Biodiversity research: 13x new research on chemical emissions, biodiversity basics, biodiversity returns, bio-regulatory risks, ESG history, ESG rating divergence, net-zero conviction, German impact, transition logic, brown engagement, good committees, willingness to answer, and AI overkill (# shows the number of SSRN full paper downloads as of May 15th,2025)
Social and ecological research
Chemical emissions: Lessons in Chemistry Climate Action Giants by Planet Tracker as of May 8th, 2025: “The chemical industry … accounts for up to 6% of global greenhouse gas (GHG) emissions, … Specifically, this report benchmarks the climate transition performance of eight of the world’s top chemical companies: BASF, Bayer, Dow, Incitec Pivot, Air Liquide, LyondellBasell, SABIC, and Toray Industries. It evaluates them across emissions performance, value chain engagement, governance and remuneration, capital allocation, and policy advocacy … to provide financial institutions with a clear picture of these companies’ transition readiness and their potential climate-related risks and opportunities” (p. 39).
Biodiversity lecture: A Course on Biodiversity by Thierry Roncalli from Amundi as of May 14th, 2025 (#293) covering definition, ecosystem functions and services, threats and risks, measurement, governance and regulation and investment approaches and exercises.
ESG investment research (in: Biodiversity research)
Biodiversity returns: It’s all about cash, but what about biodiversity? Cutting through the biodiversity measurement jungle to account for biodiversity in corporate activities by Saverio Olivito and Patricia Ruffing-Straube as of May 7th, 2025 (#31): “… Our results show that … firm-specific industry-dependency on biodiversity and ecosystem services is strongly associated with financial performance …“ (abstract).
Bio-regulatory risk: Do Equity Markets Reflect Biodiversity Regulatory Risk? by Ricardo Peña, Shikhar Singla, and Zirui Wang as of May 12th, 2025 (#32): “We combine endangered species data with establishment locations to identify firm exposure to Areas of Unprotected Biodiversity Importance (AUBI)— areas likely to be targeted by future conservation policy. Between 2020 and 2023, firms in nature- and location dependent sectors earned 5.53% lower annual returns per standard deviation increase in AUBI exposure. Returns for high-exposure firms in these sectors were negative following Biden’s 2021 “30 by 30” executive order and positive after the 2024 election“ (abstract).
ESG history: A Study of ESG by Min Ruan and Haoxu Zhang as of May 7th, 2025 (#35): “Despite its widespread adoption, existing literature on ESG often lacks a cohesive historical perspective. This study draws on historical events and major shifts to review its origins and evolution and analyse its strengths and weaknesses. By delving into its historical roots and connecting a series of seemingly unrelated facts and statistics under the framework of ESG, we further identify key drivers and co-benefits beyond sustainable finance and provide practical implications for improvements in the adoption process. Overall, the findings underscore the necessity of viewing ESG as a long-term institutional commitment for sustainable development rather a buzzword, highlighting its ongoing significance in a rapidly changing world“ (abstract).
Rating divergence: ESG Rating Uncertainty: Causes, Consequences and Potential Remedies by Ali Bayat, Ruini Qu, and Zohreh Rahmani as of May 7th, 2025 (#30): “… This paper synthesizes the fragmented literature on ESG rating disagreement to assess how much ratings differ, what drives the variation, and what consequences follow. The paper also reviews potential responses that include efforts to achieve convergence, strategies that reduce the impact of disagreement, and the use of outcome-based alternatives to ESG ratings. The paper introduces a four-dimensional framework that categorizes the sources of disagreement into the content of what is measured, firm-specific factors, rater-specific attributes, and the methods used to produce the scores …“ (abstract). My comment: Divergence is understandable because of the complexity. Divergence is no excuse not to use ESG data.
Net-Zero conviction: Does Greenhouse Gas Disclosure Trigger a Net-Zero Fallacy for Retail Investors? by Christian Friedrich, Marco Meier, and Christian Peters as of May 7th, 2025 (#10): “… our experiment shows that retail investors make less efficient investments when a fund discloses net-zero emissions as a salient sustainability achievement than when a fund discloses net-positive emissions, thereby documenting a phenomenon we label as “net-zero fallacy.” Our experiment further provides evidence that retail investors substitute more complex, multifactorial decisions by narrowly focusing on the salient sustainability achievement. Thereby, achieving net zero causes retail investors to ignore alternative mechanisms for more efficient emission reductions“ (abstract).
SDG investment research
German impact: Network Analysis of ESG and SDG across Legal Origins by Kausik Chaudhuri, Han Jin, Ting Xie and Yongcheol Shin as of May 7th, 2025 (#10): “… we investigate the network causal relationship from ESG to SDG. … In particular, spill-out effects from German legal origin dominate while its spill-ins are almost negligible, which renders it to be the most influential ESG/SDG shock transmitter in the system. … the positive impacts of ESG on SDG diffuse mostly from German legal origin to English and French legal origins” (p. 22).
Transition logic: Productive Climate Finance by Dominik Boos and Julia Meyer as of May 7th, 2025 (#4) “We extend the standard financial market model of sustainable finance by incorporating a production economy with heterogeneous firms (abstract) … First, normative and ethical dilemmas arise for values-based investors: is it justifiable to remain invested in a company with unsustainable practices, whose business model conflicts with the values of the financing party? What is an appropriate time frame for companies to start and complete their transformation? Second, current measurement approaches predominantly capture companies’ static sustainability performance, while identifying forward-looking sustainability indicators remains a challenge. … transition ambitions should play a greater role in classifying companies and investments as sustainable …” (p. 24)
Brown engagement: Impact Investing with Shareholder Engagement by Jean-Francois Chassagneux, Roxana Dumitrescu, and Olivier David Zerbib as of May 7th, 2025 (#12): “… we propose a continuous-time equilibrium model in which heterogeneous investors exert costly shareholder engagement to decrease a representative firm’s greenhouse-gas emissions. … our framework shows that shareholder engagement induces investors to overweight high-emitting firms, accepting lower expected returns, to secure deeper emissions cuts. More precisely, we establish three main results: (i) stronger pro-environmental preferences or lower engagement costs amplify capital al locations and engagement toward brown firms; (ii) such engagement mechanically reduces brown firms’ equilibrium expected returns; and (iii) firms respond with a two-fold mitigation: they are incentivized to cut their gross emissions and subsequently are compelled to cut them further due to shareholder engagement” (p. 20). My comment: I try to invest in the 30 most sustainable companies and engage with all of them, see Shareholder engagement: 21 science based theses and an action plan
Good committees: Sustainability committee and eco-innovation: A global perspective by Asad Mashwani and Rizwan Mushtaq as of May 7th, 2025 (#7): “This study investigates the influence of sustainability committees on corporate environmental innovation (hereafter eco-innovation) … We find that the existence of sustainability committee and climate governance mechanisms positively influences corporate eco innovation. Our results indicate that the sustainability committee along with sustainability reporting and corporate emission performance improves eco-innovation. Moreover, our results suggest that eco-innovation is associated with the firm’s overall environmental and ESG (Environmental, Social and Governance) performance” (abstract).
Other investment research (in: Biodiversity research)
Willingness to Answer: Willingness To Pay: An Interrogation by Cass R. Sunstein as of Feb. 26th, 2025 (#70): “Both free markets and government regulators tend to use willingness to pay (WTP) as the measure of value of goods that people do not own, and willingness to accept (WTA) as the measure of value of goods that people do own. … WTP and WTA might be infected by a lack of information, by behavioral biases, and by hedonic forecasting errors … There are questions about how to proceed when WTA is much higher than WTP for the same goods; the WTP-WTA disparity has yet to be fully understood. These questions are especially challenging when valuing environmental amenities, animal welfare, and social media”.
AI overkill: AI in Finance and Information Overload by Attila Balogh, Antoine Didisheim, Luciano A. Somoza, and Hanqing Tia as of May 2nd, 2025 (#142): „This paper documents information overload in Large Language Models applied to financial analysis. Using earnings forecasts from corporate calls and market reaction predictions from news, we show that predictive accuracy follows an inverted U-shaped pattern, where excessive context degrades performance. Larger LLMs mitigate this effect, increasing the optimal context length” (abstract).
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Werbung (in: Biodiversity research)
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Der Fonds konzentriert sich auf die UN-Ziele für nachhaltige Entwicklung mit durchschnittlich einzigartig hohen 99% SDG-vereinbaren Umsätzen der Portfoliounternehmen und sehr hohen E-, S- und G-Best-in-Universe-Scores sowie einem besonders umfangreichen Aktionärsengagement (siehe auch My fund).
Zum Vergleich: Ein traditioneller globaler Small-Cap-ETF hat eine SDG-Umsatzvereinbarkeit von 5 %, ein diversifizierter Gesundheits-ETF 13 %, Artikel 9 Fonds 21%, liquide Impactfonds 39% und ein ETF für erneuerbare Energien 42 % (vgl. Hohe SDG Umsätze? Nur wenige Investmentfonds!).
Insgesamt hat der von mir beratene Fonds seit der Auflage im August 2021 eine ähnliche Performance wie traditionelle globale Small- und Mid-Cap-Fonds (vgl. z.B. Fonds-Portfolio: Mein Fonds | CAPinside.
Ein Fondsinvestment war also bisher ein „Free Lunch“ in Bezug auf Nachhaltigkeit: Ein besonders konsequent nachhaltiges Portfolio mit marktüblichen Renditen und (eher niedrigeren) Risiken. Vergangene Performance ist allerdings kein guter Indikator für künftige Performance.
