Investing in Our Future: How to Think Sustainably in Finance

Kogod School of Business professor H. Kent Baker explores the emerging field of sustainable investing in his most recent book.

H. Kent Baker

Professor Kent Baker at the Kogod School of Business.


 

Professor H. Kent Baker knows well that investing is constantly evolving. In his 27th year at the Kogod School of Business, he has seen changes in investment theories, attitudes, and technologies throughout his career— his work in the field reflects these many shifts.

Baker et al Sustainable Investing WENTK - Option 1 - 01-05-22

“If we look at the study of finance over the years, it has advanced dramatically—largely through technology,” said Professor Baker. “There isn’t a single path anymore, but multiple paths.”

Baker’s newest book Sustainable Investing: What Everyone Needs to Know (Oxford University Press, 2022) approaches the investing field through the lens of environmental, social, and governance (ESG) financial decisions. Sustainable Investing aims to equip readers with the knowledge to thoughtfully invest while keeping personal values in mind. Combining investment and ESG topics is a fairly new endeavor, but one that Baker says reflects current trends.

If we go back 30 or 40 years, few were concerned about sustainable investing. But over time, people realized that we live on this planet together, and companies’ actions could be detrimental. As more people started to realize the situation, the general concept of sustainability became more important." 

H. Kent Baker

Kent Baker

Kogod Professor

Sustainable Investing focuses primarily on the evolution of sustainability as a concept, especially regarding how it relates to the investing world. A more than 250-page read that follows a question-and-answer format, Baker’s book aims to be accessible to a broad audience. “We’re trying to write books that help create savvy, knowledgeable investors,” Professor Baker said. “The level of education that people have in investing is low, but it’s no fault of their own. The topic hasn’t been introduced to them in college, high school, or by their parents.” By demystifying investing for those interested but not informed, Baker hopes to enable people to make intelligent decisions in every aspect of their financial life.

The themes covered in Sustainable Investing also reflect Professor Baker’s broader focus on behavioral applications in finance. While pursuing his MBA and DBA at the University of Maryland, he became interested in how economic theory translates into practice and has since taken a more behavioral approach to this research. “Traditional finance theory assumes that everyone who makes investments has all the information they need, is perfectly rational, and no emotions come into the process. That’s never the case,” Professor Baker said. “Looking at other dimensions provides a better picture of how people actually make decisions.” Several of Baker’s award-winning books approach the economic world through this lens—reflecting decades of research in behavioral finance and focusing on financial decisions and the people who make them.

Recent years have seen an uptick in individual investors alongside institutional investors, and younger generations want to invest their money in ways that reflect their values. The rise of values-aligned investing and an increased focus on ESG make Professor Baker’s latest book especially timely.

People want to make their money mean more. People want to be able to make money over time, but also want their investments to be consistent with their value systems. So now, many investors have financial and non-financial objectives."

H. Kent Baker

Kent Baker

Kogod Professor

Kogod students interested in the interdisciplinary aspects of finance will soon be able to take an ESG course that addresses the many applications of the financial field. As a part of this course, students can make investments using one percent of the university’s endowment, enabling them to apply firsthand what they learn in class. Professor Baker sees the value in this course, emphasizing that students in business disciplines need to be well prepared for the different concepts they will face in their careers. “It’s important to equip students to face what they will go into after graduation,” he said. “They need to be financially literate and understand how people make decisions, especially their behavioral biases.”” Kogod’s soon-to-be-offered ESG course will give students firsthand experiences that transfer directly to real-world business and financial scenarios.

Professor Baker looks forward to witnessing the Kogod School of Business continue its trend of developing courses that address emerging fields.

“Good business schools look at what’s taking place now and what’s needed in the future. They modify their programs to meet current and future needs," said Professor Baker. By establishing these courses based on current financial trends and issues, Kogod ensures that students graduate with the tools necessary to meet today’s challenges and prepare for tomorrow’s.