Archiv des Autors: Soehnholz

Über Soehnholz

Geschäftsführer der Soehnholz ESG GmbH. Alles Weitere siehe Xing oder Linked-In.

Biodiversity risk illustration with Marine Life picture fom Pixabay

Biodiversity risk: Researchpost #153

Biodiversity risk: 10x new (critical) research on ESG ETF and net-zero, sustainability-linked bonds, lifecycle and thematic investments, altruism and stablecoins

Biodiversity risk research

Broad biodiversity risk: Living in a world of disappearing nature: physical risk and the implications for financial stability by Simone Boldrini, Andrej Ceglar, Chiara Lelli, Laura Parisi, and Irene Heemskerk from the European Central Bank as of Nov. 14th, 2023 (#23): “Of the 4.2 million euro area NFCs (Sö: Non-financial corporations) that were included in our research, around 3 million are highly dependent on at least one ecosystem service. … approximately 75% of euro area banks’ corporate loans to NFCs (nearly €3.24 trillion) are highly dependent on at least one ecosystem service. … we have enough data and knowledge available to enable timely and nature-friendly decision-making” (p. 38).

Biodiversity risk reduction? How could the financial sector contribute to limiting biodiversity loss? A systematic review by Lisa Junge, Yu-Shan Lin Feuer, and Remmer Sassen as of Feb. 7th, 2023 (#109) “the currently available scientific discourse is also not unanimous about the status of biodiversity in finance. Therefore, this paper aims to synthesise existing publications to gain transparency about the topic, conducting a systematic review. Three main concepts emerge about how the private finance sector can aid in halting biodiversity loss, namely: (1) by increasing awareness of biodiversity, (2) by seizing biodiversity-related business opportunities, and (3) by enlarging biodiversity visibility through reporting. Overall, we assume that the private finance sector upholds a great leverage power in becoming a co-agent of positive biodiversity change”(abstract).

Responsible investment research (Biodiversity risk)

Blackrock-problem? Fossil-washing? The fossil fuel investment of ESG funds by Alain Naef from Banque de France as of Nov. 16th, 2023 (#19): “… I analysed all the large equity Exchange Traded Funds (ETFs) labelled as ESG available at the two largest investors in the world: Blackrock and Vanguard. For Blackrock, out of 82 funds analysed, only 9% did not invest in fossil fuel companies. Blackrock ESG funds include investments in Saudi Aramco, Gazprom or Shell. But they exclude ExxonMobil or BP. This suggests a best-in-class approach by the fund manager, picking only certain fossil fuel companies that they see as generating less harm. But it is unclear what the criteria used are. For Vanguard, funds listed as ESG did not contain fossil fuel investment. Yet this needs to be nuanced as information provided by Vanguard on investments is less transparent and Vanguard offers fewer ESG funds” (abstract). My comment: For my ESG and SDG ETF-selection I use demanding responsibility criteria and more so for my direct equity portfolios, see the newly updated Das-Soehnholz-ESG-und-SDG-Portfoliobuch.pdf (

Listed equity climate deficits: The MSCI Net-Zero Tracker November 2023 – A guide to progress by listed companies toward global climate goals from the MSCI Sustainability Institute as of November 2023: “Listed companies are likely to put 12.4 gigatons (Gt) of GHG emissions into the atmosphere this year, up 11% from 2022. … global emissions are on track reach 60.6 Gt this year, up 0.3% from 2022. … Domestic emissions in eight emerging-market G20 countries examined rose by an average of 1.2% per year over the period, while emissions of listed companies in those markets climbed 3.2% annually. … Just over (22%) of listed companies align with a 1.5°C pathway, as of Aug. 31, 2023 … Listed companies are on a path to warm the planet 2.5°C above preindustrial levels this century … More than one-third (34%) of listed companies have set a climate target that aspires to reach net-zero, up from 23% two years earlier. Nearly one-fifth (19%) of listed companies have published a science-based net-zero target that covers all financially relevant Scope 3 emissions, up from 6% over the same period” (page 6/7).

ESG or cash flow? Does Sustainable Investing Make Stocks Less Sensitive to Information about Cash Flows? by Steffen Hitzemann, An Qin, Stanislav Sokolinski, and Andrea Tamoni as of Oct. 30th, 2023 (#56): “Traditional finance theory asserts that stock prices depend on expected future cash flows. … Using the setting of earnings announcements, we find that sustainable investing diminishes stock price sensitivity to earnings news by 45%-58%. This decline in announcement-day returns is mirrored by a comparable drop in trading volume. This effect persists beyond the immediate announcement period, implying a lasting alteration in price formation rather than a short-lived mispricing“ (abstract).

Similar calls: SLBs: no cal(l)amity by Kamesh Korangi and Ulf Erlandsson as of Nov. 16th, 2023 (#13): A common criticism of sustainability-linked bonds (SLBs) has been around callability, where it is sometimes suggested that bond issuers are pushing this feature into bond structures to wriggle out of sustainability commitments. … Our analysis finds scant quantitative evidence to support this critique. Overall, when comparing SLBs with similar non-SLB issuances, we observe little ‘excess’ callability in SLBs. The key to this result is to control for sectors, ratings and issue age when comparing SLBs with the much larger market of traditional bonds” (p. 1).

Other investment research

100% Equity! Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice by Aizhan Anarkulova, Scott Cederburg and Michael S. O’Doherty as of Nov.1st, 2023 (#950): “We challenge two central tenets of lifecycle investing: (i) investors should diversify across stocks and bonds and (ii) the young should hold more stocks than the old. An even mix of 50% domestic stocks and 50% international stocks held throughout one’s lifetime vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests. These findings are based on a lifecycle model that features dynamic processes for labor earnings, Social Security benefits, and mortality and captures the salient time-series and cross-sectional properties of long-horizon asset class returns” (abstract).

Lemming investors? The Big Shortfall? Thematic investors lose lion’s share of returns due to poor timing by Kenneth Lamont and Matias Möttölä from Morningstar as of Nov. 15th, 2023 : “While thematic funds‘ average total return was 7.3% annualized over the five-year period through June 30, 2023, investors earned only a 2.4% return when the impact of cash inflows and outflows is considered. … Investors lost more value in focused funds such as those tracking Technology or Physical World broad themes compared with more diversified Broad Thematic peers. Return gaps were far wider in exchange-traded funds than in thematic mutual funds. ETFs tend to offer more concentrated bets and lend themselves to tactical usage. The largest return shortfalls occur across highly targeted funds, which posted eye-catching performance, attracting large net inflows before suffering a change of fortune“ (p. 1). My comment: My approach to thematic investments see e.g. Alternatives: Thematic replace alternative investments (

Risk-loving altruists? Can Altruism Lead to a Willingness to Take Risks? by Oded Shark as of Mov. 7th, 2023 (#7): “I show that an altruistic person who is an active donor (benefactor) is less risk averse than a comparable person who is not altruistic: altruism is a cause of greater willingness to take risks” (abstract). … “The lower risk aversion of an altruistic person … might encourage him to pursue risky ventures which could contribute to economic growth and social welfare” (p. 7).

Unstable coins? Runs and Flights to Safety: Are Stablecoins the New Money Market Funds? by Kenechukwu Anadu et al. from the Federal Reserve Bank of Boston as of Oct. 9th, 2023 (#743): “… flight-to-safety dynamics in money market funds have been extensively documented in the literature—with money flowing from the riskier prime segment of the industry to the safer government segment … flight-to-safety dynamics in stablecoins resemble those in the MMF industry. During periods of stress in crypto markets, safer stablecoins experience net inflows, while riskier ones suffer net outflows. … we estimate that when a stablecoin’s price hits a threshold of 99 cents (that is, a price drop of 100 basis points relative to its $1 peg), investor redemptions accelerate significantly, in a way that is reminiscent of MMFs’ “breaking the buck … Should stablecoins continue to grow and become more interconnected with key financial markets, such as short-term funding markets, they could become a source of financial instability for the broader financial system” (p. 33).

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Glorreiche 7 Best-in-Universe ESG-Ratings

Glorreiche 7: Sind sie unsozial?

Glorreiche 7 werden die Megaunternehmen Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia und Tesla genannt. Sie haben im Jahr 2022 und bis Juli 2023 besonders gute Aktienkursentwicklungen gehabt (vgl. Marktanalyse: Was ist los mit den Glorreichen Sieben? | Morningstar). Ich habe bewusst keinen dieser Werte in meinen direkten Aktienportfolios und auch nur sehr wenig Allokation dazu in meinen SDG ETF-Portfolios.

Glorreiche 7: Kein expliziter Ausschluss

Dabei schließe ich die „Glorreichen 7“ nicht explizit aus meinen Geldanlageportfolios aus. Sie sind aufgrund ihrer hohen Aktienindexallokationsanteile in meinen traditionellen passiven Allokationsportfolios enthalten. Auch in den ESG ETF-Portfolios sind die meisten der Glorreichen 7 zu finden, weil sie in den von mir genutzten ESG-ETFs enthalten sind. In meinen selbst zusammengestellten direkten Aktienportfolios findet sich jedoch keine der „Glorreichen 7“ Aktien.

Das liegt daran, dass meine ESG-Anforderungen erheblich strenger sind als die der meisten nachhaltigen ETFs. Nachhaltigkeit wird oft anhand von ESG-Ratings gemessen. Dabei werden Umwelt- Sozial- und Unternehmensführungsrisiken zu einer Kennzahl zusammengefasst. Nachhaltige ETFs nutzen meistens aggregierte Best-in-Class ESG-Ratings.

Best-in-Class heißt, dass die Ratings innerhalb der jeweiligen „Klassen“, meist Branchen, untereinander verglichen werden. So kann ein Autohersteller wie Tesla im Vergleich zu anderen Autoherstellern relativ geringe ESG-Risiken haben. Im Vergleich zu Herstellern von Personenzügen oder Fahrrädern kann das jedoch ganz anders aussehen. Wenn Ratings aller Unternehmen branchenunabhängig miteinander verglichen werden, nennt man das Best-in-Universe Ansatz.

ETF-Anbieter nutzen oft Mindestanforderungen an solche Ratings für ihre Wertpapierauswahl und/oder deren Gewichtung. Das geschieht zum Beispiel, indem nur Wertpapiere solcher Unternehmen zugelassen sind, die zur besseren Hälfte der jeweilig ESG-gerateten gehören.

Glorreiche 7: Relativ große Abweichungen bei Sozial- und Umweltratings

Die „Glorreichen 7“ scheinen auf den ersten Blick ziemlich nachhaltig zu sein. Sie erreichen Anfang November 2023 nach Best-in-Class Ansatz jeweils mindestens 55 von maximal 100 Punkten meines Ratinganbieters Apple liegt sogar über 70 und auch Microsoft schneidet sehr gut ab. Bei der Nutzung eines vergleichbaren aggregierten Best-in-Universe Ratings sinkt das durchschnittliche Rating zwar, aber alle sieben Werte liegen noch über 50.

Für meine Portfolios sind aber jeweils E, S und G-Mindestratings von 50 erforderlich, denn ich möchte kein Unternehmen im Portfolio haben, das überdurchschnittlich hohe ökologische, soziale oder Unternehmensführungsrisiken hat.

Bei Nutzung der separierten Best-in-Class Ratings meines Anbieters dürften Alphabet, Amazon, Meta und Tesla nicht ins Portfolio aufgenommen werden, weil die Sozialratings jeweils unter 50 liegen. Nur Apple, Microsoft und NVIDIA haben E, S und G Best-in-Class Ratings von jeweils mindestens 50.

Best-in-Universe sind viel anspruchsvoller als Best-in-Class Ratings

Das sieht bei der Nutzung von Best-in-Universe Ratings anders aus. NVIDIA zum Beispiel hat ein durchschnittliches ökologisches Rating im Vergleich zu anderen Halbleiterherstellern. Aber im Vergleich zu allen börsennotierten Unternehmen (BiU-Ansatz) liegt NVIDIA erheblich unter meiner Mindestanforderung von 50. Ähnliches gilt für Apple und Microsoft mit Best-in-Universe-Sozialratings unterhalb der 50.

Bei der Nutzung von Best-in-Universe Ratings liegen Alphabet, Meta und Tesla sogar unterhalb von 40. Ökologische und Unternehmensführungsrisiken werden dagegen bis auf das Umweltrating von NVIDIA auch nach Best-in-Universe Ansatz mit über 50 bewertet.

ESG-Ratings setzen sich aus Dutzenden von Einzelkriterien zusammen und variieren deshalb oft von Anbieter zu Anbieter. Die Ratings meines Anbieters sind aber gut nachvollziehbar. So wird bei Alphabet unter anderem eine fehlende „Freedom of Association“-Politik und der niedrige gewerkschaftliche Organisationsgrad kritisiert, bei Amazon werden Bezahlung und Arbeitsbelastung aufgeführt, bei Apple Vorkommnisse (Incidents) in Zusammenhang mit Produktwerbung, bei Meta die geringe Anzahl von Frauen an den Mitarbeitenden und Managementpositionen, bei Microsoft Themen des Kundendatenschutzes, bei Tesla Produktqualitäts- und Sicherheitsthemen und bei NVIDIA eine geringe Wasserrecyclingquote.

Fehlende Vergleiche von Best-in-Universe Ratings

Das ist durchaus auch für Anleger relevant, die nicht besonders an Nachhaltigkeit interessiert sind. Denn mit ESG-Ratings werden Umwelt-, Sozial- und Unternehmensführungsrisiken gemessen. Und an niedrigen derartigen Risiken sollten auch traditionelle Geldanleger interessiert sein.

Für meine direkten Aktienportfolios ist meine selbst gesetzte Regel klar: Weil keine der „Glorreichen 7“ nach Best-in-Universe Ansatz bei Umwelt-, Sozial- und Governanceratings zugleich über 50 liegt, darf ich keine davon in meine Portfolios aufnehmen.

Bisher habe ich noch keine systematischen Vergleiche von Best-in-Class und Best-in-Universe Ratings gesehen. Meine Analysen nur auf Basis der Glorreichen 7 und nur mit Daten von Anfang November 2023 zeigen Folgendes: Bei den aggregierten ESG-Ratings liegen die Best-in-Universe Ratings im Schnitt um etwa 7 Prozentpunkte unter den Best-in-Class Werten. Bei den Governanceratings gibt es kaum Unterschiede zwischen den beiden Ansätzen. Die Best-in-Universe-Umweltratings der 7 Aktien fallen sogar um 5 Prozentpunkte besser aus, während die Best-in-Universe-Sozialratings sogar 16 Prozentpunkte schlechter sind als die Best-in-Class Sozialratings. Unterschiede für andere Unternehmen sind sogar teilweise noch stärker, wie eine vergleichbare Analyse der 30 Small- und Midcaps meines Fonds ergab.

Warum andere vor allem Best-in-Class Ratings nutzen

Geldanlageanbieter nutzen in der Regel einen Best-in-Class Ansatz. Das liegt daran, dass sie meist über mehrere Branchen gestreute Portfolios anbieten wollen. Mit dem Best-in-Class Ansatz können sie das einfach erreichen. Bei einem konsequenten Best-in-Universe Ansatz so wie ich ihn nutze, müssten viele Marktsegmente aufgrund ihrer hohen ESG-Risiken ganz entfallen.

Generell gilt: Konzentrierte (Best-in-Universe) Ansätze können nachhaltiger sein als stark diversifizierte Portfolios. Grund: Wenn man so wie ich mit den nachhaltigsten Aktien startet, reduziert zusätzliche Diversifikation die durchschnittliche Nachhaltigkeit. Der Grenznutzen weiterer Diversifikation für Risikoreduktion ist aber sehr gering und abnehmend (vgl. dazu 30 stocks, if responsible, are all I need – Responsible Investment Research Blog (

Privatanleger haben typischerweise keinen Zugang zu Best-in-Universe Ratings. Ich weiß jedenfalls nicht, in welcher frei zugänglichen Datenbank man Investmentfonds finden kann, die einen Best-in-Universe Ansatz oder separate E, S und G Mindestratings nutzen.

Glorreiche 7: Geringe Allokation in meinen SDG ETF-Portfolios

Für meine SDG ETF-Portfolios schließe ich die Glorreichen 7 ebenfalls nicht explizit aus. Aber ich versuche, nur eine geringe Allokation zu den Glorreichen 7 haben. Das mache ich jedoch eher aus Diversifikations- als aus Nachhaltigkeitsgründen. Kerninvestments enthalten typischerweise bereits hohe Alloaktionen zu den Glorreichen 7. Und meine SDG-ETF Portfolios sind als Ergänzung bzw. Satelliteninvestments für Kerninvestments gedacht.

Deshalb versuche ich, Überschneidungen der SDG ETFs mit typischen Kerninvestments und auch untereinander möglichst gering zu halten. Das ist gar nicht so einfach, weil viele SDG-aligned bzw. Themen-ETFs teilweise mehrere der Glorreichen 7 enthalten. Allerdings suche ich vor allem ETFs mit möglichst vielen sogenannten SDG-aligned Pure Plays. Und fokussierte Unternehmen sind meist eher klein. Deshalb nutze ich nur ETFs mit Fokus auf kleine und mittlere Marktkapitalisierungen. Darum enthalten diese meist keine der Glorreichen 7. Und so ist es mir auch in diesem Jahr gelungen, ETFs zu den Themen Dekarbonisierung, Energie, Ernährung, Gesundheit, Immobilien, Pharmazie, Smarte Städte und Wasser zu finden, die untereinander kaum Überschneidungen aufweisen.

SDG rating confusion illustration with picture from GoranH from pixabay

SDG rating confusion: Researchpost #152

SDG rating confusion: 13x new research on emissions, life expectancy, green bonds, physical risks and transition, environmental information, private equity ESG, SDG ratings, bond and equity factors, fraud, health-wealth relations, LLM financial analysts (# shows the number of full paper SSRN downloads as of Nov. 16th, 2023)

Ecological and social research (SDG rating confusion)

Too hot: The State of Climate Action: Major Course Correction Needed from +1.5% to −7% Annual Emissions by the World Economic Forum and The Boston Consulting Group as of November 2023: “As 1.5°C is slipping out of reach, achieving it now calls for a 7% annual emissions reduction, more than the climate reduction impact from COVID-19 and against the current trend of a 1.5% annual increase. … Only 35% of emissions are covered by a national net-zero commitment by 2050, and only 7% by countries that complement bold targets with ambitious policies. Fewer than 20% of the world’s top 1,000 companies have set 1.5°C science-based targets, and, based on the Net Zero Tracker, fewer than 10% also have comprehensive public transition plans. Technologies that are economically attractive now or will be in the near future can only achieve just over half of the emissions reductions needed to reach 1.5°C. … More than half of climate funding needs are still unmet, with critical gaps in early technologies and infrastructure particularly acute, and the climate funding gap twice as large in developing economies as in developed ones” (p. 4).

Longer lifes: The Long-run Effect of Air Pollution on Survival by Tatyana Deryugina and Julian Reif as of Nov. 13th, 2023 (#8): “We show that the short-run mortality effects of acute SO2 exposure can be decomposed into two distinct phenomena: mortality displacement, where exposure kills frail individuals with short counterfactual life expectancies, and accelerated aging, where mortality continues to increase after exposure has ceased. … we calculate that a permanent, ten percent decrease in air pollution exposure would improve life expectancy by 1.2–1.3 years … our estimates imply that value of reducing pollution exposure may be substantially larger than has previously been recognized“ (p. 37).

Responsible investing research (SDG rating confusion)

Green bond limits: Decoding Corporate Green Bonds: What Issuers Do With the Money and Their Real Impact by Yufeng Mao as of Nov. 8th, 2023 (#157): “This paper reveals a distinct motivation for issuing green bonds compared to conventional bonds. Proceeds from green bonds remain as cash for longer periods, largely owing to the time required to identify eligible projects. Contrary to the notion of fungibility, my results indicate that they neither lead to more new investments than conventional bonds nor are used in apparent green-washing. … firms issuing green bonds show improved environmental performance, particularly in the reduction of GHG intensity. However, this improvement appears not to stem from incremental green investments facilitated by green bonds but rather from issuers that would have pursued green initiatives regardless” (p. 44).

Physical risk costs: The cost of maladapted capital: Stock returns, physical climate risk and adaptation by Chiara Colesanti Senni and Skand Goel as of July 23rd, 2023 (#48): “Using S&P Global Sustainable data on Physical Risk and measures of adaptability to physical risk from S&P Global Corporate Sustainability Assessment, we find evidence that higher physical risk is associated with higher expected returns. However, this risk premium diminishes with increased adaptability, signifying that risk management through adaptation reduces a company’s cost of capital. Notably, this adaptability-driven risk discount is more pronounced for high levels of physical risk, reflecting market incentives for efficient adaptation” (abstract).

Carbon-free distance: Carbon-Transition Risk and Net-Zero Portfolios by Gino Cenedese, Shangqi Han, and Marcin Kacperczyk as of Oct. 5th, 2023 (#493): “…. using a novel measure of distance-to-exit (DT E) … we show that companies that are more exposed to exit from net-zero portfolios have lower values and require higher returns from investors holding them. This result is economically large and is consistent with the view that DT E are useful measures of transition risk. Notably, we show that DT E capture distinct variation to that captured by previously used measures based on corporate carbon emissions. Distinct from these, they capture information that is forward-looking and is grounded in climate science“ (p. 29)

Attention, outsiders: Do Insiders Profit from Public Environmental Information? Evidence from Insider Trading by Sadok El Ghoul, Zhengwei Fu, Omrane Guedhami, and Yongwon Kim as of Oct. 19th, 2023 (#26): “We provide evidence that insiders sell their stocks profitably based on publicly available information on environmental costs. Further analysis indicates that these results become more pronounced when the search frequency for environmental information in Google is low, in countries governed by left-leaning governments, and in countries where investor protection is weak. These results … suggest that investor inattention and investor protection are key drivers of insider trading performance“ (abstract).

PE ESG boost: ESG Footprints in Private Equity Portfolios: Unpacking Management Instruments and Financial Performance by Noah Bani-Harounia, Ulrich Hommel, and Falko Paetzold as of Nr. 8th, 2023 (#13): “Based on data covering 206 buyout funds for the time period 2010-2022, … Improving fund-level ESG footprints by 50% explains a statistically and economically significant net IRR increase of up to 12.4% over a fund’s life cycle. The outcome is linked to specific ESG-management instruments of private equity investors, such as centralised ESG management and ESG value enhancement plans, while no significant effect is recorded for other measures, such as ESG reporting frequencies and ESG impact controlling” (abstract).

SDG rating confusion: “In partnership for the goals”? The (dis)agreement of SDG ratings by Tobias Bauckloh, Juris Dobrick, André Höck, Sebastian Utz, and Marcus Wagner as of May 31st, 2023 (#59): „This paper analyzes the (dis)agreement of Sustainable Development Goals (SDGs) ratings across different rating providers and implications for portfolio management. It documents a considerable level of disagreement that is particularly high for large companies and for companies from the Healthcare and the Basic Materials sector. In general, the sector in which the companies are mainly active explains a large part of the variation in disagreement measures of the SDG ratings. Moreover, we document different return characteristics and risk factor exposures of portfolios sorted according to SDG ratings of different rating providers” (abstract). My comment: I expect SDG-Risk-Ratings to have little additional value to ESG-Ratings. I prefer to use SDG-related revenues or Capex in addition to ESG-Ratings to avoid SDG rating confusion (see e.g. Divestments: 49 bei 30 Aktien meines Artikel 9 Fonds – Responsible Investment Research Blog (

Other investment research

Equity factors: Factor Zoo (.zip) by Alexander Swade, Matthias X. Hanauer, Harald Lohre and David Blitz from Robeco as of Nov. 15th, 2023 (#2546): “Using a comprehensive set of 153 U.S. equity factors, we find that a set of 10 to 20 factors spans the entire factor zoo, depending on the selected statistical significance level. This implies that most candidate factors are redundant but also that academic factor models, which typically contain just three to six factors, are too narrowly defined. When repeating the factor selection to factors as they become available over an expanding window, we find that newly published factors sometimes supersede older factor definitions, emphasizing the relevance of continuous factor innovation based on new insights or newly available data. However, the identified factor style clusters are quite persistent, emphasizing the relevance of diversification across factor styles” (p. 20/21). My comment: Without good (almost impossible) forecasts which factors will outperform, outperforming factor investing is difficult.

Bond factors: Corporate Bond Factors: Replication Failures and a New Framework by Jens Dick-Nielsen, Peter Feldhütter, Lasse Heje Pedersen, and Christian Stolborg as of Oct. 26th, 2023 (#1257): “Many corporate bond factors cannot be reproduced even when attempting to use the methodology of the corresponding paper. More broadly, even factors that can be reproduced should be questioned, since the corporate bond literature is based on data full of errors. … we show that the majority of corporate bond factors from the literature fail to replicate, but a minority of factors remain significant. Further, analyzing corporate bond factors based on equity signals, we find a number of significant new factors“ (p. 27/28). My comment: Same as above: Without good (almost impossible) forecasts which factors will outperform, outperforming factor investing is difficult.

Big fraud? How pervasive is corporate fraud? by Alexander Dyck, Adair Morse, and Luigi Zingales as of Oct. 2nd, 2023 (#120): “… we use the natural experiment provided by the sudden demise of a major auditing firm, Arthur Andersen, to infer the fraction of corporate fraud that goes undetected. This detection likelihood is essential to quantify the pervasiveness of corporate fraud in the United States and to assess the costs that this fraud imposes on investors. We find that two out of three corporate frauds go undetected, implying that, pre Sox, 41% of large public firms were misreporting their financial accounts in a material way and 10% of the firms were committing securities fraud, imposing an annual cost of $254 billion on investors“ (p. 31). My comment: It would be interesting to see the relationship between governance-ratings and fraud.

Health-Wealth-Gap: Health Heterogeneity, Portfolio Choice and Wealth Inequality by Juergen Jung and Chung Tran as of Oct. 18th, 2023 (#28): “… the early exposure to health shocks has strong and long-lasting impacts on the portfolio choice of households and the observed wealth gap among households at retirement age. … as sicker individuals often forgo investing in risky assets that pay higher returns in the long-run. This health-wealth portfolio channel amplifies wealth concentration across groups and over the lifecycle. … In the absence of the health-wealth portfolio channel, the observed wealth gap at retirement is 40–50 percent smaller. In addition, we provide new insights into the social benefit of health insurance. The expansion of public or private health insurance in the US can reduce wealth inequality via mitigating exposure to health expenditure shocks and thereby allow households to make riskier investment choices with higher long-term returns” (p. 27/28).

LLM financial analysts: Large Language Models and Financial Market Sentiment by Shaun A. Bond, Hayden Klok, and Min Zhu as of Oct. 23rd, 2023 (#257): “… we use ChatGPT and BARD to recall daily news summaries related to the S&P 500 Index, classify sentiments from these texts, and use these sentiments to forecast future index returns. … we demonstrate ChatGPT and BARD can recall and classify summary market-level financial text from the perspective of a financial analyst. … we show these sentiments proxy for aggregate investor sentiment and forecast future return reversals of the S&P 500 Index … we provide evidence that incorporating ChatGPT-derived sentiments leads to superior economic performance compared to portfolios that incorporate sentiments from BARD, simpler transformer models, and traditional dictionary approaches. LLMs have superior potential to process contextual information around specific topics or themes beyond that of simpler transformer models and context-indifferent word frequency methods. This greater context awareness leads to better identification of aggregate market sentiment, and superior short-term economic performance when taken into account. Further, results suggest LLMs can identify different aspects of sentiment from text, such as information on different frequencies, and the presence of persistent effects“ (p. 45). My comment see AI: Wie können nachhaltige AnlegerInnen profitieren? – Responsible Investment Research Blog ( or How can sustainable investors benefit from artificial intelligence? – GITEX Impact – Leading ESG Event 2023


Liquid impact advert for German investors

Sponsor my research by investing in and/or recommending my global small/midcap mutual fund (SFDR Art. 9). The fund focuses on social SDGs and uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement with currently 24 of 30 companiesFutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T or Noch eine Fondsboutique? – Responsible Investment Research Blog (

Divestment: Arrows by vectyard from Pixabay

Divestments: 49 bei 30 Aktien meines Artikel 9 Fonds

18 Divestments wegen unerwünschter Aktivitäten oder Länder

Divestments erfolgen bei regelbasierten Investments, wenn Regeln nicht mehr eingehalten werden. Mein regelbasieter Artikel 9 Fonds „FutureVest Equities Sustainable Development Goals R“ enthält nur die aus meiner Sicht nachhaltigsten 30 Aktien. Ich prüfe laufend, ob meine Nachhaltigkeitsanforderungen noch erfüllt werden. Einmal pro Jahr analysiere ich zudem anhand aller mir zur Verfügung stehenden (immer mehr) Nachhaltigkeitsdaten aller Aktien, ob ich meine Nachhaltigkeitsanforderungen weiter erhöhen kann.

Seit dem Fondsstart im August 2021 habe ich bis Mitte November 2023 insgesamt 49 Aktien komplett verkauft (Divestments). Das ist mehr, als erwartet. Hier sind die Gründe:

13 der Verkäufe sind auf unerwünschte Aktivitäten der jeweiligen Unternehmen zurückzuführen. Die meisten derartigen Divestments erfolgten zum Jahreswechsel 2022/2023. Grund war, dass ich seitdem nicht nur grausame und kosmetische, sondern auch medizinische Tierversuche und Aktivitäten in Bezug auf Genmanipulierte Organismen (GMO) ausgeschlossen habe. Das war möglich, weil ich auch mit diesen neuen Ausschlüssen genug Aktien identifizieren konnte, die alle meine Selektionskriterien erfüllten. Hinzu kam, dass damit vor allem große Unternehmen der Gesundheitsbranche ausgeschlossen wurden. Das führte zu einer Verringerung des bis dahin besonders hohen Gesundheitsanteils und einer erheblich niedrigeren durchschnittlichen Kapitalisierung der Unternehmen im Fonds.

Durch den zunehmenden Smallcap-Anteil wurde auch die Überlappung mit gängigen Indizes und auch mit anderen konzeptionell grundsätzlich ähnlichen Fonds reduziert (und damit auch die sogenannte Active Share erhöht). Damit wurde der Fonds als Beimischung für Portfolios (noch) interessanter. Eine Mitte des Jahres durchgeführte Analyse ergab eine Active Share von über 99% und nur maximal 4 gleiche Aktien mit anderen Nachhaltigkeitsfonds.

Seit der Fondsauflage konnte auch die Anforderung an zulässige Länder erhöht werden. So werden nur Aktien mit Hauptsitz oder Hauptbörsennotiz in einem Land mit hoher Rechtssicherheit zugelassen. Nachdem ursprünglich noch 50% aller Länder akzeptiert wurden, wurde die Grenze später auf 40% verschärft. Auslöser für die Regeländerung war die für mich überraschende Entwicklung, dass China erstmals zu den Top 50% gezählt wurde. Aufgrund von zunehmend wahrgenommenen direkten Eingriffen chinesischer Behörden, wollte ich chinesische Aktien aber weiterhin ausschließen. Durch die Regelverschärfung mussten insgesamt 5 Aktien aus Südafrika und Italien aus dem Portfolio genommen werden, denn diese Länder gehören nicht zu den Top 40% nach „Rule of Law“.

16 der 17 Verkäufe erfolgten aufgrund von Regeländerungen zum Selektionszeitpunkt und nur ein Aktivitätsausschluss erfolgte unterjährig, weil eine unerwünschte Aktivität erstmals bekannt wurde.

23 Divestments wegen Sozial- bzw. Umweltratings

Von den 23 Verkäufen aufgrund von E, S bzw. G-Ratings erfolgten 17 zum Jahresende und 6 ungeplant unterjährig. Unterjährige Ratings, die unter unsere Mindestanforderungen fallen, werden zunächst geprüft. Dazu erfolgt oft eine Rücksprache mit dem Ratinganbieter und/oder dem Unternehmen selbst. Die Prüfung kann einige Wochen dauern. Zudem erfolgt ein unterjähriger Verkauf typischerweise nur, wenn die Ratingänderung mehr als 10% ausmacht, also zum Beispiel das Sozialrating von 50 auf unter 45 fällt. Für ein Divestment ist zudem normalerweise erforderlich, dass Aktien, die ebenfalls alle Anforderungen erfüllen, mit nennenswert besseren Ratings zur Verfügung stellen. Wenige Monate vor geplanten Jahresselektionen findet ebenfalls kein schneller Verkauf mehr statt, weil zunächst mögliche Regeländerungen abgewartet werden sollen. Bei Jahreselektionen dagegen stehen typischerweise genug Aktien zur Verfügung, die besser geratet sind und die dann auch Aktien ersetzen können, die noch ausreichende Ratings aufweisen.

Normalerweise erwarten wir, dass gerade die von uns selektieren besonders nachhaltigen Unternehmen sich weiterhin anstrengen noch nachhaltiger zu werden. Andererseits bemühen sich immer mehr Unternehmen um Nachhaltigkeit. Datenupdates des Hauptratinganbieters sollten trotzdem insgesamt eher zu besseren als schlechteren Ratings für die von uns selektierten Aktien führen. Das war jedoch 2023 nicht der Fall. Etliche Ratings der von uns selektierten Unternehmen haben sich unterjährig teilweise erheblich verschlechtert, so dass wir keine Nachrücker mehr hatten, die alle unsere Mindestanforderungen erfüllten. Wir haben unsere jährliche Aktienselektion, die normalerweise zu Jahresende stattfindet, deshalb auf Ende September vorgezogen.

Von den 23 ESG-Ratingbedingten Divestments entfielen zwei Drittel auf Sozial- und ein Drittel auf Umweltratings, während Governanceratings nicht zu Divestments geführt haben. Das ist nicht überraschend, denn die meisten Aktien des Fonds sind eher sozial- als ökologieorientiert und weisen damit auch höhere Sozialrisiken aus. Governanceratings sind zudem meist ziemlich stabil. Außerdem wurden sie von uns bis September 2023 zudem zum Ranking der zulässigen Aktien genutzt, so dass die Mindestgovernanceratings der Aktien im Fonds höher waren als die ökologischen oder Sozialmindestratings.

8 Divestments wegen Übernahmen, SDG-Alignment und Kursverlusten

Drei weitere Verkäufe erfolgten, weil die entsprechenden Unternehmen übernommen wurden. Zwei weitere Aktien wurden verkauft, weil sie unsere Anforderungen an die Vereinbarkeit mit den nachhaltigen Entwicklungszielen der Vereinten Nationen nicht mehr erfüllten. Zudem wurden Aufgrund unterjähriger Verluste oberhalb der von uns akzeptierten (relativ hohen) Grenze drei weitere Aktien aus dem Fonds genommen. „Maximaler Verlust“, der einzige „kommerzielle“ beziehungsweise „nicht-nachhaltige“ Regelbestandteil führte also nur zu einem sehr geringen Portfolioturnover.

Zwei dieser sieben Verkäufe erfolgten unterjährig aufgrund von Übernahmen der betreffenden Unternehmen, die sechs anderen im Rahmen der jährlichen Neuselektion. Aufgrund von mangelnder Reaktion auf Engagementversuche wurde bisher noch kein Unternehmen aus dem Fonds ausgeschlossen.

Regeländerungen für 2024 u.a. zur Turnover-Reduktion

Die jährliche Selektion wird vor allem genutzt, um Verschärfungen der Nachhaltigkeitsregeln zu prüfen. Bei der für 2024 etwas vorgezogenen Selektion konnte zum Beispiel das von Ratinganbieter neu zur Verfügung gestellte Kriterium SDG-Umsätze genutzt werden. In der Vergangenheit wurde für das gewünschte möglichst hohe SDG-Alignment nach entsprechenden Branchen bzw. Unternehmensaktivitäten gesucht und zusätzlich Mindestanforderungen an das SDG-Risiko gestellt.

Mit der Festlegung auf mindestens 50% SDG-Umsätze auf Basis der Analyse des Ratinganbieters wurden die Regeln objektiviert. Gewünscht wären 100% SDG-Alignment, wie es auch für die meisten Portfoliounternehmen ausgewiesen wird. Allerdings konnten nicht genug Unternehmen gefunden werden, die 100% SDG-Alignment sowie die Erfüllung aller anderen Selektionskriterien aufwiesen. Außerdem ist für uns nicht nachvollziehbar, warum zum Beispiel für Sozialimmobilien- und einige Infrastrukturanbieter von dem von uns genutzten Ratinganbieter kein ausreichendes SDG-Alignment ausgewiesen wird. Auch für Arbeitsvermittlungsunternehmen gehen wir weiter von einem guten SDG-Alignment aus und auch diese werden vom Ratinganbieter nicht so klassifiziert. Wir haben uns deshalb entschieden, zumindest bis zur nächsten jährlichen Selektion Ende 2024 solche Unternehmen weiter im Portfolio zu behalten, auch wenn die ausgewiesenen SDG-Umsätze unter 50% liegen.

Die Neuselektion wurde auch deshalb vorgezogen, weil das SDG-Risikorating ab Oktober 2023 nicht mehr zur Verfügung gestellt wird, aber noch für die Selektion genutzt werden sollte.  

Andere, kleinere Regeländerungen wurden aus analysetechnischen Gründen gemacht. So werden nicht mehr tausende potenzielle Unternehmen auf maximale Verluste geprüft, sondern nur noch, ob der maximale Kursverlust über 50% liegt. 50% wurde gewählt, weil im Vorjahr ein Viertel der unsere sonstigen Regeln erfüllenden Unternehmen mehr als 50% Kursverlust aufwies und somit ausgeschlossen wurde. Ähnliches erfolgte in Bezug auf die Mindestratinganforderungen an den zweiten Ratinganbieter. In der Vergangenheit durfte Aktien im Portfolio nicht zu den schlechtesten 25% gehören und bei der aktuellen Selektion wurde ein E, S und G Ratings von mindestens 33/100 angesetzt. Auch das entspricht ungefähr den Vorjahres-Cutoffs.   

Insgesamt kam es aufgrund der neuen Selektionskriterien zum Ersatz von 10 Aktien, was etwas unterhalb des hohen vorjährigen Austauschs lag. Weil 2022 erstmals mit dem Shareholder Engagement begonnen wurde und in 2023 auf alle Unternehmen ausgedehnt wurde, soll künftig der Turnover im Fonds idealerweise weiter sinken. Grund dafür ist, dass Shareholder Engagement relativ lange braucht, um zu wirken. Ich strebe zwar an, auch mit Unternehmen, deren Aktien nicht mehr im Portfolio sind, weiter im Dialog zu bleiben, aber der Engagementfokus liegt natürlich auf den Unternehmen im Bestand.

10 Verkäufe im 4. Quartal 2023 und Portfolioauswirkungen

Die Gründe für die zehn oben bereits mitgezählten Divestments im vierten Quartal 2023 sind ebenfalls unterschiedlich. Für sechs Aktien wurde Ersatz mit besseren Sozialratings gefunden und für zwei Aktien welche mit besseren Umweltratings. Bei einem weiteren Unternehmen haben inzwischen vom Ratinganbieter bestätigte unerwünschte Aktivitäten zum Ausschluss geführt und bei einem anderen der maximale Verlust.

Erwähnenswert ist noch, dass zwei Aktien schon früher im Portfolio waren und jetzt wieder re-investiert werden. Eine davon wurde in einer früheren Jahresselektion ausgeschlossen, weil es andere Unternehmen mit aus meiner Sicht besserer Vereinbarkeit mit den SDGs gab. Clarity-Daten zeigen für diese Gesellschaft aber aktuell über 95% Umsatzvereinbarkeit mit den SDG und sehr gute ESG-Ratings. Die andere Aktie wurde verkauft, weil sie in der Vergangenheit einen Kursverlust größer 50% hatte, der jetzt außerhalb der betrachteten 12-Monatsperiode liegt.

Insgesamt führten diese Änderungen dazu, dass sich der USA-Anteil etwas senkt aber immer noch bei knapp 50% liegt. Dafür stieg der vorher relativ geringe Anteil von ökologisch fokussierten Aktien auf über ein Drittel an. Vor allem aber haben inzwischen 2/3 der Aktien eine Marktkapitalisierung von maximal fünf Milliarden Euro und nur noch drei über 20 Milliarden.

Weiterführende Beiträge

30 stocks, if responsible, are all I need (8-2022)

Mein Artikel 9 Fonds: Noch nachhaltigere Regeln (2-2022)    

Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? (3-2023)

Active or impact investing? (6-2023)

Noch eine Fondsboutique? (8-2023)


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Green risks illustrated with bridge into the jungle by Nile from Pixabay

Green risks: Researchpost #151

Green risks: 9x new research on GPT, influencers, sustainable products, climate policies and city and market risks, environmental metrics, investment fees and art  (# shows the number of full paper SSRN downloads as of Nov. 9th, 2023)

Social and ecological research: Green risks

Good GPT? Capital Market Consequences of Generative AI: Early Evidence from the Ban of ChatGPT in Italy by Jeremy Bertomeu, Yupeng Lin, Yibin Liu, and Zhenghui Ni as of Oct. 11th, 2023 (#633): “On March 31, 2023, the Italian data protection authority found that ChatGPT violated data protection laws and banned the service in Italy …. Italian firms with greater exposure to the technology exhibit an underperformance of around 9% compared to firms with lower exposure during the ban period. We observe a more significant negative impact on stock value for smaller and newly established companies …. Analysts located in Italy issue fewer forecasts than foreign analysts covering the same Italian firm. Further, bid-ask spreads widen during the ban, particularly for firms with fewer institutional investors, limited analyst coverage, and a lower presence of foreign investors“ (abstract). My comment see How can sustainable investors benefit from artificial intelligence? – GITEX Impact – Leading ESG Event 2023

Hidden sponsors: How Much Influencer Marketing Is Undisclosed? Evidence from Twitter by Daniel Ershov, Yanting He, and Stephan Seiler as of Nov. 8th, 2023 (#133): „… we quantify the importance of undisclosed sponsored content on Twitter based on a unique data set of over 100 million posts …. We find that undisclosed sponsored posts are ubiquitous with 96% of all sponsored content being undisclosed. The share of undisclosed content decreases only slightly over time despite stronger regulation and only a small share of brands responded to a regulatory change that mandated disclosure at the beginning of a post. … We also find that young brands with a larger social media following are less likely disclose sponsored content. These kind of brands will likely rely more heavily on influencers and therefore disclosure rates might remain low in the future“.

Green distribution deficits: Sustainable Product Demand and Profit Potential by Bryan Bollinger, Randi Kronthal-Sacco, and Levin Zhu as of Oct. 13th, 2023 (#43): “… we flexibly estimate price elasticities for every product in every county in the United States, for which we have sufficient data, in different store formats. … While profit potential and availability of sustainable products increase together with some demographic variables, in other cases the availability of sustainable products does not reflect the profit potential. … for mass merchandiser stores, we find that sustainable products are more available in markets with higher incomes, higher Democratic vote share, and a higher fraction of the population that is white, despite the fact that profit potential is not higher in these markets for the majority of categories. Our findings that the demographic factors still predict availability even after controlling for profit potential suggest that product distribution decisions (either by manufacturers or retailers) may be influenced by prior beliefs about preferences of consumers that fit these criteria. Our findings speak to potential access issues to sustainable products for less “stereotypical” sustainable consumers (non-white, less college education, lower income, and Republican), which also presents a potential market opportunity for manufacturers and retailers“ (p. 30/31).

Climate action framing: Public Support for Climate Change Mitigation Policies: A Cross-Country Survey by Era Dabla-Norris, Salma Khalid, Giacomo Magistretti, and Alexandre Sollaci from the International Monetary Fund as of Nov. 2nd, 2023 (#11): “This paper uses large-scale public perceptions surveys across 28 emerging market and advanced economies to examines how individuals view different climate mitigation policies and what drives their support. We find there is significant heterogeneity on climate risk perceptions and preferences for policies across individuals and countries. Respondents in emerging market economies (in general, countries more vulnerable to climate change) tend to see it as a bigger problem and are more supportive of policies to mitigate it. Concerns about climate change are also higher among women … Our surveys find that lack of support for carbon pricing is driven by concerns about rising energy prices and the perception that such policies are ineffective at reducing climate change. Another major concern is their perceived regressiveness (disproportionate impact on low-income households). … individuals that are given a short text describing the effectiveness of carbon pricing policies and their co-benefits increase their support by 7 percentage points. In contrast, reading a paragraph highlighting the costs of such policies decreases respondents’ support by 9 percentage points… the majority of respondents in every country in our sample find that all countries should bear the burden of those policies, not only the rich ones. Finally, we also find broad support for policies based on current, rather than historical, emissions …“ (p. 26/27).

City climate costs: A Market-based Measure of Climate Risk for Cities by Alexander W. Butler and Cihan Uzmanoglu as of Oct. 30th, 2023 (#43): “We estimate the climate news sensitivities—climate news betas—of municipal bonds and invert their signs. This way, we expect bonds with higher (lower) climate news betas to be affected more (less) negatively from future negative climate news. We find that climate news betas are positively associated with yield spreads. The effect is economically meaningful: a one-standard deviation increase in climate news beta is associated with an increase of between 2.48% and 11.17% in average yield spreads. This finding demonstrates that higher climate risk exposure is associated with higher cost of borrowing. … there is substantial variation in climate risk based on cities’ demographics, such as poverty, population density, and climate science acceptance” (p. 29/30).

Responsible investment research: Green risks

Green policy risks: The Effect of U.S. Climate Policy on Financial Markets: An Event Study of the Inflation Reduction Act by Michael D. Bauer, Eric A. Offner, Glenn D. Rudebusch as of Nov. 8th, 2023 (#11): „… We show that the equity market responses to announcements of climate policy actions were quick, substantial, and distinctly heterogeneous with wide variation across firms and industries. Green stocks— equities of firms with lower carbon emission intensities and better environmental and emission scores—benefited from news that the IRA (Sö : US InflationReduction Act) would become law, while brown stocks—those of more carbon-intensive and more polluting firms—lost value. … We find equity movements in the opposite direction—with brown stocks outperforming green stocks—for the earlier event when the prospects for climate action shifted to negligible. … Industries likely to benefit from the new policies—in particular, the utilities, construction, and automobile/transportation sectors—saw their stocks appreciate. However, across all industries, there was little correlation between industry-level greenness and stock market response. This finding suggests that a more granular, firm-level level approach may often be necessary to reliably capture exposure to transition risk“ (p. 27/28).

Green risk reduction: Can environmental metrics improve bank portfolios’ performance? by Gian Marco Mensi and Maria Cristina Recchioni as of Nov. 2nd, 2023 (#13): “We investigate the effectiveness of three different climate metrics in identifying green banks within a sample of large Eurozone and US lenders in the February 2019 – April 2022 period. … relative exposure to stranded assets, environmental ratings and Scope 2 emissions … The results show that the selected climate loss proxy overperforms in the Eurozone, succeeding in creating an effective climate tilt while containing active risk. Both emission-adjusted and rating-modified portfolios work as well, albeit less effectively. Conversely, the results with respect to US banks are inconclusive, with no metric consistently overperforming … “ (abstract).

Other investment research

More active, more money? Do Fees Matter? Investor’s Sensitivity to Active Management Fees by Trond Døskeland, André Wattø Sjuve, and Andreas Ørpetveit as of Sept. 16th, 2023 (#324): “… we find that excess fees are negatively related to subsequent quarterly net flows, while the level of active management (measured by active share) is positively related to subsequent quarterly net flows … the fee variables are only moderately related to Morningstar ratings …” (p. 37). My position on active management see 30 stocks, if responsible, are all I need – Responsible Investment Research Blog (

Attractive art: Portfolio Diversification Including Art as an Alternative Asset by Diana Barro, Antonella Basso, Stefania Funari and Guglielmo Alessandro Visentinas of Oct. 31st, 2023 (#42): “We have shown that art returns are extremely volatile, and that much of this volatility can be attributed to the seasonal behavior of the time series. Moreover, notwithstanding the high risk, art still performs reasonably well compared with other asset classes, with which it is low correlated, and may even represent a better safe haven than gold“ (p. 24/25).


Liquid impact advert for German investors

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Responsible Derivatives illustration shows manager juggler

Responsible derivatives? Researchpost #150

Responsible derivatives: 10x new research on migration, ESG labels, biodiversity measurement, effective shareholder voting, responsible investing mandates, green derivatives, structured products, stock market models, IPOs and alternative investments (# shows the number of full paper SSRN downloads as of Nov. 2nd, 2023)

Social and ecological research (responsible derivatives)

Migration policy backlash: The Effect of Foreign Aid on Migration: Global Micro Evidence from World Bank Projects by Andreas Fuchs, Andre Groeger, Tobias Heidland and Lukas Wellner as of Oct. 2023: “Our short-term results indicate that the mere announcement of a World Bank aid project significantly decreases migration preferences. We find similar effects for project disbursements, which also reduce asylum seeker flows to the OECD in the short run. This reduction seems related to enhanced optimism about the economic prospects in aid recipient provinces and improved confidence in national institutions. In the longer run, aid projects increase incomes and alleviate poverty. The negative effect of aid on asylum seeker flows fades out, and regular migration increases. … There is no evidence in our study that targeting the “root causes” of migration through aid on average increases irregular migration or asylum seeker numbers. … In the short run, aid projects reduce migration preferences and asylum seeker flows to the OECD from Latin America, MENA, and non-fragile Sub-Saharan African countries. However, we do not find a significant effect in fragile countries of Sub-Saharan Africa, which are an important source of irregular migration to Europe. For policymakers, a key takeaway from our study is that aid projects do not keep people from migrating from the 37 most hostile environments, but they can be effective in more stable environments” (p. 37/38).

Sustainable investing research (responsible derivatives)

Rating beats label: Talk vs. Walk: Lessons from Silent Sustainable Investing of Mutual Funds by Dimitrios Gounopoulos, Haoran Wu, and Binru Zhao as of Oct. 26th, 2023 (#81): “… in the Morningstar fund sustainability rating landscape, most funds with top ratings do not self-label as ESG funds (“silent” sustainable investing). … We find that investors tend to overemphasize ESG labels and often overlook sustainability rating signals in the market. More importantly, we show that “silent” funds with high sustainability ratings have comparable return performance to ESG funds and that high sustainability ratings have a stronger influence on mitigating fund risks than the ESG label” (p. 33/34). My comment: In general, I agree. But the type of ESG rating used is also very important. Watch out for my next opinion blogpost on Apple, Amazon, Alphabet etc. and their ESG-ratings

Biodiversity confusion: Critical review of methods and models for biodiversity impact assessment and their applicability in the LCA context by Mattia Damiani, Taija Sinkko, Carla Caldeira, Davide Tosches, Marine Robuchon, and Serenella Sala as of Nov. 17th, 2022 (#139): “… The five main direct drivers of biodiversity loss are climate change, pollution, land and water use, overexploitation of resources and the spread of invasive species. …  this article aims to critically analyse all methods for biodiversity impact assessment … 54 methods were reviewed and 18 were selected for a detailed analysis … There is currently no method that takes into account all five main drivers of biodiversity loss” (abstract).

Explain to change: Voting Rationales by Roni Michaely, Silvina Rubio, and Irene Yi as of Aug. 16th, 2023 (#279): “…studying voting rationales of institutional investors from across the world, for votes cast in US companies’ annual shareholder meetings between July 2013 and June 2021. … institutional investors vote against directors mainly because of (lack of) independence and board diversity. We also find evidence of some well-known reasons for opposing directors, such as tenure, busyness, or firm governance. Institutional investors are increasingly voting against directors due to concerns over environmental and social issues. Our results indicate that voting rationales are unlikely to capture proxy advisors’ rationales, but rather, the independent assessment of institutional investors. … We find that companies that receive a higher proportion of voting rationales related to board diversity (or alternatively, excessive tenure or busy directors) increase the fraction of females on board in the following year (reduce average tenure or director busyness), and the results are driven by companies that receive high shareholder dissent. … our results suggest that disclosure of voting rationales is an effective, low-cost strategy that institutional investors can use to improve corporate governance in their portfolio companies“ (p. 31/32).

Impact impact? Evaluating the Impact of Portfolio Mandates by Jack Favilukis, Lorenzo Garlappi, and  Raman Uppal as of Oct. 2nd, 2023 (#56): “… we examine the impact of portfolio (Sö: e.g. ESG or impact investing) mandates on the allocation of physical capital in a general-equilibrium economy with production and heterogenous investors. … we find that the effect of portfolio mandates on the allocation of physical capital across sectors can be substantial. In contrast, the impact on the equilibrium cost of capital and Sharpe ratio of firms in the two sectors remains negligible, consistent with existing evidence. Thus, a key takeaway of our analysis is that judging the effectiveness of portfolio mandates by studying their effect on the cost of capital of affected firms can be misleading: small differences in the cost of capital across sectors can be associated with significant differences in the allocation of physical capital across these sectors” (p. 31/32). My comment: With my ESG and SDG investing mandates I want to invest as responsibly as possible and hope to achieve similar performances as less responsible investments. With this approach, there is no need to try to prove lower cost of capital for responsible companies.

Responsible derivatives? Climate Risk and Financial Markets: The Case of Green Derivatives by Paolo Saguato as of Oct. 30th, 2023 (#37): “The post-2008 derivatives markets are more transparent and more collateralized than before. However, this regulatory framework might impose excessive regulatory and compliance costs to derivatives market which would undermine market incentives and hamper financial innovation in the green derivatives. … Right now, bespoke OTC sustainable derivatives are the predominant structures in the market, but as soon as green assets and sustainability benchmark standardization will become the norm, then exchange-traded green derivatives might start to develop more strongly, providing a valuable and reliable support to a green transition” (p. 23).

Other investment research

Responsible derivatives? Structured retail products: risk-sharing or risk-creation? by Otavio Bitu, Bruno Giovannetti, and Bernardo Guimaraes as of October 31, 2023 (#151): “Financial institutions have been issuing more complex structured retail products (SRPs) over time. Is risk-sharing the force behind this financial innovation? Is this innovation welfare-increasing? We propose a simple test for that. If a given type of SRP is not based on risk-sharing and pours new unbacked risk into the financial system, we should observe an unusual negative relation between risk and expected return offered to buyers across products of that type. We test this hypothesis using a sample of 1,847 SRPs and find that a relevant type of SRP (Autocallables) creates new unbacked risk” (abstract).

Irrational finance professional? Mental Models of the Stock Market by Peter Andre, Philipp Schirmer, and Johannes Wohlfart as of Oct. 31st, 2023 (#74): “Financial markets are governed by return expectations, which agents must form in light of their deeper understanding of these markets. Understanding agents’ mental models is thus critical to understanding how return expectations are formed. … We document a widespread tendency among households from the general population, retail investors, and financial professionals to draw inferences from stale news regarding future company earnings to a company’s prospective stock return, which is absent among academic experts. This striking difference in their return forecasts results from differences in agents’ understanding of financial markets. Experts’ reasoning aligns with standard asset pricing logic and a belief in efficient markets. By contrast, households and financial professionals appear to employ a naive model that directly associates higher future earnings with higher future returns, neglecting the offsetting effect of endogenous price adjustments. This non-equilibrium reasoning stems from a lack of familiarity with the concept of equilibrium rather than inattention to trading or price responses. … Our findings – that mental models differ across economic agents and that they drastically differ from standard economic theories among important groups of households and financial professionals who advise and trade for these households – are likely to have significant implications. For example, our findings can provide a new perspective on previously documented anomalies in return expectations and trading decisions” (p. 30/31).

M&A not IPO: IPOs on the decline: The role of globalization by M. Vahid Irani, Gerard Pinto, and Donghang Zhang as of Oct. 2nd, 2023 (#37): “Using the average percentage of foreign sales as a proxy for the level of globalization of the U.S. economy or a particular industry, we find that the decline in U.S. initial public offerings (IPOs), particularly small-firm IPOs, is significantly positively associated with the level of globalization at both the macroeconomy and the industry levels. We also find that increased globalization of an industry makes a U.S. private firm in the industry more likely to choose M&A sellouts over IPOs as an exit strategy”“ (abstract).

Unattractive Alternatives: Endowments in the Casino: Even the Whales Lose at the Alts Table by Richard M. Ennis as of Oct. 27th, 2023 (#516): “For more than two decades, so-called alternatives—hedge funds, private-market real estate, venture capital, leveraged buyouts, private energy, infrastructure, and private debt—have been the principal focus of institutional investors. Such investments now constitute an average of 60% of the assets of large endowments and 30% of public pension funds. … … endowments—across the board—have underperformed passive investment alternatives by economically wide margins since the GFC (Sö: Global Financial Crisis) … We observe that large endowments have recorded greater returns than smaller ones because they take greater risk (have a greater equity exposure), not as a result of their alt investing. In fact, their greater returns have occurred in spite of their heavier weighting of alt investments. Alt-investing has not been a source of diversification of stock market risk. … I estimate that institutional investors pay approximately 10 times as much for their alts as they do for traditional stock-bond strategies… despite exhibiting some skill with alts, large endowments would have been better off leaving them alone altogether” (p. 8/9). My comment: See Alternatives: Thematic replace alternative investments (


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Purpose – Researchpost #149

Purpose: 14x new interesting research on free data, AI, biodiversity, gender gaps, purpose and ESG washing, geodata, shareholder engagement, financial education, ETFs, private equity and asset allocation (# shows SSRN downloads as of Oct. 26th, 2023)

Social and ecological research (Purpose)

Much (free) data: A Compendium of Data Sources for Data Science, Machine Learning, and Artificial Intelligence by Paul Bilokon, Oleksandr Bilokon, and Saeed Amen from Thalesians as of Sept. 12th, 2023 (#942): “… compendium – of data sources across multiple areas of applications, including finance and economics, legal (laws and regulations), life sciences (medicine and drug discovery), news sentiment and social media, retail and ecommerce, satellite imagery, and shipping and logistics, and sports”. My comment: My skeptical view on big data see Big Data und Machine Learning verschlechtern die Anlageperformance und Small Data ist attraktiv from 2018 and more recently How can sustainable investors benefit from artificial intelligence? – GITEX Impact – Leading ESG Event 2023

Unclear AI-Labor relation: Labor Market Exposure to AI: Cross-country Differences and Distributional Implications by Carlo Pizzinelli, Augustus Panton, Marina M. Tavares, Mauro Cazzaniga, Longji Li from the IMF as of Oct. 6th,2023 (#5): “…. a detailed cross-country analysis encompassing both Advanced Economies (AEs) and Emerging Markets (EMs) … high-skill occupations that are more prevalent in AEs, despite being more exposed, can also greatly benefit from AI. Overall, AEs have more employment than EMs in exposed occupations at both ends of the complementarity spectrum. This finding suggests that AEs may expect a more polarized impact of AI on the labor market and are thus poised to face greater risk of labor substitution but also greater benefits for productivity” (p. 31/32).

Pay for biodiversity? Revealing preferences for urban biodiversity as an environmental good by Leonie Ratzke as of Oct. 25th, 2022 (#26): “… relatively little research on urban dwellers’ preferences and willingness to pay (WTP) for urban biodiversity exists. … using a revealed preference approach based on a real estate dataset comprising around 140,000 unique entries of rental and sales transactions of apartments. I find that WTP for biodiversity is exclusively positive and economically relevant” (abstract).

Insurance gender issues: Gender-inclusive Financial and Demographic Literacy: Lessons from the Empirical Evidence by  Giovanna Apicella, Enrico G. De Giorgi, Emilia Di Lorenzo, and Marilena Sibillo as of Jan. 24th, 2023 (#104): “Consistent empirical evidence shows that women have historically experienced lower mortality rates than men. In this paper, we study a measure of the gender gap in mortality rates, we call “Gender Gap Ratio” … The evidence we provide about a Gender Gap Ratio that ranges between 1.5 and 2.5, depending on age and country, translate into a significant reduction of up to 25% in the benefits from a temporary life annuity contract for women with respect to men, against the same amount invested in the annuity. The empirical evidence discussed in this paper documents the crucial importance of working towards a more widespread demographic literacy, e.g., a range of tools and strategies to raise longevity consciousness among individuals and policy makers, in the framework of gender equality policies“ (abstract).

Corporate purpose: Sustainability Through Corporate Purpose: A New Framework for the Board of Directors by Mathieu Blanc and Jean-Luc Chenaux as of July 27th, 2023 (#106): “The definition and implementation of a corporate purpose is the most appropriate process for the board of directors and management to achieve a sustainable as well as profitable business activity, which necessarily encompasses economic, social and environmental components. The corporate purpose statement offers guidance to the managing bodies of a company to determine the necessary and difficult trade-offs between the different stakeholders and set priorities in the long-term interest of the company. In our opinion, this concept is most likely the best tool to reconcile society with business activities and remind shareholders, business leaders, customers and employees that what unites them for the development of society is much stronger that what divides them“ (p. 32). My comment: My corporate purpose is very simple: Offer liquid investment portfolios that are as sustainable as possible.

Purpose-washing? Putting Social Purpose into Your Business by Philip Mirvis of the Babson Institute for Social innovation as of Oct. 15th, 2023 (#9): “… there’s a massive “purpose gap”—large majorities of companies have purportedly proclaimed their purpose but it has not been built into their business and is either unknown to or doubted by their employees and customers. Who get this right? The research reports on how Ben & Jerry’s, Nike, Novo Nordisk, PepsiCo, and Unilever developed and implemented a “social purpose”—a pledge to address serious social problems their business operations, products, partnerships, and social issue campaigns” (abstract).

Responsible investment research (Purpose)

Costly ESG washing: When Non-Materiality is Material: Impact of ESG Emphasis on Firm Value by Sonam Singh, Ashwin V. Malshe, Yakov Bart, and Serguei Netessine as of Oct. 18th, 2023 (#63): “ESG factors are nonmaterial (material) when excluding them from corporate disclosure would not (would) significantly alter the overall information available to a reasonable investor. Using a deep learning model to earnings call transcripts of 6,730 firms from 2005 to 2021 to measure ESG emphasis the authors estimate panel data models for testing this framework. The analysis reveals a 1% increase in nonmaterial ESG emphasis decreases firm value by .30%. This negative impact on firm value is 2.12 times higher than the positive impact of material ESG emphasis. Furthermore, the negative impact of nonmaterial ESG emphasis on firm value grows over time and is more pronounced in regulated industries“ (abstract).

Geodata for ESG: Breaking the ESG rating divergence: an open geospatial framework for environmental scores by Cristian Rossi, Justin G D Byrne, and Christophe Christiaen as of Oct. 19th, 2023 (#20): “… geospatial datasets offer ESG analysts and rating agencies the ability to verify claims of company reported data, to fill in gaps where none is otherwise reported or available, or to provide new types of data that companies would not be able to provide themselves. Free to use geospatial datasets that have broad geographic coverage exist, and some are updated over time. … This paper has proposed a novel framework … to mitigate the reported divergence in ESG scores by using consistent and trusted geospatial data for environmental impact analysis at the physical asset level“ (p. 19).

Green owner success: Divestment and Engagement: The Effect of Green Investors on Corporate Carbon Emissions by Matthew E. Kahn, John Matsusaka, and Chong Shu as of Oct. 13th, 2023 (#72): “We focus on public pension funds, classifying them as green or non-green based on which political party controlled the fund. … Our main finding is that companies reduced their greenhouse gas emissions when stock ownership by green funds increased and did not alter their emissions when ownership by non-green funds changed. We find evidence that ownership and constructive engagement was more effective than confrontational tactics such as voting or shareholder proposals. We do not find that companies with green investors were more likely to sell off their polluting facilities (greenwashing). Overall, our findings suggest that (a) corporate managers respond to the environmental preferences of their investors; (b) divestment in polluting companies may be counterproductive, leading to greater emissions; and (c) private markets may be able to address environmental challenges without explicit government regulation“ (abstract). My comment: My shareholder and stakeholder engagement approach is documented here Shareholder engagement: 21 science based theses and an action plan – (

Political Private Equity: ESG Disclosures in Private Equity Fund Prospectuses and Fundraising Outcomes by John L. Campbell, Owen Davidson, Paul Mason, and Steven Utke as of Sept. 9th, 2023 (#105): “We use a large language model to identify Environment, Social, and Governance (ESG) disclosures in private equity (PE) brochures (Form ADV Part 2) … First, we find environmental, but not social or governance, disclosures are negatively associated with the likelihood a PE adviser raises a new fund. Second, using disclosure tone, we separately identify disclosures of ESG risk from disclosures of ESG related investment activity. We find environmental risk disclosure is negatively associated with new fund formation. In contrast, the effect of environmental investment disclosure is positive or negative depending on the political leaning of investors home state” (abstract).

Other investment research

Literate delegation: Household portfolios and financial literacy: The flight to delegation by Sarah Brown, Alexandros Kontonikas, Alberto Montagnoli, Harry Pickard, and Karl Taylor as of Oct. 17th, 2023 (#6): “ … we analyse the asset allocation of European households, focusing on developments during the period that followed the recent twin financial crises. … We provide novel evidence which suggests that the “search for yield” during the post-crisis period of low interest rates took place not by raising the direct holdings of stocks and bonds, but rather indirectly through higher mutual funds’ holdings, in line with a “flight to delegation”. Importantly, this behaviour is strongly linked to the level of financial literacy, with the most literate households displaying significantly higher use of mutual funds“ (abstract).

Fin-Ed returns: Selection into Financial Education and Effects on Portfolio Choice by Irina Gemmo, Pierre-Carl Michaud, and Olivia S. Mitchell as of Sept. 25th, 2023 (#34): “The more financially literate and those expecting higher gains pay more to purchase education, while those who consider themselves very financially literate pay less. Using portfolio allocation tasks, we show that the financial education increases portfolio efficiency and welfare by almost 20 and 3 percentage points, respectively. In our setting, selection does not greatly influence estimated program effects, comparing those participating and those who do not“ (abstract). My comment: I try to contribute to B2B financial literacy with (free)

Passive problems: Passive Investing and Market Quality by Philipp Höfler, Christian Schlag, and Maik Schmeling as of Oct. 5th, 2023 (#127): “We show that an increase in passive exchange-traded fund (ETF) ownership leads to stronger and more persistent return reversals. … we further show that more passive ownership causes higher bid-ask spreads, more exposure to aggregate liquidity shocks, more idiosyncratic volatility and higher tail risk. We … show that higher passive ETF ownership reduces the importance of firm-specific information for returns but increases the importance of transitory noise and a firm’s exposure to market-wide sentiment shocks” (abstract).

New allocation model: The CAPM, APT, and PAPM by Thomas M. Idzorek, Paul D. Kaplan, and Roger G. Ibbotson as of Sept. 9th, 2023 (#114): “Important insights and conclusions include: In the CAPM, there is only one “taste” and that is a single dimension of risk aversion. The CAPM assumes homogeneous expectations, so there is no “disagreement”. Both the APT and the PAPM have a linear structure, but in the APT an unknown factor structure is supplied by the economy, whereas in the PAPM the structure arises out of the investor demand for security characteristics, which need not be risk based. … The PAPM with “disagreement” leads to mispricing, inefficient markets, and the potential for active management. The CAPM, as well as a number of new ESG equilibrium asset pricing models, are special cases of the PAPM, which allows for any number of tastes for any number of characteristics and disagreement“ (p. 25). My comment: I prefer a much simpler and optimization-free passive asset allocation see 230720 Das Soehnholz ESG und SDG Portfoliobuch


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Liquid impact picture shows water drop by rony michaud from pixabay

Liquid impact – Researchpost #148

Liquid impact: 10x new and interesting research on greentech, sustainable jobs, ESG exclusions and ratings, green performance, greenwashing and advisor growth by Ulrich Atz, Thomas Dangl, Michael Halling and many more  (# show SSRN downloads on Oct. 19th)

Ecological and social research

Greentech: The global environmental effects of FinTech market growth by Charilaos Mertzanis as of Sept. 25th, 2023 (#13): “We contribute to the existing literature by examining the impact of aggregate values of FinTech finance on environmental performance across a sample of fifty-eight countries during the period of 2013-2019. Our findings show a small but statistically significant positive effect of FinTech finance on environmental performance within our sample. … government effectiveness emerges as a crucial factor in driving environmental performance, promoting it both directly and indirectly through fostering higher growth effects in the FinTech market“ (p. 20).

Good jobs: Hidden Figures: The State of Human Capital Disclosures for Sustainable Jobs by Ulrich Atz and Tensie Whelan as of Oct. 11th, 2023 (#34): “Sustainable jobs … can lead to better financial performance, and represent a material impact for most corporations. … Using data from six leading ESG rating providers, we demonstrate substantial reporting gaps. For example, we find that only 20% of social metrics are decision-useful and quantitative measures are missing for most firms (70-90% per metric across raters). Even turnover, a financially material metric, is only available for half of firms at best and lacks details. Two case studies, on Amazon and the quick-service restaurant industry, further illustrate the financial costs of ignoring employment quality. We also provide several practical recommendations for managers and other stakeholders“ (abstract).

Responsible investment research: Liquid impact

Rating differences: ESG Reporting Divergence by Qiang Cheng, Yun Lou, and Mengjie Yang as of Sept. 9th,2023 (#128): “ … the ESG reporting divergence measure is lower for firm-pairs using the same ESG reporting framework, with similar size, and with similar ESG performance than for other firm-pairs. We also find that the level of divergence in firms’ reporting of environmental or social activities is significantly higher than that of governance reporting … we find that a higher level of ESG reporting divergence is associated with more ESG rating disagreement among ESG rating providers and weaker association between ESG ratings and ESG fund allocation. … We also find that the informativeness of ESG ratings about firms’ future ESG performance declines with ESG reporting divergence“ (p. 34/35).

ESG exclusions: Green Dilution: How ESG Scores Conflict with Climate Investing by Noel Amenc, Felix Goltz, and Antoine Naly from EDHEC as of June 2023: “By comparing the greenness of portfolios built to have both higher ESG scores and lower carbon intensity to that of portfolios solely built to reduce carbon intensity, we are able to compute the incremental impact of the inclusion of ESG scores on carbon intensity reduction, which we call green dilution. We show green dilution is pervasive, regardless of which ESG scores are targeted as objectives, substantial, with an average of 92% across our portfolios, and robust across several alternative specifications. A 92% green dilution means that 92% of the carbon intensity reduction investors could have reached by solely weighting stocks to minimise carbon intensity is lost when adding ESG scores as a partial weight determinant. … A more sensible alternative is to separate the two objectives, by first screening out stocks with low ESG scores, and then weighting the remaining stocks by the investor’s key objective, carbon intensity in our case. Since both dimensions are unrelated, screening out stocks by ESG scores does not affect the carbon intensity distribution of the stock universe. ESG exclusions thus result in a neutral impact on portfolio carbon intensity, with a green dilution close to zero” (p. 6). My comment: I exclude low (best-in-universe and separate E, S and G) rated stocks since many years, see e.g. 140227 ESG_Paper_V3 1 ( and Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – (

Low emissions, high returns: Carbon emissions, stock returns and portfolio performance by Papa Orgen as of Oct. 11th, 2023 (#28): “This study offers an explanation for the absence of a carbon risk premium on the basis of firm carbon intensity. The results suggest investors became more responsive to firm-level climate risks proxied by carbon intensity in the aftermath of the Paris Climate Conference. The relationship between carbon intensity and stock performance is underpriced before the Paris Conference, but strong and economically significant afterwards. The estimated carbon premium can neither be diversified away by risk factors or size, nor can it be attributed to highly carbon-intensive sectors such as Energy, Utilities and Industrials. Moreover, portfolios with a low carbon intensity focus broadly outperform the benchmark and/or high carbon intensity portfolios regardless of firm size, beta and alpha“ (abstract).

Green performance: The impact of green investors on stock prices by Gong Cheng, Eric Jondeau, Benoit Mojon and Dimitri Vayanos from the Bank of International Settlements as of Sept. 29th, 2023: “We study the impact of green investors on stock prices in a dynamic equilibrium asset-pricing model … Contrary to the literature, we find a large fall in the stock prices of the high-emitting firms that are excluded and in turn an increase in stock prices of greener firms when the exclusion strategy is announced and during the transition process” (abstract).

Green advantage? Firm-specific Climate Risk Estimated from Public News by Thomas Dangl, Michael Halling, and Stefan Salbrechter as of Oct. 5th, 2023 (#48): “… we propose a fully data-driven methodology to estimate firm-specific climate risk from public news. … A portfolio that is long “green” stocks (low regulatory risk) and short “brown” stocks (high regulatory risk) reveals a regime shift occurring around 2012. The regulatory risk premium is positive from 2002 to 2012 (1.54% p.a.), but switches sign in the subsequent period from 2012 to 2020 and becomes significantly negative with a point estimate of -2.56%. … In addition, we find a significant positive risk premium of 1.5% p.a. for physical climate risk over the period 2002 to 2020“ (p. 51).

Costly lies: Greenwashing: Do Investors, Markets and Boards Really Care? By Erdinc Akyildirim, Shaen Corbet, Steven Ongena, and Les Oxley as of Oct. 12th, 2023 (#97): “What are the financial repercussions of corporate greenwashing? … We find a broad devaluation, with an average abnormal stock return of -0.63% …. We further find a shift in investor sentiment in parallel with the growth of social media, underscoring the potential for future swift and extensive reputational damage. … Industries inherently associated with environmental concerns, particularly energy and manufacturing, experienced more pronounced market reactions …. Furthermore, nations with robust environmental values and consciousness witnessed intensified market penalties for greenwashing …” (abstract).

Liquid impact and other investment research

Liquid impact strategies: DVFA-Leitfaden Impact Investing vom DVFA-Fachausschuss Impact vom 18. Oktober 2023: „… Additionalität nicht als notwendige Bedingung für Impact Investments gesehen werden. Stattdessen sollte besser der Beitrag einer Investition zur Lösung von ökologischen und sozialen Problemen transparent dargestellt werden. Hierfür spielen die Intentionalität sowie die Nachweisbarkeit bei der Erzielung der (netto-) positiven Wirkung eine wichtige Rolle … Erstmals werden unterschiedliche Impact- bzw. Engagementstrategien definiert (risiko- bzw. prozessorientiertes, reportingorientiertes, stakeholder- und outputorientiertes Engagement), deren Ergebnisse unterschiedlich gemessen werden können … “. Mein Kommentar: Die aktive Mitarbeit im Fachausschuß war sehr interessant und ich habe versucht, Impulse zu liefern für Engagement, vor allem Strategien, Priorisierungen und Messung, vgl. auch Shareholder engagement: 21 science based theses and an action plan – (

Advisor growth: Investment Advisors to Individual Investors by Harry Mamaysky and Yuqi Zhang as of Sept. 29th, 2023 (#43): “Investment advisors are individuals who work at firms called registered investment advisors (RIAs). We focus specifically on vanilla RIAs, whose main business is advising individuals on how they should invest. Using a novel data set of annually mandated SEC filings, we document how services, fees, advertising, misconduct, and M&A activity have evolved in the vanilla RIA sector. We show how these factors impact RIA growth, as well as how their impact on RIA growth is related to future industry evolution. We introduce a novel measure of vanilla RIA performance and show it is related to future asset flows” (abstract).


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ESG inlfationn illustration with green globe by Geerd Atmann from Pixabay

ESG inflation – Researchpost #147

ESG inflation: 18x interesting new research on real estate, pharma, monetary policy, fires, innovation, banks, corporate culture, ESG and climate funds, carbon premium, greenium, purpose, shareholder engagement, ETFs, structured products, art and crypto investing (# shows the number of full paper downloads at SSRN as of Oct. 13th, 2023)

Social research: ESG inflation

Positive big real estate: The Impact of Institutional Investors on Homeownership and Neighborhood Access by Joshua Coven as of Sept. 19th, 2023 (#89): “(Sö: Institutional buy to rent) … investors made it harder for households to purchase homes, but easier for the financially constrained to live in neighborhoods that previously had few rental options. B2R investors, by raising prices, benefited homeowners who held housing in B2R regions because they experienced capital gains. … I find that for every home B2R bought, they decreased the housing available for owner occupancy by 0.3 homes. It was not a 1:1 decrease because the demand shock triggered a supply response, and B2R investors crowded out other landlords. … I find that B2R increased the supply of rentals and lowered rents. … I also show with individual location data that B2R increased access to the neighborhoods for the financially constrained by providing rentals in areas with few rentals” (p.28/29). My comment: I consider residential listed real estate companies (REITs) to be typically aligned with SDG-goals. This research supports my hypothesis.

Pharma ESG: Aligning Environmental, Social, and Governance to Clinical Development: Moving 2 Towards More Sustainable Clinical Trials by Sandeep N. Athalye, Shylashree Baraskar, Shivani Mittra, and Elena Wolff-Holz as of Oct. 5th, 2023 (#13): “Innovation in clinical trials that delivers affordable access to life-saving therapeutics for patients worldwide is fast becoming the core of the ESG strategy. The way clinical trials are conducted has a significant impact on the environment and planetary health. Drug development is among the highest producers of greenhouse gas (GHG) emissions, with about 4.4-4.6% of the worldwide GHG emissions coming from the Pharma sector. … This article discusses/reviews how clinical researchers can align with the ESG goals for efficient conduct of clinical trials of biologics as well as their biosimilars“ (abstract).

Ecological research: ESG inflation

Carbon money policy: Does Monetary Policy Shape the Path to Carbon Neutrality? by Robin Döttling and Adrian Lam as of Oct. 4th, 2023 (#76): “… this paper documents that — in the US — stock prices of firms with relatively higher carbon emissions are more sensitive to monetary policy shocks. Consistent with the valuation results, we find that high-emission firms reduce their emissions relative to low-emission firms, but slow down emission-reduction efforts when monetary policy is tight“ (p. 28).

Northern problem: Explosive Temperatures by Marc Gronwald as of Oct. 9th, 2023 (#18):“The paper finds, first, that global temperatures are explosive. Second, the paper also finds clear evidence of temporary explosiveness in Northern hemispheric data while in the Southern hemisphere respective evidence is much weaker. … The empirical pattern described here is attributable to so-called Arctic amplification, a phenomenon widely discussed in the climate science literature …” (p. 14/15).

Fire locations: Forest Fires: Why the Large Year-to-Year Variation in Forests Burned? By Jay Apt, Dennis Epple, and Fallaw Sowell as of Oct. 9th, 2023 (#10): “California has 4% of the land area of the United States, but over the 36-year period of our sample (1987-2022) California averaged 13% of the total US forest area burned. … We find that 75 percent of the variability in forest area burned can be accounted for by variation in six variables: the mean of maximum annual temperatures, prior year precipitation, new housing construction, net electricity imports, and variation in AMO and ENSO (Sö: Atlantic Multi-decadal Oscillation (AMO) and El Niño–Southern Oscillation (ENSO)“ (p. 17).

Climate cooperation: Induced Innovation and International Environmental Agreements: Evidence from the Ozone Regime by Eugenie Dugoua as of Oct. 6th, 2023 (#11): “This paper revisits one of the rare success stories in global environmental cooperation: the Montreal Protocol and the phase-out of ozone-depleting substances. I show that the protocol increased science and innovation on alternatives to ozone-depleting substances, and argue that agreements can indeed be useful to solving global public goods problems. This contrasts with game-theoretical predictions that agreements occur only when costs to the players are low, and with the often-heard narrative that substitutes were readily available“ (abstract)

Unclear GHG bank data: Assessing the data challenges of climate-related disclosures in European banks. A text mining study by Angel Ivan Moreno and Teresa Caminero of Banco de Espana as of Oct. 5th, 2023 (#25): “The Climate Data Steering Committee (CDSC) is working on an initiative to create a global central digital repository of climate disclosures, which aims to address the current data challenges. … Using a text-mining approach, coupled with the application of commercial Large Language Models (LLM) for context verification, we calculate a Greenhouse Gas Disclosure Index (GHGDI), by analysing 23 highly granular disclosures in the ESG reports between 2019 and 2021 of most of the significant banks under the ECB’s direct supervision. This index is then compared with the CDP score. The results indicate a moderate correlation between institutions not reporting to CDP upon request and a low GHGDI. Institutions with a high CDP score do not necessarily correlate with a high GHGDI“ (abstract).

Cleaner culture: Environmental Externalities of Corporate Culture: Evidence from Firm Pollution by Wenquan Li, Suman Neupane, and Kelvin Jui Keng Tan as of Oct. 9th, 2023 (#48): “We find that firms with a strong culture tend to have lower toxic emission levels and pollution intensity compared to those with a weak culture. … Further evidence shows that cultural values related to teamwork, innovation, respect, and integrity mainly drive the negative relationship between corporate culture and firm pollution. … Moreover, we find that enhanced diversity and increased investment in R&D activities serve as two potential channels through which a strong corporate culture affects firms’ pollution reduction efforts. Moreover, our results suggest that the decrease in firm pollution does not come at the expense of production. … when facing a less regulatory burden, firms with a strong culture proactively address environmental concerns, whereas firms with a weak culture increase toxic releases” (p. 36/37).

Responsible investment research: ESG Inflation

ESG inflation? ESG names and claims in the EU fund industry by European Securities and Markets Authority (ESMA) as of October 2nd, 2023: “Focussing on EU investment funds … Using a novel dataset with historical information on 36,000 funds managing EUR 16 trillion of assets, we find that funds increasingly use ESG-related language in their names, and that investors consistently prefer funds with ESG words in their name“ (p. 3). My comment: My fund has no ESG in it’s name although it applies very strict Best-in-Universe ESG criteria and many 100% exclusions, see e.g. Active or impact investing? – (

Climate fund deficits: Investing in Times of Climate Change 2023 by Hortense Bioy, Boya Wang, Alyssa Stankiewicz and Biddappa A R from Morningstar as of September 2023: “We identified more than 1,400 open-end and exchange-traded funds with a climate-related mandate as of June 2023, compared with fewer than 200 in 2018. Assets in these funds have surged 30% in the past 18 months to USD 534 billion, boosted by inflows and product development. Fueled by higher investor interest and regulation, Europe remains the largest and most diverse climate fund market, accounting for 84% of global assets. … Against a backdrop of high oil and gas prices, falling valuations in renewable energy stocks, and despite the Inflation Reduction Act, assets in U.S. climate funds have grown by only 4% in the past 18 months to USD 31.7 billion. … Funds offering exposure to climate solutions also exhibit high carbon intensity. These funds tend to invest in transitioning companies that operate in high-emitting sectors, such as utilities, energy, and industrials, and that are developing solutions to help reduce their own emissions and those of others. None of the most common companies in climate funds are aligned to 1.5° Celsius. The most popular stocks in broad market climate portfolios are more misaligned than those in portfolios that target climate solutions, with average Implied Temperature Rises of 3.3°C versus 2.4°C. This can be explained by the high and difficult-to-manage carbon emissions coming from the supply chain and/or customers (Scope 3 upstream and downstream) of top companies in broad market portfolios“ (p. 1). My comment: My SDG-aligned fund avoids fossil fuels but is only partly focused on climate solutions, clean energy and cleantech. Current data shows a 1.9°C Temperature Alignment for Scope 1+2 and 2.9°C including Scope 3, see

Emissions pay: Does the Carbon Premium Reflect Risk or Mispricing? by Yigit Atilgan, K. Ozgur Demirtas, and Alex Edmans as of Sept. 25th, 2023 (#12782): “… the level of and change in all three scopes of carbon emissions is significantly associated with both higher earnings surprises and higher earnings announcement returns, but carbon intensities are not. The four earnings announcements each year account for 30- 50% of the carbon premium in both levels and changes. … emitting firms are able to enjoy superior earnings surprises, earnings announcement returns, and realized returns because they do not fully bear the consequences (nor are they expected to fully bear the consequences) of their polluting activity“ (p. 11).

Green hedge: Greenium Fluctuations and Climate Awareness in the Corporate Bond Market Massimo Dragottoa , Alfonso Dufoura , and Simone Varotto as of Sept. 19th, 2023 (#55): “… green bonds generally trade at a premium in comparison to their non-green counterparts. Further, we have identified dynamic fluctuations in the greenium over time, which correspond to major climate change-related events and policy decisions. … Bonds that have been externally reviewed exhibit an (up to five time) larger greenium than non-certified bonds. …. certified green bonds can also garner a ‘green premium’ during these (Sö: natural disaster) events, with the scale of this premium directly being influenced by the extent of disaster damages. … increased demand for environmentally responsible investments translates into lower spreads for green and conventional bonds issued by companies that are actively working to address climate change issues, such as the green issuers in our sample. The effect is even stronger for certified green bonds“ (p. 17/18).

ESG compensation? What Purpose Do Corporations Purport? Evidence from Letters to Shareholders by Raghuram Rajan, Pietro Ramella, and Luigi Zingales as of March 18th, 2023 (#877): “In spite of the proliferation of corporate goals, we find that executive compensation remains overwhelmingly focused on shareholder value, as measured by stock prices and financial performance. While we do observe an increase in the use of environmental and social metrics in compensation, especially by firms that announce such goals, the magnitude of this relationship is still small. We also find corporate statements of ESG goals are associated with policies and programs that favor those goals, but there is little evidence that it improves the firm’s measurable ESG outcomes“ (p. 37).

No engagement monopoly? Big Three (Dis)Engagements by Dhruv Aggarwal, Lubomir Litov, and Shivaram Rajgopal as of Oct. 5th, 2023 (#117): “This paper uses newly available data to empirically analyze how the three largest asset managers (BlackRock, Vanguard, and State Street) engage with portfolio companies” (abstract). … “The revelation that a portfolio firm is targeted for engagement leads it to exhibit negative abnormal returns. However, the magnitude of value destruction is tiny, ranging from 10 to 50 basis points, and transient, concentrated in the days immediately around the public revelation of the engagement effort. … engagement is significantly correlated with the extent of the asset managers’ ownership stake in the firm and the CEO’s total compensation. Both these variables are easily available heuristics that can be used by the Big Three’s understaffed stewardship teams to select engagement targets. … BlackRock and Vanguard become less likely to vote against management the year after they select a portfolio company for engagement. … Companies do not reduce CEO compensation, increase female board representation, or become less likely to have dual class structures after being targeted for engagement by the largest asset managers“ (p. 26/27). My comment: If Blackrock has only 15 engagement professionals, then my fund has relatively more shareholder engagement resources. My approach see Shareholder engagement: 21 science based theses and an action plan – (

Other investment research

Active index funds? Discretionary Investing by ‘Passive’ S&P 500 Funds by Peter Molk and Adriana Robertson as of Aug.28th, 2023 (#169): “… we examine funds that track the most prominent index, the S&P 500. S&P 500 index funds do not typically commit, in a legally enforceable sense, to holding even a representative sample of the underlying index, nor do they commit to replicating the returns of that index. Managers therefore have the legal flexibility to depart substantially from the underlying index’s holdings. We also show that these departures are commonplace: S&P 500 index funds routinely depart from the underlying index by meaningful amounts, in both percentage and dollar terms. While these departures are largest among smaller funds, they are also present among mega-funds: even among the largest S&P 500 funds, holdings differ from the index by a total of between 1.7% and 7.5% in the fourth quarter of 2022” (abstract).

Structured product markets: Essays on Structured Products 2022 by Jacob H Schmidt and Esha Pilinja as of Sept. 26th, 2023 (#78): “Over the past 30 years structured products (SP) have become popular with all investors – institutional, family offices, high-net-worth individuals and retail investors. But what are structured products? Put simply, SP are investment products linked to equities, fixed income (bonds or interest rates), commodities or any other market or underlying asset, with or without derivatives overlay, with or without leverage, with or without capital guarantee. Crypto-linked products are the latest variant. …. we present ten essays on structured products in wealth management … The focus is on the role, risk-return profile and applications of structured products in wealth management, in different countries and for different investors“ (abstract). My comment: Several essays seem to be too optimistic but I find the ones from Karl David Bok on risks and from Fereydoun Valizadeh on Switzerland and Anna Sandberg on Germany interesting.

Art investment research: A Bilbliometric Analysis of Art in Financial Markets by  Diana Barro, Antonella Basso, Stefania Funari, Guglielmo Alessandro Visentin as of Oct. 6th, 2023 (#25): “Over 250 scholars contributed to writing 181 articles on art in financial markets, published in almost 100 journals. … a relatively small fraction of authors is responsible for a large percentage of the contributions. We have identified the most relevant papers, journals, and authors in the field …“ (p. 23).

Crypto infections: New Evidence on Spillovers Between Crypto Assets and Financial Markets by Roshan Iyer and Adina Popescu from the International Monetary Fund as of October 5th, 2023 (#52): „The paper finds that crypto asset markets exhibit a high level of integration, potentially surpassing other asset classes, with significant spillovers in terms of both returns and volatilities. Over time, this connectedness has shown an upward trend, especially following 2017, reaching its peak during the early phase of the COVID-19 pandemic. … Although Ethereum stands out in terms of the number of spillovers to other coins in the more recent period, various other coins also play significant roles in transmitting spillovers … we find that crypto assets exhibit a significant level of connectedness with global equities, while the spillovers with bond indices and the USD are relatively modest. Volatility spillovers between crypto assets and the VIX and commodity prices are also pronounced, with gold in particular receiving substantial spillovers from crypto assets” (p. 31/32).


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Alternatives (green) and SDG (blue) ETF Portfolios

Alternatives: Thematic replace alternative investments

Alternatives: Thematic investments can take up (part) of the allocation which alternative investments should have had in the past. The main reason is a stricter focus on responsible investments. Here I explain, why I support this development:

Extensive alternative and responsible investment experience

I started my financial services career trying to select the best private equity funds worldwide. Soon, I also covered hedge funds, real estate funds and infrastructure funds. In my current multi-asset portfolios, alternatives have a share between a quarter and a third of the portfolios.

In 2015, I developed three innovative ETF-Portfolios. One passively diversified multi-asset portfolio, one pure alternative investment portfolio and one ESG portfolio. The multi-asset ETF-portfolio and the ESG ETF-portfolio will be continued whereas I decided to stop the active offer of my alternatives ETF-Portfolio and will focus on my (multi-theme) SDG ETF-portfolio, instead. I follow a similar approach by replacing my direct listed alternatives ESG-portfolios with SDG-aligend investments.

My traditional multi-asset allocations will not change

My rather large allocation to alternatives is based on scientific studies of aggregated asset allocations of investors worldwide. I use ETFs not only for traditional equity and bond allocations but also for alternative investments. I have documented this most-passive asset allocation approach in detail in my Soehnholz ESG and SDG portfolio book. This approach is and will be applied to my traditional (non-ESG) Weltmarkt ETF-Portfolio and to my multi asset ESG ETF-Portfolio also in the years to come.

Stand-alone alternatives portfolios scrapped from my offering

There are two reasons for my decision to stop offering stand-alone alternatives portfolios: First, I want to focus on even stricter responsible investing and second, I could not find many investors for my “alternatives” portfolios.

The alternatives portfolios were offered to diversify traditional and ESG investment portfolios and I still think that this makes a lot of sense. Unfortunately, the returns of most alternatives market segments lagged the ones of traditional large-cap equities more or less since the start of my portfolios in 2016/2017. And low returns have not been good for sales.

It may well be that the timing of my decision is bad and that market segments such as listed (ESG) infrastructure and (ESG) real estate will perform especially well in the (near) future. But SDG-aligned investments did not perform well, either (see ESG gemischt, SDG schlecht: 9-Monatsperformance 2023 – Responsible Investment Research Blog ( I expect that they may recover soon. Performance, therefore, did not play a role in my decision.

The reason is, that I want to focus even more than in the past on responsible investments. Therefore, stopping the active offer of my „non-ESG“ alternatives ETF-portfolio should be obvious. But I will also stop to actively offer my direct listed real estate ESG and my listed infrastructure ESG portfolio.

I started similar portfolios at my previous employer in 2013 when there were no such products available in Germany. In 2016, with my own company, I began to offer such portfolios with much stricter ESG-criteria. I could find enough REITs and listed real estate stocks. For listed infrastructure, even though I extended my ideal definition from core infrastructure to also include social infrastructure and infrastructure related companies, I struggled to find 30 companies worldwide which fulfilled my responsibility requirements.

Thematic SDG-aligned portfolios can fill the “alternatives” allocation

But I will not give up on allocations to alternative investments. In the future, most of my actively offered portfolios will be SDG-aligned. I also use ESG-selection criteria in addition to SDG-alignment for all of these portfolios. And my SDG-aligned portfolios have significant exposures to “alternative” investment segments including green and social real estate and infrastructure.

My SDG ETF-Portfolio, for example, currently includes 10 Article 9 ETFs (see Drittes SDG ETF-Portfolio: Konform mit Art. 9 SFDR – Responsible Investment Research Blog ( Several of these ETFs invest in  infrastructure (e.g. the Clean Water, Clean Energy and Smart City Infrastructure ETF). Two others are purely real estate focused. In addition, my SDG-ETFs are selected as portfolio-diversifiers and typically include a significant number of small cap investments which often have “private equity like” characteristics. Also, SDG-aligned ETF are only admitted for my portfolios if they have a low country- and company-overlap with traditional indices.

And my direct Global Equities ESG SDG portfolios and my mutual fund include about 20% “responsible” infrastructure and 7% social (healthcare and senior housing) real estate stocks in September 2023. In addition, almost half of the stocks in the portfolio are small cap investments (compare Active or impact investing? – (

Both ETF- and direct SDG-aligned portfolios thus can diversify most traditional (large-cap) portfolios. In addition, I will offer investors the ability to easily create bespoke SDG-aligned ESG-portfolios which may well focus on “alternatives”.  

Even the performance of my Alternatives ETF- (green in the chart above) and the SDG-ETF portfolio (blue) have been similar for quite some time.