This paper examines a PBL project module "Sustainable Urban Transformation" in an Urban Design master's education. The module combines urban design and hydrology engineering. Within the module, students are supported by lectures and study circles on various dimensions of sustainability, especially vis-a-vis climate change. However, they are left with the freedom to choose how they balance between design and engineering approaches when they give a physical form for sustainability in the site transformation projects with which they work through the semester. This paper discusses the development of their skills building on three Aristotelean concepts: techne (engineering), poiesis (aesthetic form-giving), and phronesis (making of ethical judgments). The last two concepts, the paper argues, are especially important when at issue is design education. Based on an analysis of the student projects in Fall 2022, the paper examines whether and how the students manage to find a balance between engineering skills, on the one hand, and aesthetic creativity and ethical judgement, on the other hand, in their project work.