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Hiro Mizuno is chief executive of Good Steward Partners, a former UN special envoy, and special adviser to the CEO of MSCI
As someone who has managed the world’s largest pension fund, sits on the boards of multinationals, and interacts frequently with CEOs and investors, I see that sustainability is increasingly a core corporate priority.
Why, then, are so many MBA programmes failing to update business education in ways that account for a changing world and business landscape? By clinging to outdated curricula, educators are missing a key opportunity to stimulate interest among students in the very topics that require mastery after graduation in the modern C-suite.
Think back 50 years. Finance faculty probably never thought option pricing theory had to be taught to business graduates. Today, it is a business basic — an example of education reflecting the needs of business, including the finance industry, to prepare students properly.
It is critical that business schools view sustainability in a similar light, with a major distinction: sustainability is not a one-off course but a new business fundamental. Gone are the days when we can treat it as an elective. Specifically, MBA programmes need a more holistic, interdisciplinary approach that integrates sustainability thinking, concepts and tools across the curriculum. Until all business schools do this, they will be failing their students.
In 2015, when I began advocating to integrate ESG factors into the pension fund portfolio at Japan’s Government Pension Investment Fund (GPIF), we were very much in the minority. Now, asset managers around the world use ESG in their analysis — some as the most critical factor, others as a hygiene factor and a basic requirement. Portfolio managers can no longer ignore or dismiss ESG or they risk overlooking the long-term risks associated with their portfolios.
The finance industry has driven the sustainability agenda. The Glasgow Financial Alliance for Net Zero is a good example. It includes 650 leading financial institutions from more than 50 countries, committed to transitioning their financial portfolios to net zero carbon emissions.
There has been pushback, including political attacks on ESG in the US. It is important to take the long view. ESG was developed as a financial analytical tool for managing systemic risk in investment portfolios.
The next generation of leaders is itself asking for a stronger emphasis on sustainability. However, the lack of a sustainability focus on business courses risks suggesting to students that they don’t need it. I have experienced this first-hand: I used to tweet regularly about ESG and often received aggressive feedback. When I looked into who was most sceptical, many of them were young MBAs!
And there are still some big obstacles to overcome within finance curricula. A lack of data and research discourages academics from pursuing or teaching a topic. It’s fair to say it has been quite a challenge for academic researchers to obtain institutional-grade data on ESG and climate.
MSCI, where I serve as special adviser to the CEO, recently launched a sustainability institute with that goal in mind: to provide sustainability-related financial data to academic researchers without any direction or expectations on their research agendas. The goal is to level the playing field, and ensure that academics can work with the same data that practitioners are using.
In addition, finance curricula need to change. Today’s business students need to learn how to evaluate systemic risk, such as climate change, which cannot be covered by conventional portfolio theory. It is also important for them to understand the sustainable investment movement, including its impact on financial analysis more broadly.
A third and important driver of change is companies themselves, especially investment firms that recruit from the top MBA programmes. MBA recruits will engage with sustainability topics in meeting rooms every day, so ESG needs to be a core competency of graduates. If a company or investment firm commits to a net zero goal, for example, it is fair for them to expect new hires to have the requisite training needed to help chart the way there.
Recruiters need to know that business graduates received the training that employers expect. And corporate recruiters need to update their approach, inquiring about qualifications that include ESG analytical skills and a sustainability mindset. As with the MBA itself, recruitment has not adapted enough. Companies should synchronise human resources with the direction of travel in finance — and that means an overall focus on sustainability.
With our planet on fire, sustainability is arguably the most important topic for CEOs today. Business is under tremendous pressure to reduce emissions, facilitate the energy transition and catalyse a shift towards a regenerative economy that better serves people, our planet and future generations.
If the purpose of business school is to prepare young people to be the leaders of tomorrow, we cannot allow ourselves to graduate students who are underprepared for the world that awaits them. The time has come for an across-the-board revamp of business education — including, and especially, the finance curriculum — to reflect the world we need.
