An appealing training experience – insights of scholarship programme, by Edouard Sers

An appealing training experience – insights of scholarship programme, by Edouard Sers

From the very start of Frankfurt School ESG & Impact Investing course1 early March 2023, I discovered a school attracting professionals from diverse countries, ranging from Europe, Asia and Africa, and from various sectors (commercial banking, development finance, energy, education, etc.). The welcome words from Karl H. Dichter, Callum Lee and our renowned teachers were engaging. They provided us with a helpful overview of the program. After the introductory unit, we will dive into the history and theory of ESG & impact investing, go through case studies and then learn how to implement a quality approach in ESG & impact investing. At this stage, we will be ready to go through an assignment in small international groups. In the final two units, we will learn about financial instruments and ESG & impact data disclosures. This trip into ESG & impact investing concludes with a final exam early September to sanction our achievements. 

Over the next 6 months, I will share with you insights and thoughts about this training and I am happy to start with sharing a couple of observations with my fresh eyes of new Frankfurt School student. 

  • · Defining terms to navigate the (confusing) ESG & impact landscape – we got the first tips to draw a line between ESG investing that aims to achieve better investment performance (better returns or lower risks) by considering environmental, social, and governance issues, and Impact investing that aims to achieve positive environmental or social outcomes through investment decisions, even if this comes with lower returns. This sounds familiar with the “do not harm” versus “do good” approaches known in several sectors (including the microfinance sector2) and with Do No Significant Harm (DNSH) principle of the EU’s new sustainable finance framework. Dr. Sautner however warns us that confusing terminologies may be used across sectors and investment mandates and that it is not always easy to draw a line that is clear for everybody even more so as one can see a continuum between initiatives to avoid negative impact and generate a positive one. Even European Regulations (SFDR, Taxonomy and Paris-aligned benchmarks) have various approaches to DNSH!3 In an article called “Lost in Impact”4, Jean Michel Severino had last year also reflected in depth on the confusing use of the term “impact” and made recommendations for the historic impact-investing industry. 
  • · ESG ratings themselves can be confusing… ESG investing has been booming over the past years, as illustrated by the increasing number of PRI signatories (managing more than 100 trillions of USD) and the increasing flow to ESG funds (80 billion of USD per quarter at the end of 2020 according to Morningstar). And so have ESG ratings who played a major role in helping mainstream sustainable investing, but are also subject to criticism.5 Raters may issue significantly different ratings on the same company, may not have access to all the required information to assess ESG risks (complete and up-to-date) and may even rewrite some data expost.6 
  • · Greater ESG performance is achievable through investor ESG engagement. Despite their limits, ESG ratings have been used by investors and it is fair to ask whether well-rated ESG funds are outperforming or underperforming in terms of returns. Empirical studies show that ESG seem to pay off: Firms investing in material ESG issues have stronger returns, but the question of causality remains open. I also discovered that ESG engagements can lead to a reduction in a firm’s downside risk, that risk reduction effects are stronger for more successful engagements and that effects are also strongest when environmental topics are addressed, primarily climate change.7 
  • · Impact investing may provide some return however at a lower rate than traditional investing – Contrasting with confusing promises about the combination of impact and returns, an important study on private debt and equity8 show that impact funds earn 4.7 percentage points lower internal rate of return than traditional VC funds, reflecting the impact investors’ willingness to pay for impact. 

Looking forward to sharing further insights on these topics in the coming months! 

1 Frankfurt School of Finance and Management Certificate in ESG&Impact investing is a six month online course designed for professionals and executives working in private asset management and institutional investors, international development and donor organizations who want their investments to achieve positive impact and/or offer ESG compliant options to their clients. 

2 As progressively articulated by CERISE + Social Performance Task Force over the past 20 years. “First, do no harm. But don’t stop there” –  

3 “Regulations such as SFDR, the Taxonomy for sustainable activities and the Benchmark Regulation all refer to it with different nuances.”  

4 Severino, J-M. (2022) “Lost in impact: une nouvelle cartographie pour les aventuriers du sens”, Ferdi WP302, March. 

5 To be fair, raters have started to tackle such criticism: Rate the Raters 2020 Report ( 

6 Berg, Fabisik, and Sautner, 2020, Rewriting History II: The (Un)Predictable Past of ESG Ratings

7 Hoepner et al.. 2020, ESG Shareholder Engagement and Downside Risk 

Impact Investing by Barber, Morse and Yasuda, 2020. 

Author: Edouard Sers, head of risk, impact and compliance at the Grameen Credit Agricole Foundation. Edouard, as an scholar, is sharing his experience and insights of the Certified Expert in ESG and Impact Investing executive programme he is attending at the Frankfurt School.