Archiv der Kategorie: Aktien

Direct Indexing (ESG) shows Pixabay picture of colorful face from Alexandr Ivanov

Direct Indexing (ESG) and more: Researchpost #130

Direct Indexing (ESG): 10x new research on brownshifting, denials, greenwashing, lack of ESG products, missing research, sin premium, female private equity, fintech and AI-accountants by Lubos Pastor, Robert Stambaugh, George Serafeim, Andreas Hoepner, Marc Eulerich and many more (# shows SSRN downloads on June 8th)

Social and ecological research

Brownshifting? Are Firms Voluntarily Disclosing Emissions Greener? by Yilin Shi, Christopher S. Tang, and Jing Wu as of May 22nd, 2023 (#132): “… we use different regression models to show that disclosing firms tend to have lower internal emissions (Scope 1) and yet they have higher Scope 3 external emissions generated by their upstream suppliers. This finding reveals that disclosing firms are not necessarily greener. Instead, they may have shifted their emissions to their upstream suppliers knowingly or unknowingly” (p. 27).

Denial based violations: Climate Change Denial and Corporate Environmental Responsibility by Mansoor Afzali, Gonul Colak,  and Sami Vähämaa as of April 25th, 2023 (#85): “… firms located in counties with higher levels of climate change denial have weaker environmental performance ratings … Furthermore, … firms headquartered in high climate change denial counties are more likely to commit federal environmental compliance violations. … strong corporate governance mechanisms and corporate culture moderate the negative relationship between climate change denial and corporate environmental responsibility” (p. 31).

Responsible investment research: Direct Indexing (ESG)

Clear Greenwashing? Green Tilts by Lubos Pastor, Robert F. Stambaugh, and Lucian A. Taylor as of May 31st, 2023 (#80): “The total amount of ESG investing is substantial but much smaller than the aggregate AUM of institutions that proclaim to invest in line with ESG-related principles. Our estimates indicate that the total amount of ESG-related tilts in institutional equity portfolios is about 6% of the institutions’ total equity AUM. This fraction has been fairly steady throughout our sample from 2012 to 2021. … our approach allows the three dimensions of ESG to enter separately, recognizing, for example, that investors may assess Tesla’s environmental virtues separately from Tesla’s treatment of its employees. We find that using only a composite ESG score misses over 40% of the tilts associated with the E, S, and G characteristics. We also find that each of those three dimensions contributes about equally to ESG-related tilts. … institutions divest from brown stocks mostly by reducing positions rather than eliminating them. … the … steady rise in the investment industry’s aggregate net green tilt is fully driven by the largest third of institutions … whereas smaller institutions are increasingly brown … the least green institution type is banks“ (p. 23/24). My comment: This analysis clearly shows that there is still a huge potential for additional green investments (or that we currently can observe is a lot of greenwashing)

Few ESG products? ESG: From Process to Product by George Serafeim as of June 7th, 2023 (#2250): “ESG is the process of measuring relevant resources and outcomes, analyzing the resource allocation process that could derive optimal outcomes for an organization, managing those resources to improve outcomes, and communicating the management of those resources and outcomes to stakeholders of the organization. Therefore, as a process, it can be implemented by any organization as they see fit with their purpose and strategy. … A conceptual framework for ESG investment products defines their objectives, identifies their fundamental characteristics, and highlights enhancing characteristics that could create ‘shades of ESG,’ in a continuum range rather than as a binary outcome. Central to the conceptual framework is the need for verifiability of intentions, through documentation of organizational beliefs, processes, and capabilities, and the measurement of outcomes from those intentions. Given lack of those attributes across many investment funds, the market size of eligible ESG investment products is likely to be much smaller than otherwise thought” (p. 15/16). My comment: My approach is documented in detail see Das-Soehnholz-ESG-und-SDG-Portfoliobuch.pdf (

Direct Indexing (ESG): Portfolio Choice with ESG Disagreement: Customizing Sustainability Through Direct Indexing by Paul Ehling, Stig Roar Haukø Lundeby, and Lars Qvigstad Sørensen as of Jan. 18th, 2023 (#150): “Previous research has demonstrated that, despite similar aims, there is considerable diversity across the ESG ratings. This paper has detailed that this divergence persists when maximizing ESG scores subject to a tracking error constraint. … from a risk point of view, the optimized ESG portfolios differ more across each other than they differ relative to the benchmark. Further, we showed that on average the optimization tilts toward good ESG scores for large stocks with low specific risk. The implication is that an ESG-motivated portfolio differs substantially based on the agency chosen for the ESG ratings. If clients choose a single ESG rating provider, this must be a deliberate decision after ascertaining that the vendor provides ratings in accordance with the client’s values and beliefs. … The techniques detailed in this paper to manage ESG uncertainty could be made available to direct indexing clients, enabling them to choose portfolios aligned with their ESG preferences as there is mounting evidence that ESG is in the eye of the beholder“ (p. 12/13). My comments: First: There are millions of indices available. Tracking error to any one index should not be an investor priority. Second: Aggregating different ESG-ratings creates intransparency: Why which rating I good or bad cannot be identified easily anymore. Third: It is better to start direct indexing (ESG) with a universe with very sustainable investments according to convincing ESG-ratings and then deselect investments based on personal values, see Custom ESG Indexing Can Challenge Popularity Of ETFs ( or Direct ESG Indexing: Die beste ESG Investmentmöglichkeit auch für Privatkunden? – Responsible Investment Research Blog (

Missing research: Sustainability in Private Capital Investing: A Systematic Literature Review by Majid Mirza, Truzaar Dordi, Pedro Alguindigue, Ryan Johnson, and Olaf Weber as of April 23rd, 2023 : “… It was found that less than 1% of the literature, written in English, between 1960−2020 on private equity and venture capital addresses topics related to sustainability. … The objective of this paper is to provide evidence of the dearth of academic literature on the topic of private capital markets and sustainable investment, while identifying current themes in the existing literature so that future work may address gaps in research” (abstract).

General investment research: Direct Indexing (ESG)

Sin Premium? Measuring Business Social Irresponsibility: The Case of Sin Stocks by Hamid Boustanifar and Patrick Schwarz as of March 30th, 2023 (#222): “We propose a novel method based on the textual analysis of corporate annual reports to identify sin stocks and to measure their sinfulness. Our method performs much better than the procedure used in the prior literature, which relies on using industry classification codes. … Contrary to the findings of several recent studies, we find strong evidence consistent with the existence of a sin premium. A sin-weighted (but not necessarily an equal- or value-weighted) portfolio of sin stocks generates a FF6 alpha (Söhnholz: Fama French Six Factor Ouperformance) of 4% per year from 1997 to 2021. This suggests that investors require higher expected returns to hold more sinful stocks“ (p. 27/28). My comment: I doubt that there will be enough buyers willing to pay sin premia in the future, see 30 stocks, if responsible, are all I need – Responsible Investment Research Blog (

Female PE impact: Does Gender Influence the Investment Strategy of Private Equity Firms? Evidence from Impact Investing by Theodor Cojoianu, Pia Helbing, Andreas G. F. Hoepner, Xi Hu and Beiyun Xiao as of April 25th, 2023 (#68): “Using a comprehensive dataset on all PE deals from 2010-2021, we uncover new evidence that … female ownership significantly increases the probability of impact investment strategy. We find pronounced differences of this relationship between Common (positive) and Civil (negative) Law countries. … It appears that there is a gender difference on impact investing strategy that can be identified at the PE, syndicate or deal level …” (p. 13).

Mind the Gap: Fintech, investor sophistication and financial portfolio choices by Leonardo Gambacorta, Romina Gambacorta, and Roxana Mihet as of May 31st, 2023 (#13):“… we present a simple micro-founded model that derives testable predictions on the links between financial technologies, investors’ degree of sophistication, and their portfolio choices and financial returns. Using microdata from the Survey on Household Income and Wealth conducted by Banca d’Italia over the period 2004-20, we … find that the gaps in financial returns and share of risky assets between sophisticated and unsophisticated investors increase with progress in financial technology. This means that inequality is reduced only if financial technology is accessible to everyone, and if all investors have the same capacity to use it“(p. 35/36).

AI-Accountants: Can Artificial Intelligence Pass Accounting Certification Exams? ChatGPT: CPA, CMA, CIA, and EA? by Marc Eulerich, Aida Sanatizadeh, Hamid Vakilzadeh and David A. Wood as of June 3rd, 2023 (#1228): “We … examine if newly released ChatGPT models and capabilities can pass major accounting certification exams including the CPA, CMA, CIA, and EA (enrolled agent) certification exams. We find that the early released ChatGPT 3.5 model is unable to pass any exam … However, with additional efforts … ChatGPT averaged a score of 85.1 percent across all sections of exams and passed them all. This high performance suggests ChatGPT has sufficient performance that it likely will prove disruptive to the accounting and auditing industries” (abstract).


Advert for German investors: “Sponsor” my research by investing in and/or recommending my article 9 mutual fund. The fund focuses on social SDGs and small and midcaps, uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement (currently 24 of 30 companies engaged). The fund typically scores very well in sustainability rankings, e.g. see this free tool, and the risk-adjusted performance is relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T

Greenwashing Banks Illustration: Green Clothespin pciture by Robert Allmann from Pixabay

Greenwashing banks? Researchpost #129

Greenwashing banks? 12x new research on immigration, suppliers, greenwashing, banks, ESG ratings, AI voting, green bonds, climate inflation, (climate) VCs and crowdinvesting by Christian Klein et al. (# shows the number of SSRN-downloads on May 31st, 2023):

Social and ecogical research

Positive immigration: Firm-Level Prices, Quality, and Markups: The Role of Immigrant Workers by Giulia Sabbadin as of March 17th, 2023 (#16):“… I study … French manufacturing traders. I find that the share of immigrant workers in a local labor market is positively associated with firm-level export prices and quality and that this quality advantage translates to higher markups. I present evidence for the mechanism accounting for these relationships and find that the presence of immigrant workers is positively associated with firms importing higher-price (higher-quality) intermediate inputs, which are key to producing higher-price (higher-quality) exports. The hypothesized economic mechanism is that immigrant workers help firms overcome informational barriers to sourcing higher-price (higher-quality) inputs from abroad. I provide evidence consistent with immigrant workers having specialized knowledge of the upstream market” (abstract).

Climate inaction? Climate Policies in Supply Chains by Swarnodeep Homroy and Asad Rauf as of May 15th, 2023 (#33): “… we show that suppliers are more likely to adopt climate action and climate governance practices following the adoption of emission targets by their customers. The effects are economically meaningful and increase with the relative bargaining power of the customer firm over its suppliers …. However, we find no evidence that adopting climate policies following customer pressure, on average, changes supplier firms’ climate outcomes (emissions and energy expenses) and leading indicators of emission abatement (capital investments and R&D expenses)“ (p. 24). My comment: ESG-evaluation and engaging suppliers is one of my top shareholder engagement priorities, compare Shareholder engagement: 21 science based theses and an action plan – (

Sustainable investment research: Greenwashing banks?

Greenwashing Corporates: Show & Tell: An Analysis of Corporate Climate Messaging and its Financial Impacts by Joseph E. Aldy, Patrick Bolton, Zachery M. Halem, Marcin T. Kacperczyk, and Peter R. Orszag as of Aril 22nd, 2023 (#288): “… investors are increasingly scrutinizing a patchwork of voluntary climate-related communications–namely public disclosures, emission reduction commitments, and soft information from earnings calls and other public announcements. We observe, for large-cap U.S. firms, a rise in the usage of all forms of climate communication from 2010-2020. We also find evidence that a majority of firms are not decarbonizing on a sufficient trajectory to meet committed emission reduction targets. In regard to financial effects, we show that increased transparency from disclosure can offset a significant portion of the price-to-earnings discount associated with carbon emissions, especially for firms in the energy and industrial sectors. … “ (abstract). My comment: Disclosure of Scope 3 emissions is another of my most important engagement topics.

Greenwashing banks? “Glossy Green” Banks: The Disconnect Between Environmental Disclosures and Lending Activities by Mariassunta Giannetti, Martina Jasova, Maria Loumioti, and Caterina Mendicino as of May 24th, 2023 (#250): “… we show that banks with extensive environmental disclosures lend more to brown borrowers and do not provide more credit to firms in green industries. These results are not driven by banks’ financing of brown borrowers’ transition to greener technologies. Instead, banks lend to the weakest borrowers in brown industries, especially if they have low capital adequacy. Our results suggest that banks overemphasize their climate goals and credentials while continuing their relationships with polluting borrowers“ (abstract). My comment: I do not consider banks in my most sustainable investment portfolios such as my mutual fund

Bank ESG factors: Bank and ESG score by Belinda Laura Del Gaudio, Serena Gallo, Daniele Previtali, and Vincenzo Verdoliva as of  April 26th, 2023 (#79): “This paper analyses factors affecting international banks‘ Environmental, Social and Governance (ESG ) performance from 2008-2018. Using data for all listed banks in the U.S., E.U. and U.K., we show that the characteristics of banks‘ boards influence their ESG performance. In particular, banks with a higher female presence, a larger board size, high networking and more qualified directors are more likely to show better ESG performance. Furthermore, we find that banks with a propensity to pursue a fintech innovation strategy are more likely to have a better ESG performance …. also banks‘ financial factors influence their sustainability profile” (abstract).

Better big? Size bias in refinitiv ESG data by Juris Dobrick, Christian Klein, and Bernhard Zwergel as of May 19th, 2023: “Even though Refinitiv claims to have minimized the well-known size bias present in ASSET4 ESG data, we find that it is still there and has even become … A one unit increase in company size corresponds to an increase in the ESG (E) score of around 5.8 (6.7) compared with previous 3.5 (4) in Drempetic et al.(2020). For G and S it is 3.7 and 6.3, respectively” …. My comment: There are still enough well ESG-rted small and midsize companies available for investment, see e.g. Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – (

ESG factor: ESG as risk factor by Juris Dobrick, Christian Klein, and Bernhard Zwergel as of May 26th, 2023 (#14): “… we address the question of whether factors constructed using ESG (Environmental, Social, Governance) scores could potentially meet the necessary requirements for risk factors in multi-factor models. … We pay particular attention to the problem of divergent scores across different rating providers and investigate whether the regression results of 4- and 5-factor models converge. … We find that there are ESG factors across all investigated rating providers that capture common-variation in stock returns over time, indicating that ESG should be considered in common asset pricing models” (abstract).

AI Voting? Outsourcing Voting to AI: Can ChatGPT Personalize Index Funds’ Voting Decisions? by Chen Wang as of April 25th, 2023 (#184): “Asset Management giants like Vanguard have already been utilizing AI to “create customized financial plans that help clients meet their short-term and long-term financial goals.” … By fine-tuning ChatGPT, its ability of generalization can be enhanced by training with curated datasets. Thus, investment funds can employ customized ChatGPT to make self-informed and personalized proxy voting more in line with their shareholders’ interests and preferences. … The cost of hiring experts to fine-tune the model, as well as the cost of acquiring high-quality data, could be a significant obstacle for small funds. … there were also limitations such as token limitations and long-range dependencies. … AI models trained on biased data could lead to biased voting decisions …” (p. 41/42).

Green demand: The Demand for Green Bonds by Hari Gopal Risal, Chandra Thapa, Andrew P. Marshall, Biwesh Neupane, and Arthur Krebbers as of April 22nd, 2023 (#314): “… we find that the demand for corporate GB is about 32 to 42% points higher than comparable conventional non-GB issued by similar firms. Further, the demand for debut GB is stronger than seasoned GB offerings and higher for those issued by financial firms compared to non-financial firms. Finally, our results also show that the demand is higher for GB issued by firms with higher environmental commitments and issued in countries with better environmental performance“ (abstract).

Traditional and alternative investment research: Greenwashing banks?

Heated inflation: The impact of global warming on inflation: averages, seasonality and extremes by Maximilian Kotz, Friderike Kuik, Eliza Lis, and Christiane Nickel as of April 24th, 2023 (#31): “… in the absence of historically un-precedented adaptation, future warming will cause global increases in annual food and headline inflation of 0.92-3.23 and 0.32-1.18 percentage-points per year respectively, under 2035 projected climate … Moreover, we estimate that the 2022 summer heat extreme increased food inflation in Europe by 0.67 (0.43-0.93) percentage-points and that future warming projected for 2035 would amplify the impacts of such extremes by 50%“ (abstract).

Outcrowded VC? Crowdfunding vs. Venture Capital: Complements or Substitutes? A Theoretical Assessment by Guillaume Andrieu and Alexander Peter Groh as of April 25th, 2023 (#39): “Entrepreneurs need to weigh campaign cost as well as lower profit requirements of the crowd against the support of VCs. In addition, VCs make efficient abandonment decision and thus improve resource allocation which benefits the relationship. A passive crowd cannot detect lemons and thus creates model frictions. The model also predicts that the emergence of CF has created a shock for the VC industry. It has increased competition, and thus reduced VCs’ deal flow, and their profits. The model suggests that CF forces VCs to strengthen their own expertise and to specialize. CF may have reduced the number of VC actors, or makes them shift towards later financing stages“ (p. 24).

Tech-Defizite: Wagniskapital für Net Zero: Potenziale und Herausforderungen von Steffen Viete und Milena Schwarz von der KfW vom 17. Mai 2023: “Im Jahr 2022 wurden in Deutschland über 1,5 Mrd. EUR in 118 Finanzierungsrunden in Climate-Tech-Start-ups investiert. Dabei haben Investoren ihr Engagement bei Climate-Tech-Start-ups über die Jahre sogar deutlich stärker ausgebaut als im Rest des gesamten VC-Marktes. … Zwischen den Jahren 2019 und 2022 machten sie über 13 % des gesamten Investitionsvolumens im Markt aus. … in den USA …. wurde … zwischen 2019 und 2022 das 4,7-fache des Volumens in Deutschland investiert. … Aufgrund des hohen Kapitalbedarfs sind für die Weiterentwicklung des Finanzierungsumfeldes für Climate-Tech-Start-ups vor allem Fonds von Bedeutung, die auch größere Runden finanzieren können. … Die Forschung legt nahe, dass insbesondere im Industriesektor noch großes Potenzial zur Emissionsminderung durch technische Innovation besteht“ (S. 1).


Advert for German investors: “Sponsor” my research by investing in and/or recommending my article 9 mutual fund. The fund focuses on social SDGs and small and midcaps, uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement (currently 24 of 30 companies engaged). The fund typically scores very well in sustainability rankings, e.g. see this free tool, and the risk-adjusted performance is relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T

Climate reporting: Picture Facts by Gerd Altmann from Pixabay

Climate reporting: Researchpost #128

Climate reporting: 13x new research regarding inequality, climate reporting, biodiversity, green bonds, external costs, private equity real estate, gold, equal weighting, correlations, tail risks, robo advisors and AI (# indicates the number of SSRN downloads on May 22nd, 2023)

Ecological and social research

Inequality: Climate Inequality Report 2023 by Lucas Chancel, Philipp Bothe, and Tancrède Voituriez from the World Inequality Lab as of Jan. 30th, 2023: “The accelerating climate crisis is largely fuelled by the polluting activities of a fraction of the world population. The global top 10% are responsible for almost half of global carbon emissions and the global top 1% of emitters are responsible for more emissions than the entire bottom half of the world’s population. … within-country carbon inequality now makes up the bulk of global emissions inequality, i.e. about two thirds of the total, an almost complete reversal as compared to 1990. The carbon budgets needed to eradicate poverty below the US$ 5.50/day poverty line are equal to roughly one third of the current emissions attributable to the top 10% of global emitters. … Many countries in the Global South are significantly poorer today than they would have been in the absence of climate change. This trend is set to continue and result in income losses of more than 80% for many tropical and subtropical countries by the end of the century. Within countries, the poor suffer stronger losses from climate impacts than more affluent population groups. The income losses from climate hazards of the bottom 40% are estimated to be 70% larger than the average in low- and middle-income countries” (p. 9).

Responsible investment research: Climate reporting

Climate reporting (1): The MSCI Net-Zero Tracker by MSCI Research as of May 2023: “35% of listed companies have disclosed at least some of their Scope 3 emissions … 44% of listed companies have set a decarbonization target … 17% of listed companies have published a climate target that, if achieved, would align carbon emissions across the company’s total value chain with the ambitious 1.5°C goal of the Paris Agreement … Listed companies are on a path to warm the planet by 2.7° above preindustrial levels this century … Just over half (51%) of listed companies align with warming equal to or below 2°C, placing them at the high end of the Paris Agreement’s uppermost temperature threshold … Unlisted companies in four of the five most emissions-intensive industry groups were less carbon-intensive than their listed counterparts on aggregate …Real-assets funds held the most emissions-intensive industries per dollar of financing, followed by mezzanine- and distressed-debt funds … The carbon intensity of all three fund types was more than triple the carbon intensity of buyout funds” (p. 4/5). My comment: I try to engage with all my fund portfolio companies to report broad Scope 3 data, see Shareholder engagement: 21 science based theses and an action plan – (

Climate reporting (2): The Climate Transition Is Increasingly about Opportunity by Chris Cote and Guido Giese of MSCI Research as of May 15th, 2023: “We have found that in the most emissions-intensive sectors, for example, companies that had a higher share of revenue from alternative energy, energy efficiency and green buildings had significantly faster earnings growth than their sector peers over a period of roughly seven-and-a-half years that ended on March 31, 2023” (p. 3). … only 155 companies (1.7% of the listed universe), with a total market cap of USD 1.6 trillion, earned more than half of their revenues from such (SÖ: alternative energy or energy efficiency) activities, our analysis finds. … We found in our data that many of the more than 3,800 listed companies (42% of that universe) that have published a decarbonization target, for example, do not explain how they plan to meet their climate-related goals” (p. 6).

Biodiversity risks: Nature positive: How the world’s largest companies depend on nature and biodiversity by Esther Whieldon, Shirley Yap, Lokesh Raikwar, and Gautier Desme of S&P Global as of May 10th, 2023: “85% of the world’s largest companies that make up the S&P Global 1200 have a significant dependence onn nature across their direct operations … 46% of companies in this universe … have at least one asset located in a Key Biodiversity Area …”.

Control advantage: Corporate Green Bonds: The role of external reviews for investment greenness and disclosure quality by Tami Dinh, Florian Eugster, and Anna Husmann as of May 19th, 2023 (#69): „Our results indicate that although companies with worse environmental performance are more likely to obtain at-issuance external reviews for their green bonds, their certified investments are more likely to be greener than companies that did not obtain a review at issuance. … Additionally, we develop a disclosure index for green bond reports and exhibit how post-issuance report assurance is associated with increased transparency” (abstract).

External costs: Auf dem netto-positiven Weg? Wie Unternehmen Wert schaffen – Messung und Integration von Nachhaltigkeit in die strategische Planung von Martin G. Viehöver at al von Positive Impacts vom 2. September 2022: „Im Allgemeinen erzeugen alle Industriesektoren im Durchschnitt einen positiven Gesellschaftlichen Wert, aber auch Gesellschaftliche Verluste aufgrund der entstehenden gesellschaftlichen Kosten (externe Effekte). Es wurde jedoch bestätigt, dass Unternehmen gesellschaftliche Erträge erzielen können, indem die von ihnen gezahlten Steuern höher als die gesellschaftlichen Kosten waren, wie es bei 20 Unternehmen in der Stichprobe der Fall war“ (S. 61).

General investment research

Bad PERE: Persistently Poor Performance in Private Equity Real Estate by Da Li and Timothy J. Riddiough as of May 14th, 2023 (#629): “We compare Buyout (BO), Venture Capital (VC), and Private Equity Real Estate (RE) funds. RE funds underperform BO and VC, as well as the public market alternative. In RE, worse-performing fund managers survive at a high rate. They are also susceptible to diseconomies of fund scale, with no skill-based persistence to offset the negative scale effects. Analysis of noisy fund manager selection indicates that RE investors are not disadvantaged relative to BO and VC. LP investors in RE funds seem to be optimizing something other than, or in addition to, investment return when selecting fund managers” (abstract).

Good gold? The Safe Asset Shortage Conundrum and Why Gold is a Safe Asset by Dirk G. Baur as of April 19th, 2023 (#29): “This paper demonstrates that gold is a safe asset based on existing definitions, central bank holdings, history, and risk characteristics such as default risk and currency risk. Changes in the safe asset pool during the 2008 financial crisis and its aftermath led to a safe asset triage that potentially led to the inclusion of gold in the safe asset pool. This is evident in the weakly symmetric opposite movements of gold and US government bond prices since 2008 and also in an increasing correlation especially since 2008. A simple safe asset test that analyzes whether a supposedly “safe asset” can be sold without a loss over different investment horizons or holding periods shows that gold is indeed relatively safe when compared with US government bonds. Finally, we also argue that the “safe asset shortage” is not a “natural” shortage but caused by central bank “QE” asset purchasing programs rendering this shortage rather narrow“ (p. 8).

Easy outperformance: Beating the S&P 500 at Its Own Game – The triumph of the equally weighted index by John Rekenthaler from Morningstar as of May 15th, 2023: “… only 19 equally weighted U.S. equity funds of any flavor currently exist, and none except for Invesco’s funds possess significant assets … Since summer 1998 … a costless version of the equally weighted S&P 500 portfolio has thrashed the conventional index … Half the equally weighted portfolio is invested in firms with market caps exceeding $30 billion. But the comparable figure for the customary S&P 500 is $150 billion”. My comment: I use equal weight for all my direct equity model portfolios and my fund since many yearsm see e.g. Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – (

Correlation criticism: Co-Occurrence: A New Perspective on Portfolio Diversification by William Kinlaw, Mark Kritzman, and David Turkington as of May17th, 2023 (#25): “Investors typically measure an asset’s potential to diversify a portfolio by its correlations with the portfolio’s other assets, but correlation is useful only if it provides a good estimate of how an asset’s returns co-occur cumulatively with the other asset returns over the investor’s prospective horizon. And because correlation is an average of sub-period co-occurrences, it only serves as a good estimate of prospective co-occurrence if the assets’ returns are multi-variate normal, which requires them to be independent and identically distributed. The authors provide evidence that correlations differ depending on the return interval used to estimate them, which indicates they are not serially independent. Moreover, the authors show that asset co-movement differs between regimes of high and low interest rates and between turbulent and quiescent markets, and that they are asymmetric around return thresholds, which indicates that returns are not identically distributed. These departures from multi-variate normality cast serious doubt on the usefulness of full-sample correlations to measure an asset’s potential to diversify a portfolio. The authors propose an alternative technique for diversifying a portfolio that explicitly considers the empirical prevalence of co-occurrences and thus the non-normality of returns“ (abstract).

Tail risks: Equity Tail Protection Strategies Before, During, and After COVID by Roni Israelov and David Nze Ndong as of May 10th, 2023 (#124): “We investigate three common, yet different approaches to hedging equity drawdowns and a few themes emerge. First, hedging is expensive. … Second, the variable equity exposure embedded in option strategies is a source of risk and path dependence. … Third (and related to the previous point), a hedger’s decision on whether to delta-hedge their option exposure to isolate the option convexity or to maintain an unhedged position materially impacts performance in non-forecastable ways. …. Finally, there is enormous dispersion in the performance of tail risk hedging strategies. Well-reasoned arguments can be made in favor or against any number of decisions on how to implement a tail risk hedge. We only considered a few strategies (long options hedged or unhedged, long put protection, and long VIX futures) and the dispersion in outcomes is notable … those who implement hedging solutions should plan for the possibility – as remote as it might be – that their hedges make things worse in times of stress“ (p. 11/12).

Invest-Tech research (Climate reporting)

Robo-risks: Demystifying Consumer-Facing Fintech: Accountability for Automated Advice Tools by Jeannie Paterson, Tim Miller, and Henrietta Lyons as of May 10th, 2023 (#12): “Currently, the most prominent forms of fintech available to consumers are automated advice tools for investing and budgeting. These tools offer advantages of low cost, convenient and consistent advice on matters consumers often find difficult. … the oft-stated aspiration … should not distract attention from their potential to provide only a marginally useful service, while extracting consumer data and perpetuating the exclusion of some consumer cohorts from adequate access to credit and banking. … Fintech tools that hold out to consumers a promise of expertise and assistance should genuinely be fit for purpose. Consumers are unlikely to be able to monitor this quality themselves …“ (p. 15/16).

AI Advantage? Can ChatGPT Forecast Stock Price Movements? Return Predictability and Large Language Models by Alejandro Lopez-Lira and Yuehua Tang as of May 12th, 2023 (#32759): “We use ChatGPT to indicate whether a given headline is good, bad, or irrelevant news for firms’ stock prices. We then compute a numerical score and document a positive correlation between these “ChatGPT scores” and subsequent daily stock market returns. Further, ChatGPT outperforms traditional sentiment analysis methods. … Our results suggest that incorporating advanced language models into the investment decision-making process can yield more accurate predictions and enhance the performance of quantitative trading strategies. Predictability is concentrated on smaller stocks and more prominent on firms with bad news, consistent with limits-to-arbitrage arguments rather than market inefficiencies“ (abstract).


Advert for German investors: “Sponsor” my research by investing in and/or recommending my article 9 mutual fund. The fund focuses on social SDGs and midcaps, uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement (current engagement with 24 of 30 companies). The fund typically scores very well in sustainability rankings, e.g. see this free tool, and the risk-adjusted performance is relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T

Banning dividends: Picture with dollar notes by Oleg Gamulinksii from Pixabay

Banning dividends? Researchpost #127

Banning dividends: 10x new research on gender wealth, activists, dividends, greenium, correlations, diversification, ChatGPT and investment committees by Charlotte Bartels, Eva Sierminska, Carsten Schroeder, Marcos López de Prado, Bernd Scherer et al. (# indicates the number of SSRN downloads on May 17th, 2023)

Social and ecological research

Gender wealth: Wealth creators or inheritors? Unpacking the gender wealth gap from bottom to top and young to old by Charlotte Bartels, Eva Sierminska and Carsten Schroeder as of April 28th, 2023 (#19): “Our analysis of gender-specific age-wealth profiles revealed that the average gender wealth gap is small up to age 40, then widens, and shrinks after retirement. … men tend to inherit larger sums than women during working life. Women often outlive their male partners and therefore receive large inheritances in old age. But these transfers come too late to be used productively, for instance, to start a business. Against this backdrop, the average gender wealth gap underestimates the inequality of opportunity that men and women have during the active, wealth-creating phase of the life course” (p. 11/12).

Sustainable investment research: Banning dividends?

ESG preferred: ESG Spillovers by Shangchen Li, Hongxun Ruan, Sheridan Titman, and Haotian Xiang as of May 10th (#537): “We study ESG and non-ESG mutual funds managed by overlapping teams. We find that non-ESG mutual funds include more high ESG stocks after the creation of an ESG sibling, and the high ESG stocks they select exhibit superior performance. The low ESG stocks selected by ESG funds also exhibit superior performance and despite being more constrained, the ESG funds outperform their non-ESG siblings. The latter result is consistent with fund families making choices that favor ESG funds. Specifically, ESG funds tend to trade illiquid stocks prior to their non-ESG siblings and get preferential IPO allocations” (abstract).

Good action, bad result? Activist Pressure and Firm Compliance with ESG Disclosure Policy: Experimental Evidence from the U.K. Modern Slavery Act by Matthew Lee and Jasjit Singh as of May 10th, 2023 (#55): “Many corporate ESG disclosure regulations rely on private activist pressure to enforce compliance, but relatively little is known about its effectiveness. We present results from a field experiment testing the effect of various types of pressure from a leading human rights NGO on subsequent corporate compliance with the U.K. Modern Slavery Act of 2015, a law requiring disclosure of actions taken to address human rights issues. Sending firms a letter describing their legal ESG disclosure obligations had an unexpected effect of reducing rather than increasing compliance. This effect was partly mitigated for firms whose letter additionally included a list of already compliant firms, the mitigating effect being greatest when this list of peers was drawn from the same geographic location as the targeted firm” (abstract). My comment: Together with my engagement proposals, I send best-practice examples e.g. regarding supplier ESG evaluation to the companies I am invested in see Shareholder engagement: 21 science based theses and an action plan – (

Banning dividends? Power Struggle: How Shareholder Primacy in the Electrical Utility Sector Is Holding Back an Affordable and Just Energy Transition by Nicholas Lusiani as of April 17th, 2023 (#10): “Instead of reinvesting earnings into more efficient, zero-carbon energy systems for consumers and future generations, this brief details how US investor-owned utilities have instead distributed over $250 billion—or 86 percent of net earnings—to shareholders over the past decade, at tremendous cost to a just transition. … policy recommendations to head off creeping shareholder primacy in the electricity sector, including: Creating a ban or very low bright-line limits on share buybacks; Implementing an annual shareholder payout cap, prioritizing reinvestment in efficiency and resiliency; Instituting a new set of binding fiduciary duties, toward alignment with the public interest; and establishing clear guardrails to protect against utility lobbying efforts currently undermining a just transition” (abstract). My comment: Divesting from such companies would most likely not stop their energy production because they still will be able to sell their energy (self-financing), although some investors seem to suggest such effects

Greenium problems: Who benefits from the bond greenium? by Daniel Kim and Sebastien Pouget as of May 3rd, 2023 (#56): “Using a sample of 354 US firms active in the bond market from 2005 to 2022, we establish our main result: there is a greenium that appears larger on the secondary than on the primary market. … Our evidence suggests that two economic forces underlie our main result. The part of the greenium pocketed in by financial intermediaries appears related i) to uncertainty regarding investors’ future climate concerns and ii) to a lack of competition among underwriting dealers. … green investors should try and participate more directly in primary bond markets if they want to increase their impact on firms’ financial incentives to become green” (p. 31).

Traditional investment research: Banning dividends

Misleading correlations: The Hierarchy of Empirical Evidence in Finance by Marcos López de Prado as of May 14th, 2023 (#190): “… the majority of journal articles in the investment literature make associational claims, and propose investment strategies designed to profit from those associations. For instance, authors may find that observation X often precedes the occurrence of event Y, determine that the correlation between X and Y is statistically significant, and propose a trading rule that presumably monetizes such correlation. A caveat of this reasoning is that the probabilistic statement “X often precedes Y” provides no evidence that Y is a function of X, thus the relationship between X and Y may be coincidental or unreliable … misspecification errors make it likely that the correlation between X and Y will change over time, and even reverse sign, exposing the investor to systematic losses. … The hierarchy of empirical evidence proposed in this article can help readers assess the strength and scientific rigor of the claims made by financial researchers (p. 18). My comment: For good reasons my rules-based investment strategies do not rely spurious correlations

Bad diversification? Which is Worse: Heavy Tails or Volatility Clusters? by Joshua Traut and Wolfgang Schadner as of April 28th, 2023 (#152): “Asset returns are known to be neither normally distributed nor of perfect random order. In contrast, they appear to exhibit a heavy-tailed distribution and are ordered in a complex, non-random way that causes large (small) fluctuations to be followed by large (small) fluctuations, a phenomenon that is known as volatility clustering“ (p. 2). … “We find that financial markets across various asset classes are clearly more destabilized from volatility clusters than from heavy-tailed distributions per se. We also observe that the effect gets more pronounced with an increasing degree of portfolio diversification” (p. 33). My comment: Good add-on argument to 30 stocks, if responsible, are all I need – Responsible Investment Research Blog (

Large beats small: Is Information Production for the U.S. Stock Market Becoming More Concentrated? Yang Cao, Miao Liu, and Xi Zhang as of April 18th, 2023 (#40): “The US stock market has experienced dramatic shifts in structure in the past two decades. While small firms have disappeared, large ones have increasingly gained market share. … we find consistent and robust evidence that as large firms take a more significant market share, they attract market attention away from smaller ones, even when small firms’ business fundamentals remain unchanged. … If the market produces more and better information for large firms relative to small firms, capital would be allocated away from small firms to large ones, further deepening market concentration” (p. 25).

To ChatGPT or not? Unleashing the Power of ChatGPT in Finance Research: Opportunities and Challenges by Zifeng Feng, Gangqing Hu, and Bingxin Li as of pril 25th, 2023 (#183): “This article explores the multifaceted potential of ChatGPT as a transformative tool for finance researchers, highlighting the benefits, challenges, and novel insights it can offer to facilitate the research. We demonstrate applications in coding support, theoretical derivation, research idea assistance, and professional editing. A comparison of ChatGPT-3.5, ChatGPT-4, and Microsoft Bing reveals unique features and applicability. By discussing pitfalls and ethical concerns, we encourage responsible AI adoption and a comprehensive understanding of advanced NLP’s impact on finance research and practice“ (abstract).

Inefficient Expert Groups? Optimal Design of Investment Committees by Bernd Scherer as of May 1st, 2023 (#93): “… traditional investment committees are riddled with challenges. This results in biases (group shift bias), incentive problems (free rider), and aggregation problems (how to ensure that all member views enter the IC portfolio equally). I argue that these challenges will likely become considerably smaller once an investment committee moves towards creating an algorithmic consensus by averaging anonymous member portfolios instead of relying on qualitative group discussions. While investment committees based on these principles always performed well in my previous CIO positions, communication is one weakness in this design choice. Finding a coherent ex-post narrative that builds on a consistent top-down view is problematic because consistency across positions is neither enforced nor desired” (p. 13/14). My comment: Better use rules-based investment strategies (such as mine, see Das-Soehnholz-ESG-und-SDG-Portfoliobuch.pdf ( where committees may discuss the rules, although I do not believe much in superior “committee expertise”


Advert for German investors: “Sponsor” my research by investing in and/or recommending my article 9 mutual fund. The fund focuses on social SDGs and midcaps, uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement (currently 22 of 30 companies engaged). The fund typically scores very well in sustainability rankings, e.g. see this free tool, and the risk-adjusted performance is relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T

ESG AI: Picture from Gordon Johnson from Pixabay to illustrate green or ESG AI

ESG AI: Researchpost #125

ESG AI: >10x new research on climate AI models (for banks), CO2 removal, bridge technology risks, human capital, ESG risk management and ESG bullshit, government greenium, double materiality and listed impact investing and industry versus regional diversification by Markus Leippold, Marco Wilkens, Johannes Leister, Ottmar Edenhofen, Timo Busch, Andreas Hoepner and many more (# indicates the number of SSRN downloads on April 30th, 2023)

Social and ecological research: ESG AI

Climate LLM: Enhancing Large Language Models with Climate Resources (ESG AI) by Mathias Kraus, Julia Anna Bingler, Markus Leippold, Tobias Schimanski, Chiara Colesanti Senni, Dominik Stammbach, Saeid Ashraf Vaghefi, Nicolas Webersinke as of April 17th, 2023 (#114): “Our prototype LLM agent retrieves information from general Google searches and emission data from ClimateWatch to provide reliable and accurate information. Through two exemplary experiments, we showcase how such an LLM agent can operate to enhance the accuracy and reliability of climate-related text generation. This work contributes to the exploration of LLM applications in domains where up-to-date and accurate information is critical …” (p. 6).

Complex climate scenarios: Klima-Szenarioanalysen in Banken (ESG AI) von Marco Wilkens und Johannes Leister vom April 2023: “… supervisory-motivated climate scenario analyses build on „traditional scenario analyses“ for assessing market and economic risks, but they are much more complex. This is in particular due to the need to model the interrelationship between climate data and macroeconomic data and the significantly much longer period under consideration. In addition, there is very little empirical data available for mapping climate risks, which is needed for econometric modeling of relevant relationships. Moreover, these long time periods require considerations of how banks and bank customers act over time. However, taking into account resulting dynamic bank balance sheets lead to hardly comparable results between banks. … this allows primarily a relative estimation of climate-related risks between banks than a realistic and comprehensive estimation of climate-related credit risks for individual banks. … In summary, we see climate scenario analyses as one of several important tools for transforming both the financial industry and the real economy toward the green economy“ (abstract).

Tricky CO2 removal: On the Governance of Carbon Dioxide Removal – A Public Economics Perspective by Ottmar Edenhofer, Max Franks, Matthias Kalkuhl, and Artur Runge-Metzger as of April 19th, 2023 (#25): “This paper highlights the importance of carbon dioxide removal (CDR) technologies for climate policy. We … discuss removal costs and storage duration of different technologies. … seemingly cheap removal technologies in the land sector can indeed be very expensive when increasing opportunity costs and and impermanence are appropriately accounted for. The use of non-permanent removal – though to a certain extent economically optimal – creates high liability to firms and regulators that warrants a careful and deliberative risk management“ (abstract).

Human-Climate relations: Climate Changes Affect Human Capital by Germán Caruso, Inés de Marcos, and Ilan Noy as of April 19th, 2023 (#13): “… we provide a framework for analyzing the multiple interlinkages between climate change and human capital … The framework presents two channels through which human capital is affected: direct effects on health, nutrition, and wellbeing, and indirect effects through changes in economic systems, markets, and through damage to infrastructure. … For mitigation and adaptation, we find that while these are overall clearly beneficial, they are also associated with significant human capital costs for specific sectors and groups in society. … Since there is also evidence that high human capital improves adaptation and mitigation, this suggests that adaptation and mitigation that accounts and compensates for these ‘sectoral’ losses can create a virtuous cycle that leads to positive outcomes for both climatic action and human capital“ (abstract). My comment: My fund focuses on human/social and climate topics, see Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – (

Responsible investment research

Risky bridges: Bridge technologies from a sustainable finance perspective by Timo Busch, Tanja Ohlson, Ana Sarantidi, and Özüm Yenen as of March 2023: “The interviewees identified risks related to a particular bridge technology, in our case LNG infrastructure, risks that stemmed from the classification of the investment into bridge technologies, and risks to the own organizations mainly in the reputational context. These risks often led to a low appetite for investing in bridge technologies. However, the asset managers also recommended that these risks could be minimized by providing a more transparent and reliable path forward for the “end of bridge” phase of the technology. In the LNG case this relates to the future utilization of hydrogen. Moreover, a classification scheme and related label for transition finance products could help increase the attractiveness of bridge technology investments, and better communication and science-based long-term decision making would help minimize risks in the context of the bridge technology” (p. 50).

Less (ESG) bullshit: Bloated Disclosures: Can ChatGPT Help Investors Process Information? (ESG AI) by Alex G. Kim, Maximilian Muhn, and Valeri V. Nikolaev as of April 27th, 2023 (#443): “By summarizing a large sample of corporate disclosures with GPT-3.5- Turbo, we show that the length of the summaries is shortened by as much as 80%, on average. Importantly, the obtained summaries appear to provide more relevant insights as compared to the underlying raw documents. Specifically, we show that summarized sentiment better explains cumulative abnormal returns around disclosure dates than raw sentiment. Building on this insight, we construct a novel and easy-to-implement measure of the degree of “bloat” in textual disclosures. … We show that bloated disclosures are associated with slower price discovery and higher information asymmetry, thus implying negative capital market consequences. Finally, we show that GPT is useful to investors interested in targeted summaries related to important topics, such as a summary of ESG-related activities” (p. 24/25).

Good E/S/G risk management: How ESG risk management can impact security risk by Miranda Carr, Yuliya Plyakha Ferenc, Blessy Varghese, Zoltán Nagy, and Guido Giese from MSCI ESG Research as of April 13th, 2023: “Our findings indicate that companies with higher E and S risk management and governance scores, and consequently higher ESG Ratings, than their peer groups had lower stock-specific risk than their peers during the 2017-2022 time period. … A key element behind this lower risk profile is … how the company itself managed these risks … our findings demonstrated that E and S risk management adds valuable informational content in portfolio management. … For social key issues, management metrics include elements such as the promotion of training and development of the workforce for companies in knowledge-intensive industries, transparency and visibility over the supply chain for companies in the retail industry, robust health and safety policies for companies in the consumer-durables sector and positive community relations for companies in the mining industry“ (p. 14). My comment: My engagement policy focuses on several of these topics see Shareholder engagement: 21 science based theses and an action plan – (

Government greenium? How Large is the Sovereign Greenium? by Sakai Ando, Chenxu Fu, Francisco Roch and Ursula Wiriadinata as of April 19th, 2023 (#18): “This paper is the first empirical study to estimate the sovereign greenium using both the twin bonds issued by Denmark and Germany, and panel regression analysis. While the estimated greenium in this paper is not large, it has been increasing over time alongside the level of sovereign green bond issuances. Whether the administrative costs associated with green bond issuance exceed the benefit is a country-specific question … It remains an open question whether the purpose of the project associated with the green bond is a key determinant of the greenium, and whether green bonds have resulted in the climate outcomes they intended to achieve” (p. 11/12).

Double materiality: Beyond Climate: ‚EU Taxonomy‘ Criteria, Materiality, and CDS Term Structure by Andreas G. F. Hoepner, Johannes Klausmann, Markus Leippold, and Jordy Rillaerts as of April 18th, 2023: “… the risks associated with water and biodiversity impacting a firm are perceived to be long-term issues, as evidenced by significantly negative effects on CDS slopes. The negative effects are weaker but still significant for pollution prevention, also suggesting a long-term vision. The financing benefits due to a firm’s commitment to pollution prevention, however, have stronger long-term implications rather than short-term advantages. In contrast, a firm’s impact on biodiversity has no such timing differential, revealing a more imminent awareness. … Overall, our findings identify the long-term focus on infrastructure firms’ financing conditions with regard to the environmental topics covered in the latest EU taxonomy beyond climate change. Moreover, they highlight the importance of considering both materiality sides, i.e., the impact of the environment on firms and the impact of firms on the environment“ (p. 23).

Listed impact? Guidance for Pursuing Impact in Listed Equities by the Global Impact Investing Network as of March 30th, 2023: “Developed with input from over 100 investors, Guidance for Pursuing Impact in Listed Equities uses the GIIN’s “Core Characteristics of Impact Investing” to provide baseline practices and expectations for asset managers seeking to achieve positive impacts in listed equities. The guidance is structured around four main aspects of listed equities impact investing: setting fund/portfolio strategy, portfolio design and selection, engagement and performance data usage. Additionally, it introduces two key concepts, investor contribution and theory of change, that investors should consider when designing and managing listed equities impact funds”.

Traditional investment research

Good industry diversification: Market Segmentation and International Diversification Across Country and Industry Portfolios by Mehmet Umutlu, Seher Gören Yargı and Adam Zaremba as of April 14th, 2023 (#22): “We conjecture that partially segmented stock indexes that are characterized by low correlation with the world market are mainly priced by local factors and should produce abnormal returns relative to a global asset-pricing model. This implies a negative relation between correlation and future index returns in the presence of segmented indexes. Empirical evidence confirms such a relationship for the sample of industry indexes, suggesting a heterogeneous segmentation. Nonetheless, we do not observe a similar pattern for country indexes. Thus, cross-industry diversification is superior to cross-country diversification. The international diversification potential of industries does not vanish during volatile periods” (abstract).


Advert for German investors: “Sponsor” my research by investing in and/or recommending my article 9 mutual fund. The fund focuses on social SDGs and midcaps, uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement. The fund typically scores very well in sustainability rankings, e.g. see this free new tool, and the performance is relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T

ESG Beliefs: Piture by Yolanda Diaz Tarrago from Pixabay shows green world with fruits

ESG beliefs: Researchpost #124

ESG beliefs: 10x new research on biodiversity, subsidies, governance, greenium, ESG beliefs, divestments, taxonomy reporting, fund commissions, SVB, private asset platforms etc. by Theresa Kuchler, Johannes Stroebel, Christian Klein and many more (# indicates the number of SSRN downloads on April 19th, 2023)

Ecologial and social research

Quantified biodiversity risks: Biodiversity Risk by Stefano Giglio, Theresa Kuchler, Johannes Stroebel, and Xuran Zeng as of April 4th, 2023 (#8): “The goal of this paper is to introduce measures of aggregate biodiversity risk as well as measures of firms’ and industries’ exposures to these risks; to connect and validate the two; to study the pricing of this risk in financial markets; and to publicly release our biodiversity exposure measures at to facilitate more research on this important topic“ (p. 28).

Dubious subsidies: Green Technology Adoption, Complexity, and the Role of Public Policy: A Simple Theoretical Model by Sanjit Dhami as of April 13th (#9): “We present a simple model of technology choice by heterogeneous firms … We illustrate the extreme unpredictability of the final outcome, and consider the role of public policy in the form of taxes and subsidies in influencing the long-run expected outcome. Our model … highlights the challenges and limitations of public policy in such scenarios“ (p. 24).

continues on page #2 fund evaluation instead of EU taxonomy reporting

Taxonomy reporting: Can companies boost their share-prices?

Taxonomy reporting: Many investors want to invest responsibly. Investment funds which want to attract such investors should report their share of responsible investments.

Slow regulatory details

In the EU, so far only two (climate change mitigation and adaption) of the predefined six environmental categories and zero social categories have been officially defined. Thus, reported responsible investments are limited to those two climate categories.

The good news: Regulation is finally advancing and last week the EU finally published a call for feedback on the 4 remaining green categories: Sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control and protection and restoration of biodiversity and ecosystems (see Sustainable investment – EU environmental taxonomy (

Taxonomy reporting is scarce and of little meaning

I want to invest 100% responsibly and I think that my fund portfolio is close to that goal (see e.g. my FutureVest fund in and Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – ( My fund mainly focuses on social topics but social investment cannot officially be reported as responsible.

The auditors of my fund – one of the top 4 firms – only allows to count revenues as responsible for my fund if they have been officially declared by my investment companies as EU taxonomy aligned. Specifically, the auditors do not accept responsible investment estimates, even if they are provided by well recognized third parties such as MSCI. My fund only has a low share of EU-based investments. The few EU companies who focus on the first two defined green categories of the EU Taxonomy tend to report taxonomy aligned revenues. Others, especially non-EU based companies, do not. 

Therefore, I agreed to officially define only 5% as the “responsible” minimum investment of my fund (see for the offical documents). Other suppliers of investment funds follow a similar approach. Therefore, (EU-)investors who look for responsible investments can often only find funds with low minimum targets for such investments.

For all listed companies, taxonomy reporting can pay off fast

Companies are typically free to report EU taxonomy-aligned investments. In doing so, they can attract additional investments by the many funds who want to sell to European investors. That could increase their share prices for very low additional reporting costs.

In any case, investment providers should be allowed to estimate green and especially social investments to give investors a better view of overall responsible investments. Even without detailed regulation, such estimates are nor riskless for data- and investment providers. Many organizations and individuals have started to observe and report potential green and social washing.

Only once all green and social goals have been clearly defined and EU-based companies have to report these revenues, estimates for such revenues regarding EU-based companies could be forbidden.

ESG or impact: Results or Excuses Picture from Gerd Altmann from Pixabay

ESG or impact? Researchpost #123

ESG or impact: 15x new research on (social) housing, AI lawyers, DWS, climate models, divestments, sustainability loans and greenium, green fees, ESG ratings, ESG labels, Article 9 funds, fiduciary duty and suppliers by Marco Wilkens, Maximilian Görgen, Martin Rohleder, Daniel Engler, Gunnar Gutsche, Paul Smeets, Mauricio Vargas, Marie Kuhn and many more

Ecological and social research

Housing risks: European Housing Markets at a Turning Point – Risks, Household and Bank Vulnerabilities, and Policy Options by Laura Valderrama, Patrik Gorse, Marina Marinkov, and Petia Topalova as of April 5th, 2023 (#6): „European housing markets are at a turning point as the cost-of-living crisis has eroded real incomes and the surge in interest rates has made borrowers more vulnerable to financial distress. … Under the baseline IMF macroeconomic forecast, the share of households that could struggle to meet basic expenses could rise by 10 pps reaching a third of all households by end 2023. Under an adverse scenario, 45 percent of households could be financially stretched, representing over 40 percent of mortgage debt and 45 percent of consumer debt. The impact on the banking sector seems contained under the baseline forecast, though there are pockets of vulnerability. … Fiscal measures, such as subsidies to the bottom income tercile, could save 7 percent of households from financial distress at an estimated cost of 0.8 percent of GDP” (abstract).

Social housing: The Global Housing Affordability Crisis: Policy Options and Strategies by Albert Saiz as of March 29th, 2023 (#320): “… I described the basic parameters and foundations behind global affordable housing policies and strategies. I also provided several case studies that inform the discussion. At least thirty different economic strategies can be combined to conform a large field of potential interventions” (p. 39). My comment see Wohnteilen: Viel Wohnraum-Impact mit wenig Aufwand – (

AI lawyer: GPT-4 Passes the Bar Exam by Daniel Martin Katz, Michael James Bommarito, Shang Gao, and Pablo David Arredondo as of March 20th, 2023 (#3225): “The exam, which includes both multiple-choice and open-ended tasks testing theoretical knowledge and practical lawyering, has long been viewed as an insurmountable summit for even domain-specific models. This assumption no longer holds; large language models can meet the standard applied to human lawyers in nearly all jurisdictions in the United States by tackling complex tasks requiring deep legal knowledge, reading comprehension, and writing ability“ (p. 10).

Kein Vorbild: DWS: Hohe Boni durch Greenwashing von Mauricio Vargas und Marie Kuhn von Greenpeace vom 15. März 2022: „ … DWS-CEO unter Berücksichtigung der Unternehmensgröße mit Abstand Deutschlands bestbezahlter Manager eines börsennotierten Unternehmens … Im Vergütungsbericht 2021 ist die problematische Zielgröße des „ESG-spezifisch verwalteten“ Vermögens aus den Leistungszielen für den CEO verschwunden. Allerdings wurde auch der überarbeitete Katalog der Nachhaltigkeitsziele auf weitgehend wirkungslose Pseudo-Nachhaltigkeitsindikatoren reduziert“ (p. 4). My comment: My engagement focuses on CEO pay ratio see Shareholder engagement: 21 science based theses and an action plan – (

Advert for German investors: “Sponsor” my research by investing in and/or recommending my article 9 mutual fund. The fund focuses on social SDGs and midcaps, uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement. The fund typically scores very well in sustainability rankings, e.g. see this free new tool, and the performance is relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T

… continue on page 2 (# indicates the number of SSRN downloads on April 10th, 2023):

Digital Art Sloth created with Dall-E

Q1: Nachhaltige Portfolios mit ordentlicher Rendite im ersten Quartal 2023

Im ersten Quartal 2023 (Q1) haben meine Portfolios wie folgt performt:

Traditionelle most-passive ETF-Portfolios

Dafür, dass das nicht-nachhaltige Alternatives ETF-Portfolio -1,9% verloren hat, hat das regelbasierte Multi-Asset Weltmarkt ETF-Portfolio im ersten Quartal mit +2,1% trotz seines hohen Anteils an Alternatives relativ gut abgeschnitten, denn die Performance ist ähnlich wie die aktiver Mischfonds (+2,3%).

ESG und SDG ETF-Portfolios in Q1

Vergleichbares gilt für das ebenfalls breit diversifizierte ESG ETF-Portfolio mit +2,1%. Das ESG ETF-Portfolio ex Bonds lag mit +3,2% aufgrund des hohen Alternatives-Anteils aber hinter den +4,9% traditioneller Aktien-ETFs und leicht hinter den +3,6% aktiv gemanagter globaler Aktienfonds. Das ESG ETF-Portfolio ex Bonds Income verzeichnet ein etwas geringeres Plus von +2,8%. Das ist aber besser als die +2,0% traditioneller Dividendenfonds. Anders als in 2022 hat meine Trendfolge im ersten Quartal mit -2,8% für das ESG ETF-Portfolio ex Bonds Trend nicht gut funktioniert. Mit -0,2% schnitt das ESG ETF-Portfolio Bonds (EUR) im Vergleich zu +1,5% für vergleichbare traditionelle Anleihe-ETFs ebenfalls relativ schlecht ab.

Das aus thematischen Aktien-ETFs bestehende SDG ETF-Portfolio lag mit +1,8% hinter traditionellen Aktienanlagen zurück und das SDG ETF-Trendfolgeportfolio zeigt mit -3,3% eine relativ schlechte Performance, nachdem es in 2022 outperformt hatte.

Q1: Direkte pure ESG und SDG Aktienportfolios

In 2022 hat das aus 30 Aktien bestehende Global Equities ESG Portfolio hat im ersten Quartal +3,7%gemacht und liegt damit gleichauf wie traditionelle aktive Fonds aber hinter traditionellen Aktien-ETFs. Das aus nur aus 5 Titeln bestehende Global Equities ESG Portfolio war mit +0,7% dagegen nur knapp positiv, liegt aber seit dem Start in 2017 immer noch etwas vor dem 30-Aktien Portfolio.

Das Infrastructure ESG Portfolio hat +2,9% gemacht und liegt damit vor den +0,4% traditioneller Infrastrukturfonds und vor allen vor den -3,9% eines vergleichbaren Infrastruktur-ETFs. Im Gegensatz dazu hat das Real Estate ESG Portfolio im ersten Quartal -7,4% verloren, während traditionelle globale Immobilienaktien-ETFs und aktiv gemanagte Fonds nur um die -2% verloren haben. Das Deutsche Aktien ESG Portfolio hat im ersten Quartal +8,7% zugelegt. Das liegt etwas hinter aktiv gemangten traditionellen Fonds mit 10% und vergleichbaren ETFs mit ähnlichen Renditen.

Das auf soziale Midcaps fokussierte Global Equities ESG SDG hat mit -2% im Vergleich zu allgemeinen Aktienfonds schlecht abgeschnitten. Allerdings haben aktive gemanagte Gesundheitsfonds mit -2,5% noch schlechter rentiert. Das Global Equities ESG SDG Trend Portfolio hat mit -4,5% – wie die anderen Trendfolgeportfolios – im ersten Quartal nicht gut abgeschnitten. Das noch stärker auf Gesundheitswerte fokussierte Global Equities ESG SDG Social Portfolio hat mit -3,1% ebenfalls unterdurchschnittlich rentiert.

Benchmarkabhängige Fondsperformance-Beurteilung

Mein FutureVest Equity Sustainable Development Goals R Fonds, der am 16. August 2021 gestartet ist, zeigt nach einem sehr guten Jahr 2022 vor allem aufgrund des immer noch relativ starken Gesundheitsfokus mit -0,8% eine erhebliche Underperformance gegenüber traditionellen Aktienmärkten. Insgesamt ist die Performance seit Fondsstart weiterhin aber besser als die von traditionellen aktiv gemanagten Aktienfonds. Auch gegenüber dem mit dem Fonds vergleichbaren Global Equities ESG SDG Portfolio (-2%) wurde eine etwas bessere Rendite erzielt. Zum Jahresende 2022 wurden die Selektionskriterien im Fonds gegenüber dem Portfolio verschärft, indem Gentechnik und auch medizinische Tierversuche komplett ausgeschlossen wurden. Das hat dazu geführt, dass die Gesundheits- und Largecap-allokation im Fonds gegenüber dem Global Equities ESG SDG Portfolio reduziert wurde.

=> Werbung für deutsche Anleger: Mein Fonds FutureVest Equity Sustainable Development Goals R (DE000A2P37T6) konzentriert sich auf soziale SDGs und Midcaps, verwendet separate E-, S- und G-Best-in-Universe-Mindestratings und ein breites Aktionärsengagement. Der Fonds schneidet in der Regel in Nachhaltigkeits-Rankings sehr gut ab, siehe z. B. dieses kostenlose neue Tool. Mehr Infos siehe Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen?

Fazit Q 1: Nachhaltige wie traditionelle Performance aber Trendfolge schwächelt

Vereinfacht zusammengefasst haben im ersten Quartal 2023 (Q1) meine nachhaltigen ESG und SDG-Portfolios ähnlich rentiert wie vergleichbare traditionelle ETFs bzw. aktiv gemanagte Fonds. Nachdem meine Trendfolgeportfolios in 2022 Verluste in erheblichem Umfang reduzieren konnten, haben die Signale im ersten Quartal 2023 zu Verlusten gegenüber Portfolios ohne Trendfolge geführt.

Anmerkungen: Die Performancedetails siehe und zu allen Regeln und Portfolios siehe Das Soehnholz ESG und SDG Portfoliobuch. Benchmarkdaten: Eigene Berechnungen u.a. auf Basis von

Taxing or nudging with a tram picture by Rudy and Peter Skitterians and Pixabay

Taxing or nudging? Researchpost #122

Taxing or nudging: 10x new research on wealth taxes, climate nudges, ESG data, buybacks, private equity, GPT and visuals

Social and ecological research: Taxing or nudging?

Efficient taxes: Does a Progressive Wealth Tax Reduce Top Wealth Inequality? Evidence from Switzerland by Samira Marti, Isabel Martínez, and Florian Scheuer as of March 21st, 2023 (#7): “Like in many other countries, wealth inequality has increased in Switzerland over the last fifty years. By providing new evidence on cantonal top wealth shares for each of the 26 cantons since 1969, we show that the overall trend masks striking differences across cantons, both in levels and trends. … Our results imply that a reduction in the top marginal wealth tax rate by 0.1 percentage points in-creases the top 1% (0.1%) wealth share by 0.9 (1.2) percentage points five years after the reform. This suggests that wealth tax cuts over the last 50 years explain roughly 18% (25%) of the increase in wealth concentration among the top 1% (0.1%)” (abstract).

Bad luxury: Taxing luxury emissions by Clinton G. Wallace and Shelley Welton as of March 14th, 2023 (#36): “A host of recent economic and sociological studies have documented the rising challenge of carbon inequality … These disparities are driven by “luxury emissions” produced by the carbon-intensive lifestyles of the rich, which too often include private jets, mega-SUVs, yachts, and multiple mansions. … we explore how to design a carbon tax to target luxury emissions, considering potential tax bases, rates, and revenue uses“ (abstract).

Climate nudging: Can social comparisons and moral appeals increase public transport ridership and decrease car use? By Johannes Gessner, Wolfgang Habla, and Ulrich J. Wagner as of Feb. 8th, 2023 (#17): “Explanations for why social comparisons fail to achieve the desired effects in our setting include (i) boomerang effects … (ii) disregard of how other people, in particular colleagues, travel, (iii) strong habits that are difficult to change … By contrast, we do find evidence that combining a social comparison with a moral appeal, framed in the context of climate change, significantly altered mobility…. Specifically, it decreased car-related mobility expenditures and frequency of use, particularly mostly for taxis and other ride-hailing and ride-sharing services. It increased expenditures on micromobility but not on public transport. Total expenditures did not change significantly” (p. 30).

Advert for German investors: “Sponsor” my research by investing in and/or recommending my article 9 mutual fund. The fund focuses on social SDGs and midcaps, uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement. The fund typically scores very well in sustainability rankings, e.g. see this free new tool, and the performance is relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T, see also Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – (

… continue on page 2 (# indicates the number of SSRN downloads on March 23rd, 2023):