Deep dive into sustainable corporate finance.

Our work

When you open a conventional finance textbook, you may get the impression that the goal of finance is finance: profit maximisation for shareholders. Traditional finance focuses on financial return and regards the financial and corporate sector as separate from the society of which it is part and the environment in which it is embedded. This conventional approach to finance has led to a lack of responsibility and minimal incentives for companies to adopt sustainable practices.

The challenge

Today, we face significant social and environmental challenges. Humanity has exceeded several of the world's planetary boundaries, threatening the Earth’s stability, while mass production has led to long working hours, underpayment, and child labor, threatening the social foundations of dignity and opportunity for many (Sachs, 2015). To address these issues, society increasingly expects companies to take the lead, as their strategies directly impact society and the planet (Cone Communications, 2017).

Our solution

While sustainability is often seen as costly, our book Corporate Finance for Long-Term Value (2023) demonstrates that it doesn’t have to be. It shows how to broaden the goal of the company to balancing integrated value (IV), which combines financial value (FV), social value (SV) and environmental value (EV). In that way, the interests of current and future stakeholders can be equal and aligned with sustainable development. Through a step-by-step guide with real-life examples, it illustrates how this new approach can be implemented and offers the tools to achieve this balancing act. Applying this new paradigm of integrated value is the real innovation of sustainable finance.

Success in today’s world is no longer just about financial returns - it’s about creating value that lasts.

Corporate Finance
for Long-Term Value

This open access textbook offers a guide to corporate finance for modern companies that want to create long-term value. Drawing on recent literature on sustainable companies, it starts by analysing the Sustainable Development Goals as a strategy for the transition to a sustainable economy. Next, it translates the general concept of sustainability into core corporate finance methods, such as net present value, company valuation, cost of capital, capital structure and mergers and acquisitions.

Current corporate finance textbooks are primarily based on the shareholder model, designed to maximise financial value. This book instead adopts the integrated model, which argues that companies have to serve the interests of their current and future stakeholders. Accordingly, companies move from simply maximising financial value to optimising integrated value, which combines financial, social and environmental value. Applying this new paradigm of integrated value is the truly innovative feature of this textbook.
Written for undergraduate and graduate students of Finance, Economics, and Business Administration, this textbook provides a fresh analysis of corporate finance. Combining theory, empirical data and examples from actual companies, it reveals the sustainability challenges for corporate investment and shows how finance can be used to steer funds to sustainable companies and projects and thus accelerate the transition to a sustainable economy.

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Large corporations hold immense potential to address global challenges such as climate change and social inequality. By driving positive social and environmental impact, companies not only contribute to societal well-being but also enhance trust in the company and the continuity of its business model long-term. However, traditional performance benchmarks often fail to capture the full picture, focusing primarily on financial indicators such as market capitalisation, Return on Equity (RoE), or Price-to-Book ratio. Risks are typically assessed using backward-looking measures like stock return volatility.

To shift this paradigm, we asked ourselves a critical question: To what extent do large companies create and destroy value for society? The result is the AEX Futureproof Index, an integrated value analysis of AEX-listed companies. This index evaluates companies not only on their financial performance but also on their ability to manage existential risks and generate positive societal and environmental impact.

AEX Futureproof Index Report

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Meet our
faculty members

Willem Schramade

Willem Schramade is a professor of Finance at Nyenrode Business University

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Dirk Schoenmaker

Dirk Schoenmaker is a professor of Banking and Finance at the Rotterdam School of Management

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“Integrated thinking in finance requires, first and foremost, a mindset that is open to integrate the social foundations and the planetary boundaries into finance.”

— Dirk Schoenmaker

Neo-classical finance theory finds it difficult to address sustainability challenges adequately, since the prevalent model is designed to mainly maximize short-term results and to address mostly shareholders. One of the biggest challenges for the financial sector will be to take a more integrated and long-term approach. To truly add value in the long run.
There is a growing need for new methods to incorporate sustainability into asset pricing and valuation. Moreover, corporate governance is making a transition towards long-term value creation as the ultimate goal for corporates. How can research and education promote to such practice? Rotterdam School of Management (RSM) has established a platform to foster thought-leadership and excellence in this field.
Addressing these questions requires an interdisciplinary approach. Not only research in finance is needed, but the fields of economics, sustainability, strategic management and law are also connected. Rotterdam School of Management works in close cooperation with the economics and law faculties at Erasmus University to deliver such integrated thinking.
The purpose of this platform is to develop new insights through research and education in close collaboration with leading sustainable finance players in the industry and academia. The platform brings together academic faculty research, PhD, Master and Bachelor students, MBAs and executive education, NGOs and professionals in the financial industry.