanisms.
• Part III: ESG data quality and analysis. This part of the course: (i) introduces students to the use of data analytics to extract information about a firm's non-financial performance (from sustainability reports and data from third-party providers); (ii) shows them how to evaluate the quality of the data; and (ii) teaches them how to assess a firm's non-financial performance and how to integrate sustainability analysis into a variety of analyses (e.g., firm sustainability performance and accountability).

30 hours of seminars in the Winter Term.

This course has a reading week in Week 6 of Winter Term.

The course consists of one hour and a half sessions delivered twice a week in the Winter Term, with a reading week in Week 6. The seminars focus on the theory and practice of sustainability reporting and non-financial performance, with strong emphasis on research, data analytics and current real-world examples. Students are expected to prepare the required readings in advance of the seminars and complete problem sets.

Case analysis / study weekly

Weekly cases to be discussed in class. Students are expected to read the cases in advance and prepare for in-class discussion.

Students are also expected to read academic papers and other relevant material. The lecturer will guide students in the reading of academic papers.

The textbook for this course is:

• Dechow, P. and R. Sloan, Business Sustainability Reporting and Analysis, 1e. Cambridge University Press, 2024.

Indicative academic articles:

• Bénabou, R., and J. Tirole, 2010, Individual and corporate social responsibility, Economica 77, 1-19.
• Berg, F., Kölbel, J. F., & Rigobon, R., 2022, Aggregate confusion: The divergence of ESG ratings. Review of Finance 26,1315–1344.
• Chen, Y., Hung and Wang, 2018, The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China, Journal of Accounting and Economics 65, 169-190.
• Christensen, Hans B., Hail, L., & Leuz, C.,2021, Mandatory CSR and sustainability reporting: Economic analysis and literature review. Review of Accounting Studies 26, 1176–1248.
• Christensen, H., E. Floyd, L. Liu and M. Maffett, 2017, The real effects of mandated information on social responsibility in financial reports: Evidence from mine safety records, Journal of Accounting and Economics 64, 284-304.
• Christensen, D. M., Serafeim, G., & Sikochi, A., 2021, Why is Corporate Virtue in the Eye of The Beholder? The Case of ESG Ratings. The Accounting Review 97, 147–175.
• Dhaliwal, D., O. Li, A. Tsang, and Y. Yang, 2011, Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting, The Accounting Review 86, 59-100.
• Khan, M., Serafeim, G., & Yoon, A., 2016,. Corporate Sustainability: First Evidence on Materiality. The Accounting Review 91, 1697–1724.
• Leuz, C., & Wysocki, P., 2016, The economics of disclosure and financial reporting regulation: Evidence and suggestions for future research. Journal of Accounting Research 54, 525–622.
• Lins, K., H. Servaes, and A. Tamayo, 2017, Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis, Journal of Finance 72, 1785-1824

In addition, there are many online sources of information, such as:

• https://sdgs.un.org/goals
• https://www.integratedreporting.org/resource/international-ir-framework/
• https://www.sasb.org/
• https://www.sasb.org/standards/materiality-finder/find/?lang=en-us
• https://www.ifrs.org/issued-standards/sasb-standards/
• https://www.efrag.org/lab6?AspxAutoDetectCookieSupport=1
• https://www.globalreporting.org/standards
• https://www.sec.gov/sec-response-climate-and-esg-risks-and-opportunities
• https://assets.bbhub.io/company/sites/60/2021/10/FINAL-2017-TCFD-Report.pdf

Exam (60%), duration: 120 Minutes, reading time: 15 minutes in the Spring exam period

Project (40%) in Winter Term Week 1