Business backs Master’s in Finance sustainability program
At the Department of Finance (TiSEM), the first students to take the Master’s track in sustainability graduated this summer. These graduates have learned to value companies not only on the basis of economic factors, but also on their ESG profile. When it comes to sustainability, Tilburg University works closely with the business community. In one such collaboration, an international financial specialist at the Deals department of PwC Netherlands not only developed a business case for the Master’s track but also provided support for the student teams tasked with solving it. Master’s student Oliwia Lipecka and her team came up with the best solution.
The Master’s students worked on a case devised by PwC, centered on international fashion company. Tilburg University’s collaboration with PwC goes back several years. Anne-Marie Slaa, a senior manager with PwC’s ESG Deals team fills in the background: “We first worked together on corporate finance projects. This latest Master’s project with lecturers Luc Rennenboog and Jasmin Gider was our first collaboration with the university on sustainability. We enjoy sharing our knowledge with young talent. For us, it’s a way to raise our profile among potential employees. And because sustainability and ESG are still very much a developing force in Deals and a wider financial context, we can also learn from how finance students think about these topics. Projects of this kind are about bridging the gap between research and business.”
ESG and SDGs explained
ESG stands for Environmental, Social and Governance. ESG criteria are becoming increasingly important in the world of business. They provide a way of measuring the ethical and sustainable impact of a company’s operations on people and the environment. Sustainable Development Goals—often abbreviated as SDGs—are another global instrument for working toward a better world. A total of seventeen SDGs were adopted by the United Nations in 2015 and together they represent a global call to action, highlighting ways to make the world a better place by tackling challenges such as poverty, inequality, and the climate crisis. The aim is to attain these goals by 2030.
When sustainability meets fashion
Within the Deals department, Anne-Marie and her team provide ESG due diligence. “We analyze a company’s level of sustainability and look at how sustainability can create value for companies. This enables us to advise on possible investments in the context of sustainability.” The students who worked on the case were given a similar assignment. They were asked to identify the most pressing sustainability topics impacting the company now and in the long run. The analysis of non-financial ESG data was based on publicly available information, which made it even more challenging. They also had to develop a model for valuing the company’s financial position in a range of different scenarios. The three student teams with the best solutions got to present their case to a team of PwC specialists.
In our recommendations to the company, we emphasized the importance of achieving all your sustainable goals
Winning team with Oliwia Lipecka
Gains from achieving sustainability goals
Oliwia Lipecka from Poland completed her Master’s of Finance degree in August. “My position as a teaching assistant finished at the end of July, so that’s when my job search began. Returning to Poland is still an option, but nothing is sure yet.” Before she came to Tilburg, Oliwia worked for one year as a financial analyst in her homeland. “I learned to value companies but without taking into account sustainability factors. The approach at Tilburg University is based on more recent studies, so it’s much more modern than the valuation system I learned in Poland. This made it very useful to do my Master’s here.” She and her two teammates were given roughly six weeks to work on the case. “We divided the work between us and explored topics like environmental impact and factors like inclusion and diversity. We measured the company’s performance in these areas.” During their research phase, they found a paper which shows that seventy percent of consumers are willing to pay ten percent more for sustainable clothes. And even though such a change would increase the company’s production costs, it would nevertheless have a positive impact on the company’s financial result. “So in our recommendations to the company, we emphasized the importance of achieving all your sustainable goals.”
Developing skills and setting milestones
Oliwia sees the case as a valuable learning experience. “When I started the Master’s, I didn’t know very much about ESG and sustainability in the context of finance and valuing companies. The program helped me to develop my research and data analysis skills. The great thing about this assignment was being able to put into practice all the aspects of theory I had learned during my Master’s. The instructions PwC gave us were so helpful. Thanks to them, we knew which milestones to set.”
Mastering the complexities
Anne-Marie describes the project from PwC’s perspective. “We assessed the solutions delivered by the students on how to quantify sustainability. We also looked at the quality of the presentation, the clarity of the report and the extent to which the teams had been critical and creative. Oliwia and her team had thoroughly vetted the company. Among other things, they were alert to the risk of greenwashing and their financial argumentation was outstanding. We could see how much time and effort they had put into mastering the complexities of valuing companies in terms of sustainability.”
The company claims to be able to prove which cotton is organic and which is not, and how much recycled material they use in their fashion products. Our analysis showed that they could not prove this.
Mapping ESG for fashion
Oliwia’s team looked at environmental factors such as climate change resilience and carbon emission management, as well as social factors such as human rights in the supply chain. “One tip PwC gave us was to use an ESG materiality map to work out the relevance of specific ESG topics to this type of company.” ESG materiality is measured using a variety of methods, including quantitative and qualitative assessments. Each ESG topic is usually mapped on a materiality matrix to reveal its impacts, risks, and opportunities. “We also carried out SWOT analyses and research to arrive at our final valuation of the company.” In their conclusion, the student team recommends that the company should firmly focus on achieving its ESG goals with regard to the material topics identified, as the benefits appear to greatly outweigh the costs. Environmental improvements are especially important as they play a significant role in affecting firm risk and performance. The company should concentrate on improving sustainable sourcing, circularity, and climate change resilience, as it is currently lagging behind in these areas. Given that greenwashing is a hot topic in the fashion industry Oliwia and her team took a critical look at the company’s ESG reporting. “The company claims to be able to prove which cotton is organic and which is not, and how much recycled material they use in their fashion products. Our analysis showed that they could not prove this and our recommendations include a point of attention for potential buyers not to make claims you cannot back up due to the danger of damaging your reputation.”
The Master’s program opened our eyes to what is important for companies in the future
The need to be critical
Presenting her team’s solution to PwC was a great learning experience for Oliwia. “We made a video and PwC selected us as one of the three best teams. We then gave a presentation to our fellow students, teachers, and PwC. This called on all our communication and presentation skills. The report we had delivered was pretty long, so we had to pick out the main conclusions for our presentation. We needed to be critical and work closely as a team. It was a challenge to arrive at conclusions all three of us could agree on.” As Oliwia reflects on the task of completing the case alongside the rest of her studies, “challenging” is the word that springs to mind. “But because the two were connected it worked. The Master’s program opened our eyes to what is important for companies in the future. I believe that the practical experience we gained from working on the PwC case has given us a head start on the job market.”