Archiv der Kategorie: Bonds

Climate Shaming: Illustration from Nina Garman from Pixabay

Climate shaming: Researchpost 171

Ilustration from Pixabay by Nina Garman

Climate shaming: 11x new research on green technology, sustainable fund labels, sustainable advice, carbon premium, brown profits, green bonds, green growth, green shareholder engagement, climate shaming, optimizations and investment timing (# shows number of SSRN full paper downloads as of April 11th, 2024)

Ecological and social research

Green technology benefits: Economic Impact of Natural Disasters Under the New Normal of Climate Change: The Role of Green Technologies by Nikos Fatouros as of March 18th, 2024 (#9):” In our model of the world economy, raising temperatures are expected to negatively affect consumption as well as increase debt. The most frequently proposed possible solution to climate change, is the de-carbonization of production, by using more “green” technologies. Under “green” technology adaptation, countries would be projected to achieve higher levels of consumption and welfare. This positive effect of more environmentally friendly means of production, tends to be stronger for more developed countries. However, under the assumption of greater technological progress of the “green” sector, our results show that even developing countries would be projected to follow the same path of higher and more sustainable levels of consumption and welfare” (p. 10).

ESG investment research (in: Climate Shaming)

Attractive labels: In labels we trust? The influence of sustainability labels in mutual fund flows by Sofia Brito-Ramos, Maria Céu Cortze Nipe, Svetoslav Covachev, and Florinda Silva as of April 2nd, 2024 (#29): “In Europe, investors can resort to different types of sustainable labels such as GNPO-sponsored labels and ESG ratings from commercial data vendors that assess funds’ sustainability risks. In addition, funds can communicate their sustainability features by including ESG-related designations in the name or self-classifying themselves as article 8 or 9 of the SFDR. … Drawing on a dataset of equity funds sold in Europe … Our initial results document investors‘ preferences for sustainability labels, with GNPO labels (Sö: Government and non-profit organizations) standing out as salient signals. … we find that GNPO labels have an effect on fund flows … Furthermore, this impact is stronger for funds holding other sustainability signals, such as Morningstar top globes, the LCD (Sö: Low Carbon Designation) and an ESG name, suggesting a complementary effect of labels … our results show that the effect of funds being awarded a GNPO label is stronger for the institutional invest segment. The findings show that GNPO labels and SFDR classification are influential for investors’ decisions (p. 23/24). My comment: Maybe I should consider paying for labels for my Article 9 fund. A more detailed comment can be found here Nachhaltigkeitssiegel beim Verkauf von Investmentfonds | CAPinside

(Un-)Sustainable advice? Investing Responsibly: What Drives Preferences for Sustainability and Do Investors Receive Appropriate Investments? by Chris Brooks and Louis Williams as of April 8th, 2024 (#21): „ While investors with stronger desires for sustainability do hold more highly ESG-rated funds on average, the relationship is weaker than might have been expected. Perhaps surprisingly, a majority of clients for whom responsible investing is very important hold some unrated funds, while those for whom it is unimportant nonetheless hold the highly ESG-rated funds in their portfolios. We therefore conclude that more focus on sustainability preferences is required to ensure that retail investors get the portfolios they want” (abstract). My comment: Advisor should develop detailed sustainability policies at least for larger investors, see e.g. DVFA_PRISC_Policy_for_Responsible_Investment_Scoring.pdf (English version available upon demand)

No carbon premium: Carbon Returns Across the Globe by Shaojun Zhang as of April 5th, 2024 (#272): ” Emissions are a weighted sum of firm sales scaled by emission factors and grow almost linearly with firm sales. However, emission data are released at significant lags relative to accounting variables, including sales. After accounting for the data release lag, more carbon-intensive firms underperform relative to less carbon-intensive ones in the U.S. in recent years. International evidence on carbon or green premium is largely absent. The carbon premium documented in previous studies stems from forward-looking bias instead of a true risk premium in ex-ante expected returns” (p. 23).

Profitable brown greening? Paying or Being Paid to be Green? by Rupali Vashisht, Hector Calvo-Pardo, and Jose Olmo as of March 31st, 2024 (#70): “… firms in the S&P 500 index are divided into brown (heavily polluting) and green (less polluting) sectors. In clear contrast with the literature, (i) brown firms pay to be green (i.e.better financial performance translates into higher environmental scores) but green firms appear not to. In addition, (ii) neither brown nor green firms with higher environmental scores perform better financially” (abstract). My comment: If brown and green firms perform the same, why not invest only in green firms?

Resilient green bonds: “My Name Is Bond. Green Bond.” Informational Efficiency of Climate Finance Markets by Marc Gronwald and Sania Wadud as of April 4th, 2024 (#15): “… the degree of informational inefficiency of the green bond market is generally found to be very similar to that of benchmark bond markets such as treasury bond markets. … the degree of inefficiency of the green bond market during the Covid outbreak in 2020 and the inflation shock in 2022/2023 is lower than that of the treasury bond market“ (abstract).

Green growth: Investing in the green economy 2023 – Entering the next phase of growth by Lily Dai, Lee Clements, Edmund Bourne, and Jaakko Kooroshy from FTSE Russell as of Sep. 19th, 2023: “After a downturn in 2022 … Green revenues for listed companies are on track to exceed US$5 trillion by 2025 — doubling in size since the conclusion of the Paris Agreement in 2015 — with market capitalisation of the green economy approaching 10% of the equity market. However, to shift the global economy onto a 1.5°C trajectory, green growth would have to further substantially accelerate with green market capitalisation approximating 20% of global equity markets by 2030” (p. 3).

Impact investment research (in: Climate Shaming)

Short-term impact: The Value Impact of Climate and Non-climate Environmental Shareholder Proposals by Henk Berkman, Jonathan Jona, Joshua Lodge, and Joshua Shemesh as of April 3rd, 2024 (#19): “In this paper, we investigate the value impact of environmental shareholder proposals (ESPs) for a large sample of Russell 3000 firms from 2006 to 2021 … We find that both withdrawn and non-withdrawn climate ESPs have positive CARs (Sö: Cumulative abnormal returns), indicating that management screens value-enhancing climate proposals and rejects value-destroying climate proposals. For non-climate ESPs we find insignificant CARs, suggesting that management does not have an ability to screen non-climate proposals. However, we find that close-call non-climate ESPs that are passed have negative abnormal returns, implying that for non-climate ESPs the original decision by managers not to agree with the activists is supported by the share market” (p. 26).

Climate shaming: Fighting Climate Change Through Shaming by Sharon Yadin as of April 4th, 2024 (#13): “This Book contends that regulators can and should shame companies into climate-responsible behavior by publicizing information on corporate contribution to climate change. Drawing on theories of regulatory shaming and environmental disclosure, the book introduces a “regulatory climate shaming” framework, which utilizes corporate reputational sensitivities and the willingness of stakeholders to hold firms accountable for their actions in the climate crisis context. The book explores the developing landscape of climate shaming practices employed by governmental regulators in various jurisdictions via rankings, ratings, labeling, company reporting, lists, online databases, and other forms of information-sharing regarding corporate climate performance and compliance” (abstract). My comment: Responsilbe Naming and Climate Shaming are adequate investor impact tools in my opinion (my “climate shaming” activities see Engagement report” here FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T)

Other investment research

(Pseudo-)Optimization? Markowitz Portfolio Construction at Seventy by Stephen Boyd, Kasper Johansson, Ronald Kahn, Philipp Schiele, and Thomas Schmelzer as of Feb. 13th, 2024 (#50): “More than seventy years ago Harry Markowitz formulated portfolio construction as an optimization problem that trades off expected return and risk, defined as the standard deviation of the portfolio returns. Since then the method has been extended to include many practical constraints and objective terms, such as transaction cost or leverage limits. Despite several criticisms of Markowitz’s method, for example its sensitivity to poor forecasts of the return statistics, it has become the dominant quantitative method for portfolio construction in practice. In this article we describe an extension of Markowitz’s method that addresses many practical effects and gracefully handles the uncertainty inherent in return statistics forecasting” (abstract). My comment:  Extensions of Markowitz methods create complexity but still contain many assumptions/forecasts and are far from solving all potential problems. I prefer very simple optimization and forecast-free approaches, see Das-Soehnholz-ESG-und-SDG-Portfoliobuch.pdf (

Bad timing? Another Look at Timing the Equity Premiums by Wei Dai and Audrey Dong from Dimensional Fund Advisors as of Nov. 2nd, 2023 (#1642): “We examine strategies that time the market, size, value, and profitability premiums in the US, developed ex US, and emerging markets …. Out of the 720 timing strategies we simulated, the vast majority underperformed relative to staying invested in the long side of the premiums. While 30 strategies delivered promising outperformance at first glance, further analysis shows that their outperformance is very sensitive to specific time periods and parameters for strategy construction”(abstract).


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Greeniums: Picture from Sergio Cerrato from Pixabay

Greeniums and more: Researchpost #170

Picture from Sergio Cerrato from Pixabay

Greeniums: 15x new research on transition risk, emissions assurance, biodiversity risks, materiality, climate commitments, investment consultants, green innovation, biodiversity premium, sustainable fund flows, brown home bias, greenwashing, retail governance, and private debt performance

Ecological research

Transition or not? How you measure transition risk matters: Comparing and evaluating climate transition risk metrics by Philip Fliegel as of March 28th, 2024: “We employ a new dataset containing for the first-time reported EU taxonomy alignment of both capex and revenues as a proxy for companies transition risk. … We find a strong divergence in transition risk metrics for similar companies. … We find that only taxonomy and TRBC (Sö: Refinitiv Business Classification) based portfolios are able to measure green firms’ climate transition risk. … notably, emission based green portfolios are highly invested in service, technology and finance, not typical green sectors enabling the transition …” (abstract).

CO2-Negative assurance? On the Importance of Assurance in Carbon Accounting by Florian Berg, Jaime Oliver Huidobro, and Roberto Rigobon as of March 25th, 2024: “Firms that obtain assurance for their carbon emissions report on average a 9.5% higher carbon intensity than their peers without assurance. When controlling for assurance, we do not find evidence that SBTi target-setters reduce their future emissions. Instead, firms that audit reduce their future carbon intensity by 3.3%. This has implications for portfolio managers and ESG raters as taking disclosed carbon emissions at face value would lead to penalizing firms that are more serious about their carbon reductions …“ (p. 12).

Biodiversity risk details: Study for a methodological framework and assessment of potential financial risks associated with biodiversity loss and ecosystem degradation, Final Report by Maha Cziesielski, Cosima Dekker-Hufler, Timea Pal, Graeme Nicholls, Foivos Petsinaris, Lisa Korteweg (Trinomics) Michael Obersteiner, Nikolay Khabarov for the European Commission as of February 2024: “Biodiversity and nature loss pose multifaceted risk, … Reviewing best-practices and existing frameworks, the study covers the key definitions and steps in determining risk drivers, types, transmission channels, and exposure assessments. An assessment of the EU’s sectoral exposure furthermore reveals that agriculture, real estate and construction, and healthcare sectors as most susceptible” (p. 5).

Scarce materiality? European corporate sustainability reporting – The Financial Materiality Compass as an auxiliary tool by Christina Bannier and Henry Flach as of Feb. 8th, 2024: “European companies in scope of the new Corporate Sustainability Reporting Directive (CSRD) will have to report on all sustainability topics that are either financially-material or impact-material (or both) to them. Determining materiality in an extensive individual analysis, however, proves to be an expensive undertaking that will encumber resource-constrained and smaller companies in particular. To offer an easily applicable auxiliary tool, we create a comprehensive sector-specific Financial Materiality Compass (FMC) along the lines of the European Sustainability Reporting Standards (ESRS). … We find that for companies in the consumer staples and energy sector nine out of 10 ESRS categories are financially material, but only one, respectively two, of these categories show a strong materiality. For companies in the health care, information technologies and real estate sector, in contrast, we report the lowest number of financially material ESRS categories in total“ (abstract).

Net-zero bullshit? Business as usual: bank climate commitments, lending, and engagement by Parinitha (Pari) Sastry, Emil Verner, David Marques-Ibanez from the European Central Bank as of March 26th, 2024 (2x): “A prominent initiative is the Net Zero Banking Alliance, which constitutes an agreement to set voluntary net zero targets and decrease financed emissions in targeted sectors over the medium-term (2030) and long-term (2050). This paper is the first attempt to quantify whether banks have met their stated goals using administrative data that allows for a comprehensive examination of net zero lending commitments. We find that climate-aligned lenders reduce lending to targeted sectors, both in absolute terms and relative to other sectors. However, once we compare climate-aligned lenders to other lenders, we find that climate-aligned lenders have not differentially divested from emissions-intensive firms, in mining or in the sectors for which they have set targets. … Further, we do not find evidence for engagement. Firms connected to climate-aligned banks are no more likely to themselves set decarbonization targets“ (p. 36/37).

ESG investment research (in: Greeniums)

Dangerous pension consultants? Loading the DICE against pension funds – Flawed economic thinking on climate has put your pension at risk by Steve Keen for Carbon Tracker as of July 27th, 2023: “Investment consultants to pension funds have relied upon peer-reviewed economic research to provide advice to pension funds on the damages to pensions that will be caused by global warming. Following the advice of investment consultants, pension funds have informed their members that global warming of 2 – 4.3oC will have only a minimal impact upon their portfolios. … Economists have claimed, in refereed economics papers, that 6oC of global warming will reduce future global GDP by less than 10%, compared to what GDP would have been in the complete absence of climate change. In contrast, scientists have claimed, in refereed science papers, that 5oC of global warming implies damages that are “beyond catastrophic, including existential threats,” while even 1oC of warming—which we have already passed—could trigger dangerous climate tipping points“ (p. 6).

Variable greeniums: The Monetary Channel of the Green Premium by Xinwei Li as of March 26th, 2024: „I document .. novel empirical facts about the green premium, which refers to the average return of the Green-Minus-Brown (GMB) portfolio. First, I show that the green premium varies substantially over time, where greenness can be measured ether by Trucost carbon emission intensities or by MSCI environmental scores. The green premium ranges from -53 bps to 76 bps on a monthly basis …. Second, I find that the … green premium is positive and significant during periods of expansionary monetary policy and turns zero or even negative during periods of contractionary monetary policy …“ (p. 26).

True greeniums? In Search of the True Greenium by Marc Eskildsen, Markus Ibert, Theis Ingerslev Jensen, and Lasse Heje Pedersen as of March 1st, 2024: “We find widespread robustness problems with the ESG literature that estimates the greenium based on realized returns combined with a variety of greenness measures. … the true greenium … is negative across countries and asset classes. In equities, the estimated annual greenium is −25 bps per standard deviation increase in the robust green score. This greenium corresponds to a −50 bps expected return spread between the top- and bottom third of firms by greenness. Looking at more extreme differences, the greenium corresponds to a near −100 bps expected return spread between the top- and bottom deciles. Further, the greenium becomes more negative over time and is more negative in greener countries“ (p. 45/46).

Greeniums and innovation: Funding the Fittest? Pricing of Climate Transition Risk in the Corporate Bond Market by Martijn A. Boermans, Maurice J. G. Bun, and Yasmine van der Straten as of Jan. 17th, 2024: “We focus on the amount of green patents relative to the total amount of patents of a given company, and assess whether the interaction between emission intensity and the green patent ratio affects bond yield spreads. Our empirical results provide evidence that a firm’s carbon emission intensity positively affects the bond yield spread. At the same time we find that investors reward those emission-intensive companies engaging in green innovation. … we assess whether green patenting is associated with a decline in future emission intensity. We document substantial heterogeneity in the effect over time and across industries. … our results suggest that investors should exercise caution when accommodating emission intensive companies with a smaller bond yield spreads once they innovate in the green space. Finally, our results reveal that European investors, and particularly institutional investors, are more inclined to price exposures to climate transition risk …“ (p. 35).

Biodiversity premium? Biodiversity Risk Premium by Helena Naffaa and Gergely Janos Czupya as of March 27th, 2024: “By analysing almost 3,000 constituents of the MSCI All Country World Index over a decade, spanning from 2013 to 2023 … we observed decreases of 0.9%, 1.5%, and 3.6% in the maximum attainable Sharpe ratio in the universe for low, moderate, and high levels of biodiversity risk mitigation, respectively. … Moreover, there is an additional cost associated with the reduction in portfolio diversification due to the screening process, further diminishing the Sharpe ratio by 1.1%, 2.3%, and 3.5% for the respective risk mitigation levels. Our study also highlights the added benefit of biodiversity alignment on ESG scores, revealing unintended consequences resulting in improvements in the environmental, social and governance pillar metrics, in addition to the incurred reduction in the Sharpe ratio“ (p. 30/31).

Sustainable flows? Sustainability or Performance? Ratings and Fund Managers’ Incentives by Nickolay Gantchev, Mariassunta Giannetti, and Rachel Li as of March 9th, 2024: “Following the introduction of Morningstar’s sustainability ratings (the “globe” ratings), mutual funds increased their holdings of sustainable stocks to attract flows. Such sustainability-driven trades, however, underperformed, impairing the funds’ overall performance. Consequently, a tradeoff between sustainability and performance emerged. In the new equilibrium, the globe ratings do not affect investor flows and funds no longer trade to improve their globe ratings” (abstract). My comment: If there is similar performance, I would select the more sustainable investment (for the most recent performance of my sustainable portfolios see Q1 Renditen der Soehnholz ESG Portfolios – Responsible Investment Research Blog (

Pollution home bias: Carbon Home Bias by Patrick Bolton, Marc Eskildsen, and Marcin Kacperczyk as of Feb. 18th, 2024: “We undertake a global analysis of institutional investor portfolios and find widespread underweighting of companies with higher carbon emissions. This underweighting is largely driven by underinvestment in foreign companies with high carbon emissions … Similar domestic firms are overweighted but by a smaller magnitude. Further, the divestment of foreign polluters has increased since 2015“ (abstract).

Beyond Greenwashing: Crosswashing in Sustainable Investing: Unveiling Strategic Practices Impacting ESG Scores by Bertrand Kian Hassani and Yacoub Bahini as of March 26th, 2024: “… cross-washing involves companies strategically investing in sustainable activities to boost Environmental, Social, and Governance (ESG) scores while preserving non-sustainable core operations. The study emphasizes that this specific form of greenwashing is not currently considered in existing ESG assessments, potentially leading to an inflated perception of corporate ethical practices “ (abstract). … “The findings derived from the case study indicate a notable overestimation in current ESG notations. This overestimation, however, is contingent upon the specific industry sectors and the size of the companies involved” (p. 19). My comment: For a detailed comment see Nur ESG-Ratings für Nachhaltigkeitsbeurteilungen? | CAPinside

Retail governance: Corporate Governance Through Social Media by Christina M. Sautter as of March 20th, 2024: “Retail investors are vigorously and loudly taking positions regarding corporate governance issues on social media. … Retail investors have opened tens of millions of new brokerage accounts since 2020. … These wireless investors are taking advantage of social media platforms like YouTube, Reddit, TikTok, X (formerly Twitter), WhatsApp, Telegram, and Discourse, among other venues to transform corporate governance engagement. … Although structural barriers do impede engagement and reforms to the system are necessary … a case study of one particularly illustrious event involving AMC Entertainment Holdings, Inc. .. show(s) that retail investors are anything but silent” (abstract). My comment: Shareholder engagement is not that difficult, see “Engagementresport” at FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T

Other investment research (in: Greeniums)

Unattractive debt investments? Risk-Adjusting the Returns to Private Debt Funds by Isil Erel, Thomas Flanagan, Michael Weisbach as of March 26th, 2024: “Private debt funds are the fastest growing segment of the private capital market. … Using both equity and debt benchmarks to measure risk, a typical private debt fund produces an insignificant abnormal return to its investors. However, gross-of-fee abnormal returns are positive, and using only debt benchmarks also leads to positive abnormal returns as funds contain equity risks. The rates at which private debt funds lend appear to be high enough to offset the funds’ fees and risks, but not high enough to exceed both their fees and investors’ risk-adjusted rates of return” (abstract).


Advert for German investors:

Sponsor my research by investing in and/or recommending my global small cap mutual fund (SFDR Art. 9). The fund focuses on the Sustainable Development Goals and uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement with currently 28 of 30 companiesFutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T or My fund (

Q1 Performance Illustration von Gerd Altmann von Pixabay

Q1 Renditen der Soehnholz ESG Portfolios

Q1 Renditen: Passive Multi-Asset Portfolios OK

Q1 Renditen: Das regelbasierte „most passive“ Multi-Asset Weltmarkt ETF-Portfolio hat mit +5,4% im Vergleich zu Multi-Asset ETFs (+5,1%) und aktiven Mischfonds (+4,8%) gut abgeschnitten. Das ebenfalls breit diversifizierte ESG ETF-Portfolio hat mit +4,2% dagegen unterdurchschnittlich rentiert.

Nachhaltige ETF-Portfolios: Anleihen gut, Aktien OK, SDG schwierig

Das ESG ETF-Portfolio ex Bonds lag mit +6,1% erheblich hinter traditionellen Aktien-ETFs (+10,6%) zurück. Die Rendite ist aber ähnlich wie die 7,2% traditioneller aktiv gemanagter globaler Aktienfonds.

Mit -0,3% rentierte das sicherheitsorientierte ESG ETF-Portfolio Bonds (EUR) ähnlich wie aktive Fonds (-0,7%). Das renditeorientierte ESG ETF-Portfolio Bonds hat mit +1,6% ebenfalls etwas besser abgeschnitten als vergleichbare aktiv gemanagte Fonds (+1.3%).

Das aus thematischen Aktien-ETFs bestehende SDG ETF-Portfolio lag mit -0,2% stark hinter traditionellen Aktienanlagen zurück. Besonders thematische Investments mit ökologischem Fokus liefen auch im ersten Quartal 2024 nicht gut.  

Q1 Renditen: Direkte ESG SDG Portfolios OK

Das auf Small- und Midcaps fokussierte Global Equities ESG SDG hat mit 1,4% im Vergleich zu Small- und Midcap-Aktienfonds schlecht abgeschnitten. Das ist vor allem auf den hohen Anteil an erneuerbaren Energien zurückzuführen. Das Global Equities ESG SDG Social Portfolio hat mit 3,7% dagegen vergleichbar wie Small- und Midcap-Portfolios abgeschnitten.

Mein FutureVest Equity Sustainable Development Goals R Fonds (Start 2021) hat nach einem guten Quartal 4/2023 im ersten Quartal 2024 eine Rendite von +2,6% erreicht. Das ist durch den Fokus auf Smallcaps und den relativ hohen Anteil an erneuerbaren Energien erklärbar (weitere Informationen wie z.B. auch den aktuellen detaillierten Engagementreport siehe FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T und My fund – Responsible Investment Research Blog (

Für die zu Jahresende 2023 voll investierten Trendfolgeportfolios gab es im ersten Quartal keine Signale, so dass sie wie die Portfolios ohne Trendfolge abgeschnitten haben.

Weiterführende Infos:

Regeländerungen: Nachhaltig aktiv oder passiv? – Responsible Investment Research Blog (

2023: Passive Allokation und ESG gut, SDG nicht gut – Responsible Investment Research Blog (

Glorreiche 7: Sind sie unsozial? – Responsible Investment Research Blog (

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

ESG rumor illustration from yaobim from Pixaby

ESG rumors: Researchpost #169

ESG rumors: 8x new research on carbon offsets, green innovation, sustainable fund outperformance, ESG rumors and their effects on equities and bonds, ESG factors, safe bonds and private equity (# shows SSRN full paper downloads as of March 27th, 2024)

Ecological and social research

Problematic Offsets: Carbon Offsets: Decarbonization or Transition-Washing? by Sehoon Kim, Tao Li, and Yanbin Wu as of March 23rd, 2024 (#104): “Carbon offsets allow firms to claim reductions in carbon emissions by purchasing and retiring carbon credits sold by projects or entities that achieve those reductions. … While large firms with net-zero commitments are more likely to use offsets, we find evidence that offsets are often used strategically by firms that are already positioned close to achieving these targets or in industries where it is easier to boost their ESG rankings relative to their peers. When faced by an exogenous shock to their incentives to boost rankings, firms with low emissions in industries with narrow cross-peer emission gaps become more likely to use offsets whereas heavy-emission firms in large-gap industries do not. Moreover, firms that strategically increase the use of offsets do so by retiring credits from low-quality offset projects, which command lower prices and therefore provide a cost-effective way of transition-washing. Overall, our evidence does not support the purported idea that carbon offsets can be effective at facilitating net-zero transitions by heavy-emission firms. … we do not find evidence that these firms would use such “good” offsets in large-enough quantities to meaningfully reduce their net emissions“ (p. 29/30). My comment: I do not consider/use offsets for my investments.

ESG investment research (ESG rumors)

Green innovation variations: Doing Good by Being Smart: Green Innovation and Firms’ Financial and Environmental Performance by Qiang Cheng, An-Ping Lin, and Mengjie Yang as of March 22nd, 2024 (#25): “We find that firms with more valuable pollution prevention patents have better future financial and environmental performance, whereas the value of firms’ pollution control patents is not associated with their future financial or environmental performance. We further document that pollution prevention innovation improves financial performance through its positive effects on sales growth and cost efficiency …“ (p. 29/30).

2023 ESG outperformance: Sustainable Reality – Sustainable Funds Show Continued Outperformance and Positive Flows in 2023 Despite a Slower Second Half by Morgan Stanley Institute for Sustainable Investing as of Feb. 29th, 2024: “Sustainable funds outperformed their traditional peers in 2023 with a median return of 12.6% compared to traditional funds’ 8.6%, according to Morningstar data. … Sustainable fund assets under management (AUM) globally grew to $3.4 trillion, up 15% from 2022 and reaching 7.2% of total AUM. Inflows to sustainable funds remained positive overall at $136 billion, 4.7% of the prior year-end AUM. … Equity funds with a global, Europe or APAC investment focus skew primarily to Industrials and Health Care, while funds investing in the Americas are more overweight Technology. Greater exposure to Technology stocks helped sustainable equity funds investing in the Americas in 2023, but this was not the only factor influencing sustainable funds’ outperformance” (p. 1). … “If a hypothetical fund achieved the median return for each of the past five years, a sustainable fund would be up +35% compared with a traditional fund’s +25%” (p. 6). … “Europe-domiciled Sustainable Funds Outperformed Traditional Funds, With Article 8 and Article 9 Funds in a Similar Range” (p. 18). My comment: I have a similar experience, see 2023: Passive Allokation und ESG gut, SDG nicht gut – Responsible Investment Research Blog (

ESG rumors (1): Attention-Grabbing ESG: Do Investors Extract Value-relevant ESG Information from Social Media? by Yoshitaka Tanaka and Shunsuke Managi as of March 23rd, 2024 (#9): “Initially, we find that unconditional excess stock returns exhibit a positive correlation with positive and attention-grabbing ESG events and a negative correlation with negative ESG events. Our findings also indicate that events with low financial materiality, despite their high social prominence, do not have a lasting effect on stock returns. … we find that the greater is the information asymmetry regarding ESG information, the greater is the stock return response. On the other hand, when we control for firm attributes, we find no correlation between materiality and stock returns. The regression results suggest that the response of stock returns to ESG events may be attributed to market inefficiencies arising from information asymmetries rather than fundamental factors“ (p. 20). My comment: I ,like that my ESG ratings provider incorporates ESG controversies in its frequently updated ESG ratings

ESG rumors (2): From News to Numbers: Quantifying the Impact of ESG Controversies on Corporate Bond Spreads by Doina C. Chichernea, J. Christopher Hughen, and Alex Petkevich as of March 23rd, 2024 (#7): “… we document that bondholders demand a higher credit spread for bonds issued by firms with higher ESG controversies. The adverse effect of ESG controversies on bond pricing is long-lived and is primarily observed in bond issues with higher credit risk and more pronounced information asymmetry. We also document that current ESG controversies significantly predict an increase in the firm’s future asymmetric information and default risk …” (abstract).

No ESG factor? Are ESG Factors Truly Unique? by Svetoslav Covachev, Jocelyn Martel, and Sofia Brito-Ramos as of March 21st, 2024 (#71): “This paper studies the relationships between carbon and ESG risk factors and commonly accepted equity risk factors. … the carbon and ESG risk factors can be replicated as linear combinations of risk factors that are based on stock characteristics that are not directly related to environmental and ESG policies. We note that the main inputs for building the carbon and ESG factors are ESG ratings, which have a documented link with firm size. Bigger firms tend to have greater resources for gathering and disclosing ESG information. We also examine the risk exposures of popular ESG indexes, which provide a convenient means to invest in ESG-focused companies. Our findings indicate that the indexes examined are all exposed to the market and size factors, but they are also well-explained by the long leg of the ESG factor” (p. 15). My comment: Sustainable investments should not be expected to have higher returns but rather lower (ESG and thus overall) risks than comparable other investments.

Other investment research (ESG rumors)

Flights to bonds: Global or Regional Safe Assets: Evidence from Bond Substitution Patterns by Tsvetelina Nenova as of March 25th, 2024 (#5): “This paper provides novel empirical evidence on portfolio rebalancing in international bond markets through the prism of investors’ demand for bonds. … Safe assets such as US Treasuries or German Bunds face especially inelastic demand from investment funds compared to riskier bonds. But spillovers from these safe assets to global bond markets are strikingly different. Funds substitute US Treasuries with global bonds, including risky corporate and emerging market bonds, whereas German Bunds are primarily substitutable within a narrow set of euro area safe government bonds. Substitutability deteriorates in times of stress, impairing the transmission of monetary policy“ (abstract).

Private equity dissected: The economics of private equity: A critical review by Alexander Ljungqvist as of Feb. 15th, 2024: “… I have aimed to critically synthesize the main insights of more than 90 academic studies of private equity … to draw the following conclusions. Private equity funds have, on average, historically outperformed public-market indices after fees, but maybe not when adjusted for risk, leverage, and illiquidity. … Private equity funds generate returns for their investors through a combination of the value they add to their portfolio companies and their ability to target companies whose performance is about to take off anyway.  Whether private equity creates social value for the economy at large is an open question. … Private equity is a demanding asset class in which more sophisticated investors can expect to earn better returns than less sophisticated investors. There is scope for ample misalignment of interests between fund managers and investors. Private equity is an innovative asset class, creating new practices and solutions at a fast pace. Recent examples include subscription lines, GP-led secondaries, and NAV financing“ (p. 42/43).


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SDG Performance Illustration with SDG Wheel

SDG performance: Researchpost #168

SDG Performance: 14x new research on CEO pay, greenwashing, greenium, ESG risk, regulation, audits, ungreen ETFs, SDG scores and performance, voting, circular risk, non-normality and mutual funds (# shows SSRN full paper downloads as of March 21st, 2024)

ESG research

Being CEO pays: The State Of Corporate Sustainability Disclosure 2023 by Magali Delmas, Kelly Clark,  Jiaxin Li, and Tyson Timmer as of March 14th, 2024 (#28): “… we analyze the most commonly disclosed corporate sustainability metrics among S&P 500 firms, based on data from the Open for Good initiative. Our focus is on greenhouse gas emissions (GHG), climate strategy, gender and ethnic diversity, and the ratio of CEO-to-median-employee compensation … Across all (Sö: ESG) metrics, the average disclosure rate is fairly low at 55% … reporting for Scope 1 and 2 GHG emissions is notably high, with average rates exceeding 80%. Conversely, the disclosure rate for Scope 3 emissions drops to 56% … the lack of detailed information on the assumptions and methodologies that these disclosures employ constrain this data’s usefulness … . On average, women comprise only 39% of employees in S&P 500 firms, with Financials and Health Care the sectoral exceptions, reporting averages of 50% and 51% women, respectively. At the board of directors’ level, the representation of women is lower, averaging 32%, with minimal sectoral variation … that average CEO compensation is 305 times greater than that of the median employee … However, this can vary significantly from year to year within each company …” (p. 4). My comment: With my shareholder engagement activities I encourage companies to report the CEO pay ratio so that all stakeholders can comment on them, see e.g. Wrong ESG bonus math? Content-Post #188 (

Scope 3 reporting effects: Real Effects of the Proposed SEC Climate Disclosure Rule by Mary Ellen Carter, Lian Fen Lee, and Enshuai Yu as of March 15th, 2024 (#117): “We examine changes in firm supply chain decisions following the SEC’s proposed climate disclosure rule, which requires Scope 3 emissions disclosure. … we compare the import activity of treated firms (non-SRCs: Sö. Small reporting companies) to unaffected firms (SRCs) before and after the threat of Scope 3 disclosure in the proposed SEC rule was revealed. We find a decrease in import activity for non-SRCs relative to SRCs, implying that the proposed disclosure rule creates costs that make foreign outsourcing less favorable. … we provide evidence that non-SRCs also increase their in-house production, and exhibit greater improvements in environmental efforts, compared to SRCs“ (p. 30/31).

Greenwashing risks: A Greenwashing Index by Elise Gourier Hélène Mathurin as of Feb. 18th, 2024 (#314): “We construct a news-implied index of greenwashing. Our index reveals that greenwashing has become particularly prominent in the past five years. Its increase was driven by skepticism towards the financial sector, specifically ESG funds, ESG ratings and green bonds. … Unexpected increases in the greenwashing index are followed by decreases of flows into funds advertised as sustainable, both for retail and institutional investors. … When accounting for greenwashing, the climate risk premium becomes small and statistically insignificant” (abstract). My comment: With my shareholder engagement activities I encourage companies to report broadly defined GHG Scope 3 emissions so that all stakeholders can focus on them

ETF-Greenwashing? Unmasking Greenwashing: A call to clean up passive funds by Lara Cuvelier at al. from Reclaim Finance as of March 20th, 2024: “… the five big asset managers we selected for this report based on the size of their passive portfolios – BlackRock, Amundi, UBS AM, DWS and Legal & General Investment Management (LGIM) – still held at least US$227 billion in fossil fuel developers in 2023, with more than half of this amount coming from passive portfolios. … 70% of the 430 ‘sustainable’ passive funds we analyzed were exposed to fossil fuel expansion. Focusing our analysis on the most significant of these – 25 high-profile ‘sustainable’ passive funds – we found the majority were investing in some of the world’s biggest fossil fuel developers, such as ExxonMobil and Shell. The analysis also shows that especially when these funds are invested in bonds, they provide direct financing for fossil fuel developers“ (p. 4). My comment: This result is not surprising. The reason is that these products are supposed to have very little deviation (tracking error/difference/active share) from standard indices. Therefore, they use best-in-class approaches instead of the far more sustainable best-in-universe sustainability selection approach.

Grey definitions? Greenness confusion and the greenium by Luca De Angelis and  Irene Monasterolo as of Feb. 19th, 2024 (#241):  “We use different classifications of green assets and carbon stranded assets and develop six portfolios characterized by shades of green and brown technologies, from the VeryGreen to the VeryDarkBrown, and green-minus-brown factors. Then we analyse the market pricing of the factors in augmented CAPM and Fama-French models, focusing on the firms listed in the STOXX Europe 600 index. … we find that the presence of the greenium, i.e. significant abnormal returns, depends on the classification of green and non-green used. Our results show the presence of greenium for ESG-based portfolios, in particular for the LowESG and LowE portfolios. However, the greenium disappears when we test for the science-based classifications i.e. the CPRS (for carbon stranded assets) and the EU Taxonomy (for green assets) …“ (p. 24).

Risk reducing ESG:  Investing During Calm and Crisis: Implied Expected Returns by Henk Berkman and Mihir Tirodkar as of March 15th, 2024 (#59): “… we use a novel and forward-looking measure of expected returns derived from contemporaneous stock option prices. Our main finding is that stocks with higher ESG scores have lower expected returns, however this is only observed during the Global Financial Crisis and the COVID-19 pandemic. We also find that the ESG risk premium term structure is positively related to ESG scores during crises, indicating that investors expect a reversion to normality within a year. .. we provide partial support for the theoretical prediction that ESG investing lowers expected returns. … our paper suggests that ESG investing may not be a source of systematically superior returns, but rather a way of expressing ethical preferences and temporarily reducing risk during unexpected crises …“ (p. 36).

Wenig Umweltwissen? Kooperation zwischen Aufsichtsrat, Wirtschaftsprüfer und Interner Revision – Empirische Befunde zum Einfluss von CSRD und CSDDD von Patrick Velte und Christoph Wehrhahn vom 15.3.2024: „Der Zusammenarbeit zwischen Aufsichtsrat, Wirtschaftsprüfer und Interner Revision kommt insbesondere vor dem Hintergrund aktueller EU-Nachhaltigkeitsregulierungen (CSRD und CSDDD) eine besondere Bedeutung zu. Eine intensivere Zusammenarbeit könnte u.a. in der Koordinierung von Revisions- bzw. Prüfungsschwerpunkten bei der (gemeinsamen) Überwachung der Nachhaltigkeitsberichterstattung nach der CSRD und der CSDDD bestehen. Hierfür ist eine signifikante Verbesserung der umwelt- und sozialbezogenen Kompetenzen und Ressourcen notwendig“ (p. 36).

Supplier audits: Selection, Payment, and Information Assessment in Social Audits: A Behavioral Experiment by Gabriel Pensamiento and León Valdés as of March 20th, 2024 (#9): “Companies often rely on third-party social audits to assess suppliers’ social responsibility (SR) practices. … We find that auditors who are paid and chosen by the supplier are more lenient, and the effect is more pronounced when the information observed suggests poor SR practices. … auditors who are merely paid by the supplier do not make more lenient decisions …. Our results … show that removing a supplier’s ability to choose its own auditor is critical to increase the detection of poor SR practices, particularly when the risk of bad practices is high” (abstract). My comment: With my shareholder engagement activities, I encourage companies to broadly evaluate all supplier according to ESG criteria, see Supplier engagement – Opinion post #211 (

Impact investing research (in: SDG performance)

Benchmark-hugging: Optimizing Sustainable Performance: A Strategic Approach to Value Creation and Impactful Investing by Heiko Bailer as of Feb. 29th, 2024 (#51): “Backtests against the historic MSCI World benchmark from September 2019 to November 2023 … showed that stringent universe exclusions negatively impacted performance, increased portfolio size without lowering active risk though also reduced emissions and improved the overall Sustainable Development Goals (SDG) scores“ (abstract). “The amplification of regulatory constraints, coupled with an expanding array of universe exclusions, forms an unfavorable concoction restraining the potential for significant „Value Creation“ in sustainable investing. This circumstance results in a low sustainability threshold, shifting sustainable portfolio construction toward a predominantly “Value Alignment” strategy, albeit at substantial cost of traditional performance. …” (p. 21). My comment: For a detailed analysis see Nachhaltigkeit oder Performance? | CAPinside

Diverging SDG performance: The Costs of Being Sustainable by Emanuele Chini, Roman Kraussl, and Denitsa Stefanova as of Feb. 18th, 2024 (#24): “We define a new bottom-up measure of fund sustainability that links this concept to the alignment of the fund with the SDGs. Importantly, we disaggregate this measure in four components representative of different dimensions of sustainability: economy & infrastructure, environment, basic needs, and social progress. … funds with a positive impact on the economy & infrastructure and social progress SDGs are associated with higher returns whereas funds with a positive impact on environment and basic needs have lower returns. Second, institutional investors seem to infer this sustainability—returns relationship and show a preference for sustainability dimensions that are positively correlated with abnormal returns” (p. 24/25). My comment: As expected, different investment foci result in different performances. I doubt that good financial return prognostics (for different SDG-goals) are feasible. That speaks for SDG-goal diversification (which I sue in my mutual fund, see

Homely shareholder voting: Home bias in shareholder voting by Xuan Li as of Nov. 10thm 2023 (#71): “Using a global data set from 2012 to 2022, I provide robust evidence that there is a significant home bias in shareholder voting. … An systematic review of investors’ voting polices suggests that investors actively seek out more information about domestic firms during the voting process in order to gain an information advantage in their home countries“ (p. 17).

Circular risk reduction: One, no one and one hundred thousand: how many firm risks are affected by the circular economy by Evita Allodi and Maria Gaia Soana as of March 20th, 2024 (#4): “We use a sample of 1,069 listed European non-financial companies over the period 2010-2022. We find that circular economy practices, implemented together, significantly decrease downside, idiosyncratic, and default risks. However, considering the three dimensions individually, only reduction and reusing mitigate these risks, while recycling does not“ (abstract).

Other investment research (in: SDG performance)

Normal non-normality: Diverging from the Norm: An Examination of Non-Normality and its Measurement in Asset Returns by Grant Holtes as of Feb. 17th, 2024 (#18): “This paper examines the normality of US equities and fixed income asset-class returns over 104 years” (abstract). “Returns are measurably non-normal … Returns are more normal at longer holding periods … The impacts section demonstrates that a normal assumption does not have a large impact on central estimates, but can have a large impact on estimates of low-probability events such as CVAR calculations …” (p. 10).

Crisis-delegation: Household portfolios and financial literacy: The flight to delegation by Sarah Brown, Alexandros Kontonikas, Alberto Montagnoli, Harry Pickard, and Karl Taylor as of Feb. 21st, 2024 (13x): “We analyse data on European household financial portfolios over the period 2004-2017, to explore how households change their asset allocations following the recent twin financial crises. … Our estimates show that the post-crisis period is associated with changes in European household asset allocation behaviour. Specifically, there are elevated holdings of safe assets and lower holdings of stocks and bonds, in line with the argument for cautiousness. At the same time, though, our findings reveal higher holdings of mutual funds in the post-crisis period. … This is consistent in line with a “flight to delegation”, that is, the utilisation of the perceived expertise of mutual funds managers. … the most literate households tend to hold significantly more mutual funds. … The findings for females implies a gender gap in financial literacy when investing in mutual funds which worsens following economic turmoil” (p. 14/15).


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Small-Cap ESG illustration from Aöexa from Pixabay

Small-Cap ESG: Researchpost #167

Small-Cap ESG: 6x new research on (German) migration, climate education, ESG performance, distressed ESG, and biodiversity bond risk (# shows SSRN full paper downloads on March 14th, 2024)

Social and ecological research

East-West migration: Moving Out of the Comfort Zone: How Cultural Norms Affect Attitudes toward Immigration by Yvonne Giesing, Björn Kauder, Lukas Mergele, Niklas Potrafke, Panu Poutvaara as of March 12th, 2024 (#17): “Our causal identification relies on comparing students who moved across the East-West border after German reunification with students who moved within former East Germany. Students who moved from East to West became more positive toward immigration. … the difference between East-West movers and East-East movers increases over time and is driven by East German students who often interacted with fellow students. Effects are stronger in less xenophobic West German regions“ (abstract).

Climate education limits: Climate Change Education Effects on Climate Risk Attitudes and Financial Investment: Experimental Evidence by Bin Chang, Nelson Borges Amaral as of Oct. 5th, 2023 (#44): “… we educate undergraduate finance students about climate change … Students in the course were assigned to manage a simulated investment portfolio which provided us with an opportunity to measure the share of climate-friendly, and climate-damaging exchange-traded funds, as well as the underlying reasons for their investment decisions through a trading journal that each student submitted. Our results reveal that while education influences personal attitudes about the importance of climate risks in investment decisions, those attitudes are not reflected in their investment behavior” (abstract).

Responsible investment research (in: Small-Cap ESG)

Responsible performance: The Risk-Adjusted Performance of Conventional, Socially Responsible, and Islamic Investment Funds by Ezzedine Ghlamallah, Sami Ben Larbi, and Laurence Gialdini as of Feb. 1st, 2024 (#31): “… our study shows that the risk-adjusted performance of SRI funds (Sö: Socially Responsible) does not differ significantly from that of conventional funds, and that both outperform SCI funds (Sö: Shari’ah Compliant). … the underperformance of SCI funds compared to SRI funds can be explained by structural factors such as the limitation of eligible assets (interest rate products and hedging instruments) … our study shows that SCI investment funds have lower systematic risk than SRI funds and are more resilient in times of economic recession” (p. 17).

Distressed ESG? On the Relationship between Financial Distress and ESG Scores by Christian Lohmann, Steffen Möllenhoff, and Sebastian Lehner as of March 8th, 2024 (#32): “This empirical study introduces the financial distress level obtained from a bankruptcy prediction model as a new explanatory variable for ESG scores. … data of listed US companies for 2003– 2022 reveals a pronounced and statistically significant U-shaped relationship between financial distress and ESG scores. A substantial increase in financial distress is associated with increased ESG scores … this empirical study concludes that financially distressed companies distort their ESG scores upward, a robust finding for the applied ESG scores from Refinitiv, MSCI, ESG Book, and Moody’s ESG” (abstract).

Small-Cap ESG performance: Is sustainable entrepreneurship profitable? ESG disclosure and the financial performance of SMEs by Paul P. Momtaz and Isabel M. Parra as of March 7th, 2024 (#22): “… we examine the role of ESG-related information disclosure in a longitudinal sample of Spanish SMEs (Sö: Small and medium enterprises) over the 2012-2022 period. Our results suggests that ESG is positively related to SMEs’ performance, the positive relation is amplified by institutional pressures, and sustainability may protect SMEs against failure, supporting the “doing well by doing good” view in the SME context” (p. 28). My comment: My experience with SME investing is comparable, especially regarding SMEs with a renewable energy focus

Bio credit risk: Biodiversity Risk in the Corporate Bond Market by Sevgi Soylemezgil and Cihan Uzmanoglu as of Feb. 26th, 2024 (#58): “… we find that longer term bonds issued by firms with higher biodiversity risk exposure have higher yield spreads, consistent with biodiversity being perceived as a long-run risk. This effect is stronger among firms with marginal credit quality and those that mention biodiversity regulation in their financial statements. … we find that the impact of biodiversity exposure on yield spreads is more pronounced when biodiversity-related awareness and regulatory risks rise” (abstract).


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Biodiversity Diversgence illustration with seed toto by Claudenil Moraes from Pixaby

Biodiversity diversion: Researchpost #165

Biodiversity diversion: 14x new research on donations, brown indices, ESG ETFs, ESG investing fees, greenwashing, labeled bonds, climate engagement, framing, female finance, and risk measurement (“’#” shows full paper SSRN downloads as of Feb. 29th, 2024).

Social and ecological research

Facebook donations: Does Online Fundraising Increase Charitable Giving? A Nationwide Field Experiment on Facebook by Maja Adena and Anselm Hager as of Feb. 27th, 2024 (#4): “Using the Facebook advertising tool, we implemented a natural field experiment across Germany, randomly assigning almost 8,000 postal codes to Save the Children fundraising videos or to a pure control. … We found that (i) video fundraising increased donation revenue and frequency to Save the Children during the campaign and in the subsequent five weeks; (ii) the campaign was profitable for the fundraiser; and (iii) the effects were similar independent of video content and impression assignment strategy. However, we also found some crowding out of donations to other similar charities or projects.” (abstract).

Biodiversity diversion (1)? The 30 by 30 biodiversity commitment and financial disclosure: Metrics matter by Daniele Silvestro, Stefano Goria, Ben Groom, Thomas Sterner, and Alexandre Antonelli as of Nov. 23rd, 2023 (#93): “The recent adoption of the Kunming-Montreal Global Biodiversity Framework commits nearly 200 nations to protect 30% of their land by 2030 – a substantial increase from the current global average of c. 17%. … the easiest approach to reach compliance would be to protect the cheapest areas. … Here we explore biological and financial consequences of area protection … We find substantial differences in performance, with the cheapest solution always being the worst for biodiversity. Corporate disclosure provides a powerful mechanism for supporting conservation but is often dependent on simplistic and underperforming metrics. We show that conservation solutions optimized through artificial intelligence are likely to outperform commonly used biodiversity metrics“ (abstract).

ESG investment research (in: „Biodiversity diversion“)

Biodiversity diversion (2): A Bibliometric and Systemic Literature Review of Biodiversity Finance by Mark C. Hutchinson and Brian Lucey as of Feb. 19th, 2024 (#140): “This study presents a short bibliometric analysis of biodiversity finance …. Six focal areas emerge, with Conservation, Conservation Finance, and Ecosystem Finance prominent. Thematic emphasis revolves around biodiversity challenges and the inefficiency of financial mechanisms in addressing them. Our analysis reveals an exploitable gap in the lack of finance-led solutions” (abstract).

Brown stock indices: International trade in brown shares and economic development by Harald Benink, Harry Huizinga, Louis Raes, and Lishu Zhang as of Feb. 22nd, 2024 (#9): “Using global stock ownership data, we find a robust negative relation between the tendency by investors to hold brown assets and economic development as measured by log GDP per capita. … First, at the country level, economic development is likely to lead to a greening of the national stock portfolio. Second, cross-sectionally, richer countries will tend to hold greener portfolios. … Finally, we find that investors in richer countries have a lower propensity to divest from browner firms that are included in the MSCI World index, which does not consider firms’ carbon intensities” (p. 31/32). My comment: Most (institutional) investors use benchmarks. Green benchmarks should be used more often to foster transition (regarding benchmark selection compare Globale Small-Caps: Faire Benchmark für meinen Artikel 9 Fonds? (

ESG ETF dispersion: From ESG Confusion to Return Dispersion: Fund Selection Risk is a Material Issue for ESG Investors by Giovanni Bruno and Felix Goltz from Scientific Beta as of Feb. 22nd, 2024: “… we construct a dataset of Sustainable ETFs – passive ETFs that have explicit ESG objectives. … Overall, our results indicate that ESG investors face a large fund selection risk. Over the full sample dispersion is 6.5% (4.9%) in terms of annualised CAPM Alpha (Industry Adjusted Returns), and it can reach 22.5% (25.3%) over single calendar years. We also show that past performance and tracking error do not contain useful information on future performance. … dispersion in performance allows ETF providers to always present investors some strategy that has recently outperformed“ (p. 31). My comment: It would be nice to have more details in the research article regarding conceptual differences e.g. between ESG Leader, Transition and SRI indics/ETFs, see e.g. Verantwortungsvolle Investments im Vergleich: SRI ETFs sind besser als ESG ETFs ( from 2018

Good ESG ETFs: Unraveling the Potential: A Comprehensive Analysis of ESG ETFs in Diversified Portfolios across European and U.S. Markets by Andrea Martínez-Salgueiro as of Feb. 15th, 2024 (#10): “… results indicate substantial benefits of ESG ETFs in Europe and notable hedge, diversification, and safe-haven potential in the U.S. Simulated data further demonstrate ESG portfolios‘ outperformance, especially in Europe, highlighting the risk-return tradeoff” (abstract).

Responsible fees: Responsible Investment Funds Build Consistent Market Presence by Jordan Doyle as of Feb. 21st, 2024: “… during the study period from 31 December 2012 to 31 December 2022. Total net assets for “responsible investments” as defined by Lipper increased by a factor of 2.7×, from $2,215.6 billion in 2012 to $5,974.6 billion in 2022. The market share of responsible investment funds remained relatively constant during the same period, increasing from 14.2% in 2012 to 15.4% in 2022. … Retail ownership dominates institutional ownership of responsible investment funds globally. In the United States, however, institutional assets surpassed retail assets in 2018, indicating a relative shift in demand preferences. … they both invest more assets into negative screening funds than any other type of responsible investment strategy …fund fees of responsible investing funds are largely in line with those of non-responsible investment fund fees in the United States. In Europe, however, responsible investment fund fees tend to be lower than non-responsible investment fund fees“ ( p. 3).

Unsustainable institutions? Sustainable Finance Disclosure Regulation: voluntary signaling or mandatory disclosure? by Lara Spaans, Jeroen Derwall, Joop Huij, and Kees Koedijk as of Feb. 19th, 2024 (#38): “… we point out that (i) the SFDR similarly to voluntary disclosure enables funds to signal their sustainability commitments to the market, while (ii) like mandatory disclosure, requires these funds to be transparent about the sustainability outcomes of their underlying portfolio … we show that investors indeed respond to the Article signals, but that this effect is driven by retail investors. … we see that mutual funds that take on an Article 8(/9) label after the SFDR announcement improve their sustainability outcomes compared to Article 6 funds. Specifically, we note that retail funds behave in accordance with their signal, while for institutional funds we do not find that Article 8(/9) funds behave differently from Article 6 funds. We disregard the hypothesis that these institutional funds partake in ‘window-dressing’, instead we find evidence that mandatory disclosure induces European institutional funds to significantly improve their sustainability outcomes compared to untreated, US-domiciled institutional funds“ (p. 32). My comment: For my Article 9 (global smallcap fund) see and My fund (

Less greenwashing: Do US Active Mutual Funds Make Good of Their ESG Promises? Evidence from Portfolio Holdings by Massimo Guidolin and Monia Magnani as of Feb. 23rd, 2024 (#22): “… our findings indicate a distinct shift towards greater sustainability within the mutual equity fund industry. Notably, this trend is not exclusive to self-labelled ESG funds; all types of funds have enhanced their ESG ratings and reduced their investments in sin stocks. The number of self-labelled ESG funds has continued to rise in recent years, and importantly, most of these ESG funds, on average, appear to genuinely adhere to their claims of prioritizing sustainable investing. Consequently, they demonstrate significantly higher actual ESG scores in their portfolio holdings. Moreover, we are witnessing a noticeable reduction in sin stocks within their portfolios“ (p. 34).

SDG- aligned and impact investment research

Sustainable returns: Labeled Bonds: Quarterly Market Overview Q4 2023 by Jakub Malich and Anett Husi from MSCI Research as of Feb. 21st, 2024:  Green, social, sustainability and sustainability-linked “Labeled-bond issuance reached a similar level in 2023 as in 2022, which was notably below the peak issuance of 2021. … The market continued to grow both in size and diversity, as hundreds of new and recurring corporate and government-related issuers brought labeled bonds to the market. … Most newly issued and outstanding labeled bonds were investment-grade and issued by ESG leaders … the performance of labeled bonds, despite their distinctions from conventional bonds, was primarily driven by key fixed-income risk and return drivers, such as interest-rate sensitivity, currency fluctuations and credit risk“ (p. 18). … “Corporate issuers led issuance in the fourth quarter, with USD 75 billion worth of labeled bonds (63% of the total), while supranational, sovereign and agency (SSA) entities issued USD 44 billion (37%). This continues a shift in the labeled-bond market, with corporate issuers taking a more central role” (p. 4).

Index impact: The Impact of Climate Engagement: A Field Experiment by Florian Heeb and  Julian F. Kölbel as of Feb. 6th, 2024 (#361): “A randomly chosen group of 300 out of 1227 international companies received a letter from an index provider, encouraging the company to commit to setting a science-based climate target to remain included in its climate transition benchmark indices. After one year, we observed a significant effect: 21.0% of treated companies have committed, vs. 15.7% in the control group. This suggests that engagement by financial institutions can affect corporate policies when a feasible request is combined with a credible threat of exit” (abstract). My comment: It would be interesting to know the assets of the funds threatening to divest (index funds are often large). Hopefully, this type of shareholder engagement also works for active (and small) asset managers. Further shareholder engagement research see e.g. Shareholder engagement: 21 science based theses and an action plan – (

ESG nudging: Optimistic framing increases responsible investment of investment professionals by Dan Daugaard, Danielle Kent, Maroš Servátka, and Lyla Zhang as of Jan. 1zh, 2024 (#33): “… we report insights from an incentivized online experiment with investment professionals … The analyzed sample consists of individuals who stated their intention to increase their investment in ESG within the next 10 years … We demonstrate that framing divestment decisions in a more optimistic orientation, with an emphasis on the transitory nature of costs and the permanency of future benefits, significantly increases responsible investment by 3.6%. With total professionally managed assets valued at USD $98.4 trillion globally, a comparable effect size would represent a USD $3.6 trillion shift in asset allocations” (p. 12).

Other investment research (in: „Biodiversity diversion“)

Gender differences: The Gender Investment Gap: Reasons and Consequences by Alexandra Niessen-Ruenzi and Leah Zimmerer as of Jan. 27th, 2024 (#31): „ Women, compared to men, report larger financial constraints, higher risk aversion, perceived stress in financial matters, and lower trust in financial institutions. As a result, women save and invest less consistently than men. Conditional on investing, women use fewer financial products, particularly in equity investments. We find a significant gender gap in stock market participation, with 17.6% of women and 32.3% of men investing. The motives and barriers influencing stock market participation also diverge, with men leaning towards short-term gains and the thrill of investing, while women commonly cite unfamiliarity with stocks and fear of potential losses as primary reasons for non-participation” (abstract).

New performance indicator: Maximum Cumulative Underperformance: A New Metric for Active Performance Management by Kevin Khang and Marvin Ertl from The Vanguard Group as of Jan. 18th, 2024 (#29): “… we define maximum cumulative underperformance (MaxCU)—the maximum underperformance of an active fund relative to the benchmark … The greater the benchmark return environment and the longer the investment horizon, the greater MaxCU investors should expect … Ex-ante, our framework can be used to articulate the investor’s tolerance for underperformance relative to the benchmark and inform the final active allocation decision at the outset. Ex-post, our framework can be used to set the base rate for terminating a manager who has suffered a sizeable underperformance“ (p. 19/20). My comment: Useful concept, but benchmark selection is very important for this approach. For the latter problem see e.g. Globale Small-Caps: Faire Benchmark für meinen Artikel 9 Fonds? (


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ESG Bluff: Picture from pixabay by May Leroy shows dices etc.

ESG bluff? Researchpost #164

ESG bluff: 10x new research on Swiss/sustainable retail, lab meat, Weimar politics, sustainable women, SDG financial research, green funds, real estate ESG, free trading governance effects and bond factors (#shows the number of SSRN full paper downloads as of February 22nd, 2024)

Social and ecological research (in: ESG bluff?)

Sustainable retail (English version below): Ausgebummelt – Wege des Handels aus der Spass- und Sinnkrise by Gianluca Scheidegger, Johannes Bauer, and Jan Bieser as of Dec. 7th, 2023 (#21): „Die Zeit wird neu verteilt: Was keine Freude oder Sinn stiftet, wird gestrichen … Nachhaltiger Konsum gewinnt an Bedeutung … Umfassend informiert: KI erleichtert die Produktsuche für Konsument:innen …Auf einer Linie: Persönliche Werte werden bei der Produkt- und Händlerwahl entscheidend: Purpose-driven Consumers sind die weltweit größte Kundengruppe. Tendenz steigend. Diese Kund:innen kaufen nur bei Firmen ein, die ihre Werte teilen. Die Konsument:innen erwarten in Zukunft mehr von den Unternehmen. Händler müssen Stellung zu gesellschaftlichen Problemen beziehen und aktiv zu ihrer Lösung beitragen. Die gute Nachricht ist: Die Menschen trauen dies den Unternehmen zu. Jedem Kanal seine Rolle: Transaktion primär online, Inspiration eher offline. Schnell und nachhaltig: … Händler, die beide Ansprüche unter einen Hut bekommen, verschaffen sich einen klaren Wettbewerbsvorteil“ (p. 84).

Sustainable retail (German version above): Going shopping is dead – How to Restore Meaning and Fun in Retail by Gianluca Scheidegger, Johannes Bauer and Jan Bieser as of Dec. 4th, 2023 (#17): “Time is being reallocated: what’s not fun or meaningful will be crossed off the schedule … Sustainable consumption is gaining in importance Overconsumption has a massive impact on the environment. … Fully informed: AI facilitates consumers’ searches for products … In aligment: personal values becoming decisive in choosing products and retailers Purpose-driven consumers are the largest customer group worldwide. This trend is rising. These customers only buy from companies that share their values. Consumers will expect more from companies in the future. Retailers must take a stand on social problems and actively contribute to solving them. The good news is that people trust companies to do this. Each channel has its role: transactions primarily online, inspiration mostly offline … Fast and sustainable: delivery under greater scrutiny … The fastest form of delivery is often not the most sustainable. Retailers who can reconcile both requirements gain a clear competitive advantage“ (p. 84).

Lab meat: Good conscience from the lab? The State of Acceptance for Cultivated Meat by Christine Schäfer, Petra Tipaldi and Johannes C. Bauer as of Jan. 8th, 2024 (#12; German version: Gutes Gewissen aus dem Labor? So steht es um die Akzeptanz von kultiviertem Fleisch by Christine Schäfer, Petra Tipaldi, Johannes Bauer :: SSRN, #26): “Lab-grown meat instead of beef fillet, cell-cultured patties instead of burgers – for many Swiss people this sounds far from appetising. A mere 20% would even try cultivated meat, whilst 15% remain undecided. … The Swiss population is also sceptical about other kinds of novel foods, such as insects or coffee made from mushrooms. There are, however, customer groups who may be more inclined to tuck into a steaming plate of crispy lab-grown schnitzel: They are young, male, educated, mainly live in the city, already have experience with a particular diet, such as vegetarian or low carb, and know a lot about sustainable food. … Lab-grown meat is one such example of a novel food. It is cultivated from stem cells in a bioreactor and has many advantages, namely that factory farming and the use of antibiotics are all but eliminated, less space and water is needed for production, no rainforests need to be cut down to cultivate animal feed and the combination of nutrients in the meat can be adapted to specific target groups. But there are risks …. the production facilities needed eat up enormous amounts of energy … Lab-grown meat is still hard to find on the market. Customers can only taste chicken derived from cellular agriculture in a few restaurants in Singapore and the USA at the moment. As yet, it has not been approved anywhere in Europe“ (p. 2). My comment: I am skeptical about the ecological footprint and market potential of lab meat compared to plant-based meat alternatives.

Sustainable women: Sustainable leadership among financial managers in Spain: a gender issue by Elena Bulmer, Iván Zamarrón, and Benito Yáñez-Araque as of Dec. 29th, 2023 (#13): “A total of 131 senior financial managers (106 men and 25 women), from various sectors in Spanish companies (a multi-sector study), responded to two scales: the Honeybee Sustainable Leadership Scale (focusing on stakeholder orientation and a vision of social and shared leadership) and the Locust Leadership Scale (primarily centered on achieving short-term profits at any cost). … The main finding was that female financial managers scored significantly higher on the Honeybee Leadership Scale compared to their male counterparts, signifying that female presence is key to sustainable leadership” (abstract).

Deglobalization effect? The consequences of a trade collapse: Economics and politics in Weimar Germany by Björn Brey and Giovanni Facchini as of Jan. 17th, 2024 (#18): “What are the political consequences of de-globalization? We address this question in the context of Weimar Germany, which experienced a 67% decline in exports between 1928-1932. During this period, the Nazi party vote share increased from 3% to 37%. … we show that this surge was not driven by the direct effects of the export decline in manufacturing areas. At the same time, trade shock-induced declines in food prices spread economic hardship to rural hinterlands. We document that this indirect effect and the pro-agriculture policies put forward by the Nazis are instead key to explain their electoral success” (abstract).

Responsible investment research (in. ESG bluff?)

SDG research: Finance Research and the UN Sustainable Development Goals – an analysis and forward look by Yang Sua, Brian M. Lucey, and Ashish Kumar Jha as of Feb. 13th, 2024 (#183): “This study conducts a comprehensive analysis of the interplay between the United Nations Sustainable Development Goals (UN SDGs) and scholarly output in financial journals from 2010 to 2022. … The findings demonstrate a focus within finance research on Economic Growth (Goal 8) and Peace and Justice (Goal 16), while also identifying areas that warrant further scholarly attention” (abstract). My comment: For mutual funds it seems to be easiest to focus on SDGs 3 (Health), 7 (Energy) and 9 (Industry/Infrastructure). That is my experience with a bottom-up stock selection approach, see “Nachhaltigkeitsreport”.

ESG bluff? Sustainable in Name Only? Does Bluffing or Impact Explain Success in a Moral Market? by Kevin Chuah and Witold Henisz as of Feb. 13th, 2024 (#16): “… US-domiciled equity-focused investment funds that are labeled as focusing on environmental, social, and governance (ESG) issues. Although we find that product success in terms of investment inflows is more likely for funds with better ESG performance, the draw of larger fund operators and of superior financial returns remains substantial. We further segment our sample, finding that segments offering lower levels of ESG engagement achieve inflows that are unrelated to ESG performance, yet are a substantial part of the overall market. This suggests that bluffing by large product providers may undermine genuine attempts at social impact in moral markets“ (abstract). My comment: It certainly seems to help to grow fund assets to have huge marketing power and good returns, recently often based on high allocations to the glorious 7 which I do not consider to be very sustainable, see Glorreiche 7: Sind sie unsozial? – Responsible Investment Research Blog (

Green disadvantage? Carbon Risk Pricing or Climate Catering? The Impact of Morningstar’s Low Carbon Designation on Fund Performance by K. Stephen Haggard, Jeffrey S. Jones , H. Douglas Witte, and C. Edward Chang as of Jan. 18th, 2024 (#21): “Our results show insignificant performance differences between Low Carbon Designated (LCD) funds and non-LCD funds for the most recent (three-year) period. For longer periods of five and ten years, we observe excess performance only for the Sharpe and Sortino ratios, but not for Total Return or the Treynor ratio. … our results are consistent with a catering hypothesis of climate investing. Initially, investors seeking low-carbon investments bid up the prices of low-carbon stocks. Firms respond by seeking Low Carbon Designations, whether through real efforts or greenwashing. Once enough low-carbon stocks are available to meet the demand of the lowcarbon clientele, the premium associated with low carbon disappears“ (p. 17). My comment: If low LCD funds have similar performance as high carbon funds, why invest in the latter?

Green disadvantage? Doing Good and Doing Well: The Relationships between ESG and Stock Returns of REITs by Neo Jing Rui Dominic and Sing Tien Foo as of Jan. 29th, 2024 (#31): “Using a sample of 413 REITs from both the US and other developed countries covering the period from 2018 to 2022 …We find that REITs with an ESG rating have a lower price return of 0.8% relative to REITs not assessed for ESG. … The results show that the total returns of the ESG-rated REITs were even lower when the climate change risks increased, or more specifically, when investors became more salient about climate change news, they increased their preference for ESG-rated REITs, thus reducing the total return of REITs. … we find that higher compliance and operation costs for REITs with strong ESG agendas, which may come in the form of higher compensation for the Board and Senior Management, who take on more ESG responsibilities, may have a negative impact on the ESG-rated REIT stock performance“ (p. 19/20). My comment: The higher compensation for REIT Boards and Senior Management with the associated higher pay gap compared to median employee should be explored further. With my shareholder engagement strategy I try to alert regarding this issue, see Shareholder engagement: 21 science based theses and an action plan – (

Retail anti-governance? Retail Investors and Corporate Governance: Evidence from Zero-Commission Trading by Dhruv Aggarwal, Albert H. Choi, and Yoon-Ho Alex Lee as of Feb. 9th, 2024 (#102): “We examine the effects of the sudden abolition of trading commissions by major online brokerages in 2019, which lowered stock market entry costs for retail investors, on corporate governance. … Firms with positive abnormal returns in response to commission-free trading subsequently saw a decrease in institutional ownership, a decrease in shareholder voting, and a deterioration in environmental, social, and corporate governance (ESG) metrics. Finally, these firms were more likely to adopt bylaw amendments to reduce the percentage of shares needed for a quorum at shareholder meetings” (abstract).

Other investment research (in: ESG bluff)

Few good bond factors: The Corporate Bond Factor Zoo by Alexander Dickerson, Christian Julliard, and Philippe Mueller as of Nov. 14th, 2023 (#1299): “We find that the majority of tradable factors designed to price corporate bonds are unlikely sources of priced risk, and that only one factor, capturing the post-earnings an-nouncement drift in corporate bonds, which has not been utilized in prior asset pricing models, should be included in any stochastic discount factor (SDF) with very high probability. Furthermore, we find that nontradable factors capturing inflation volatility risk … and the term structure yield spread … as well as the return on a broad based bond market index, are likely components of the SDF” (p. 37/38).


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Nutrition changes: Picture shows aubergine caricature by nneem from Pixabay

Nutrition changes: Researchpost #163

Nutrition changes: 13x new research on biodiversity, food, socially responsible buying, SFDR, ESG data, green indices, derivatives, impact investing, ESG compensation, stock and bond risks, and financial advisor biases by Patrick Velte, BaFin, Morningstar and many others (# shows number of full SSRN downloads as of Feb. 15th, 2024):

Social and ecological research (in: “Nutrition changes”)

Man vs. biodiversity: The Main Drivers of Biodiversity Loss: A Brief Overview  by Christian Hald-Mortensen as of Oct. 18th, 2023 (#101): “The drivers of biodiversity loss are complex – this paper has examined the main drivers, namely agricultural expansion, climate change, overfishing, urbanization, and the introduction of invasive species. To avoid further biodiversity loss, the role of agricultural expansion and land use change becomes apparent as a cause of 85% of at-risk species” (p. 5/6).

Nutrition changes (1): European Food Trends Report: Feeding the Future Opportunities for a Sustainable Food System by Christine Schäfer, Karin Frick and Johannes C. Bauer as of Nov. 7th, 2023 (#41): “…Industry, logistics, retail and research are developing new solutions for a diet that does not come at the expense of the planet. By employing methods of agro-ecology and precision agriculture, farmers can produce in a more resource-efficient way. Smart data enables more efficient logistics. New virtual distribution channels and a vibrant creator economy – which includes food bloggers, influencers and online chefs – are shaking up the industry and are able to bring important issues to consumers’ attention. By using packaging that is recyclable or biodegradable, the processing industry is able to reduce its ecological footprint. Meanwhile, researchers have long since explored alternative protein sources based on cells or fermentation, the production of which generates fewer greenhouse gas emissions compared with conventional meat production” (p. 2).

Nutrition changes (2): From Intention to Plate: Why Good Dietary Resolutions Fail by Petra Tipaldi, Christine Schäfer and Johannes C. Bauer as of Jan. 11th, 2024 (#17): “What we eat accounts for more than 30% of man-made greenhouse gas emissions. … The majority of the Swiss population is aware of this: 98% want to change the way they eat, at least partially. 91% want to avoid generating food waste, more than three-quarters want to eat more healthy, seasonal and regional foods and even 42% want to often cut out fish and meat. Despite Swiss people being so motivated, the same products mostly end up on their plates like before, as a representative survey from the Gottlieb Duttweiler Institute shows. The study reveals: there is an intention-behaviour gap. … Consumers can do the most for the environment by avoiding food waste, reducing their consumption of fish, meat and animal products in general and buying food with the lowest possible CO2 emissions. The study also shows the extent to which companies, the retail industry and politicians can support consumers to seize their opportunities for action so that sustainable diets do not remain an intention but become a reality on consumers’ plates”.

Community & supply SCR: Which CSR Activities Motivate Socially Responsible Buying? by Katherine Taken Smith, Donald Lamar Ariail, Murphy Smith, and Amine Khayati as of Feb. 8th, 2023 (#14): “In support of prior research, our findings revealed consumers to be more inclined to purchase from companies engaged in CSR activities. … While consumers voiced support for CSR activities in each of the social issues, only two were identified as motivating socially responsible buying: i.e., community and supply chain. As a CSR issue, the term supply chain encompasses ethical labor concerns such as child labor and human trafficking. The term community refers to a company investing resources in the local economy. … females displayed significantly higher buying intentions towards companies that practice CSR. Females, compared to males, were more supportive of CSR activities related to ethics and philanthropy. … Non-conservative consumers, compared to conservative, exhibited a higher degree of socially responsible buying. … religious consumers, compared to non-religious, were more supportive of CSR activities related to community and ethics“ (p. 18/19). My comment: My shareholder engagement activities include a focus on suppliers by asking buyers to use comprehensive ESG-ratings, see Supplier engagement – Opinion post #211 – Responsible Investment Research Blog (

Responsible investment research (in: “Nutrition changes”)

Sustainable fund details: SFDR Article 8 and Article 9 Funds: Q4 2023 in Review? by Hortense Bioy, Boya Wang, Arthur Carabia, Biddappa A R from Morningstar as of Jan. 25th, 2024: “In the fourth quarter of 2023, Article 8 funds registered the largest quarterly outflows on record and Article 9 funds their very first quarterly outflows … Over the entirety of 2023, Article 8 funds registered net outflows of EUR 27 billion, while Article 9 funds collected EUR 4.3 billion and Article 6 funds garnered EUR 93 billion. Actively managed funds drove all the outflows in the fourth quarter as well as over the full year. Passive funds sustained their positive momentum. Assets in Article 8 and Article 9 funds rose by 1.7% over the quarter to a new record of EUR 5.2 trillion. Together, Article 8 and Article 9 funds saw their market share climb further to nearly 60% of the EU universe primarily due to continued reclassification from Article 6 to Article 8 or 9. We identified 256 funds that altered their SFDR status in the fourth quarter, including 218 that upgraded to Article 8 from Article 6, while only four funds downgraded to Article 8 from Article 9” (p. 1). My comment: There are only very few Article 9 funds with a focus on SDGs (if so, mostly ecology oriented funds) or small and midcaps. There is still limited competition (and overlap with other funds) for my small/midcap (social) SDG fund which – since inception – has a similar performance as traditional small/midcap funds (see Fonds-Portfolio: Mein Fonds | CAPinside)

ESG rating deficits: BaFin Marktstudie – Durchführung einer Marktstudie zur Erhebung von und Umgang mit ESG-Daten und ESG-Ratingverfahren durch Kapitalverwaltungsgesellschaften vom 14.2.2024: „Mithilfe einer Befragung von 30 deutschen KVGen und 6 ESG-Ratinganbietern untersucht die vorliegende Marktstudie der BaFin den Status Quo hinsichtlich der Erhebung und des Umgangs der KVGen mit ESG-Daten und Ratings. … 84% der KVGen zieht MSCI als Datenanbieter heran, gefolgt von ISS (44%), Bloomberg (28%) und Sustainalytics sowie Solactive (jeweils 20%). Über 70% der KVGen, die externe Datenanbieter heranziehen, nutzen mehr als einen Anbieter… Nur rund 38% der KVGen betrachten die Qualität extern erhobener ESG-Daten und Ratings als „hoch“ … Als Gründe werden neben der zum Teil schlechten Datenabdeckung auch die zum Teil unzureichende Aktualität der Daten genannt … während 64% der KVGen sich eine schnellere Beantwortung ihrer Fragen durch die Anbieter wünschten“ (p. 3-5). My comment: MSCI is not necessarily the best sustainability data provider. The costs of <50k EUR p.a. for ESG data seems low and not high to me. Most likely, (indirect) costs charged to the portfolio managers of the funds are not included in that figure. And those costs can be very high, if detailed and transparent reporting to end-investors is offered. Also, there is a (under)performance risk if there is crowding in highly MSCI rated investments (compare: Glorreiche 7: Sind sie unsozial? – Responsible Investment Research Blog (

Green index variations: Resilience or Returns: Assessing Green Equity Index Performance Across Market Regimes by An Duong as of Jan. 5th, 2024 (#20): “… we embark on a comprehensive examination of the performance differential between green equity indices, specifically the FTSE4Good series, and conventional equity indices across a diverse set of economies: the US, UK, Japan, Indonesia, Malaysia, Mexico, and Taiwan. … in periods of market stress, green indices often demonstrate slightly less negative returns than their conventional counterparts, … in developing economies, green indices exhibit higher volatility, indicating greater sensitivity to market downturns, contrasted with the lower volatility observed in developed markets. … In addition, Green indices show a higher likelihood of remaining in bearish states, suggesting either a resilience to rapid shifts or a slower adaptation to positive market changes “ (p. 31).

Commodity ESG: ESG and Derivatives by Rajkumar Janardanan, Xiao Qiao, and K. Geert Rouwenhorst as of Feb. 8th, 2024 (#40): “We present a simple conceptual framework to illustrate how ESG considerations can be applied to derivatives in practice, using the market for commodity futures as an example. Because derivatives do not target individual firms, we link the S and G scores to the geography of global production. … Some preliminary simulation evidence suggests that, for now, including ESG considerations in the selection of commodity futures would have not materially impacted the risk and return properties of investor portfolios” (p. 14).

Impact investment research (in: “Nutrition changes”)

Beyond ESG: From ESG to Sustainable Impact Finance: Moving past the current confusion by Costanza Consolandi and Jim Hawley as of Feb. 5th, 2024 (#86): “We argue that ESG/Sustainability is moving from being based primarily on ESG ratings and rankings … to sustainability (ESG) being based on mandated disclosure and analysis of externalities. We briefly examine the basis of ESG ranking and ratings confusion concluding that based on current methodologies of major providers results in neither significant change nor accurate disclosures by firms. Alternatively, we suggest an integration of externality data will significantly modify Modern Portfolio Theory as it does not account for externality effects either … Not accounting for externalities leads to sub-optimum economic system performance … Finally, we place these concepts and developments the context of global emerging regulatory and standard setting” (abstract).

Good ESG bonus? Archival research on sustainability-related executive compensation. A literature review of the status quo and future improvements by Patrick Velte as of Feb. 13th, 2024: “This literature review summarizes previous quantitative archival research on sustainability-related executive compensation (SREC) … there are clear indications that SREC has a positive effect on sustainability performance. In contrast to the business case argument for sustainability, this is not true for financial performance. We find major limitations and research gaps in previous studies that should be recognized in future studies (e.g., differentiation between symbolic and substantive use of SREC)” (abstract). My comment: I hope that there will be more such research, e.g. focusing on pay ratios, see Pay Gap, ESG-Boni und Engagement: Radikale Änderungen erforderlich – Responsible Investment Research Blog (

Other investment research

Risk versus time: The Long and Short of Risk and Return by Leo H. Chan as of Dec. 20th, 2023 (#31): “I show that risk increases as the measurement time frame shortens, while it decreases as the measurement time frame increases. … Over the long horizon, risk (as measured by standard deviation of returns) is no longer a concern. Rather, an investor should pay more attention to the total return of an investment portfolio. In this regard, what is considered risky (stocks) is a far better choice than what is considered safe (bonds)” (abstract).

Only stocks or more? Stocks for the Long Run? Sometimes Yes, Sometimes No by Edward F. McQuarrie as of Feb. 13th, 2024: “Digital archives have made it possible to compute real total return on US stock and bond indexes from 1792. The new historical record shows that over multi-decade periods, sometimes stocks outperformed bonds, sometimes bonds outperformed stocks and sometimes they performed about the same. New international data confirm this pattern. Asset returns in the US in the 20th century do not generalize. Regimes of asset outperformance come and go; sometimes there is an equity premium, sometimes not” (abstract).

Advisor bias: Financial Advisors and Investors’ Bias by Marianne Andries, Maxime Bonelli, and David Sraer as of Jan. 27th, 2024 (#73): “We exploit a quasi-natural experiment run by a prominent French brokerage firm that removed stocks’ average acquisition prices from the online platform used by financial advisors. … First, even in our sample of high-net-worth investors receiving regular financial advice, the disposition effect – investors’ tendency to hold on to their losing positions and sell their winning stocks – is a pervasive investment bias. Second, financial advisors do exert a significant influence on their clients’ investment decisions. Third, financial advisors do not actively mitigate their clients’ biases: when advisors have access to information relevant to their clients’ disposition effect – whether stocks in their portfolio are in paper gains or losses – clients exhibit more, not less, disposition effect“ (p. 25). … “(a) decrease in disposition effect bias leads to higher portfolio returns, increased client inflow, and a lower likelihood of leaving the firm” (abstract).


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Impact washing illustration shows picture by Raca C from Pixabay thanks to Bucarama TLM

Impact washing? Researchpost #162

Impact washing: 8 new research studies on ESG performance, sustainable finance labels, sdg funds, diversification, bank purpose, SME loans, Millenials and fractional shares (#: SSRN full paper downloads as of Feb. 8th, 2024)

Responsible investment research (In: Impact washing?)

ESG study overview: Global Drivers for ESG Performance: The Body of Knowledge by Dan Daugaard and Ashley Ding as of Feb. 2nd, 2024 (#22): “… the literature on what drives ESG performance is highly fragmented and current theories fail to offer useful insights into the disparity in ESG performance. Hence, this study draws upon an accumulated body of knowledge of ESG-related literature and explores the major drivers of ESG performance. … this article reveals the fundamental debate underpinning ESG responsibility, the breath of pertinent stakeholders, the theories necessary to understand ESG management and the conditions which will best achieve ESG progress” (abstract).

Label-chaos? New trends in European Sustainable Finance Labels by Karina Megaeva, Peter-Jan Engelen, and Luc Van Liedekerke as of Feb. 1st, 2024 (#38): “… we … review the current market of labelled sustainable investments in the context of the major changes in the EU regulation of sustainable finance and to determine their (new) role and place” (abstract). “… the evolvement of the voluntary certification on the sustainable investments market will depend a lot on how the future EU Eco-label is received on that market, the reactions of the financial market participants (both asset managers and investors) and certainly on further developments of the EU regulatory initiatives” (p. 42).

Impact washing? Impact investing – Do SDG funds fulfil their promises? by ESMA – The European Securities and Markets Authority as of Feb. 1st, 2024: “… investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return – attracts growing interest from investors. … Impact claims are often based on well-known sustainability frameworks, including the United Nations Sustainable Development Goals (SDGs), … This article proposes and summarises a methodological approach towards identifying SDG funds and assessing the extent to which their holdings align with their claims by bringing together a unique set of different data sources. Our results highlight some of the challenges in assessing real-world impact claims and show that SDG funds do not significantly differ from non-SDG counterparts or ESG peers regarding their alignment with the United Nations SDGs“ (p. 3). “ … our final sample of SDG funds consists of 187 funds (p. 7) … average holding of 187 stocks and bonds for SDG funds compared with 586 for non-SDG funds (p. 9) … for scope 3 emissions, where SDG funds seem to have more than 50% more emissions compared to non-SDG funds (p. 11) … My comment: “United Nations Global Compact is a voluntary initiative whose aim is … delivering the SDGs through accountable companies and ecosystems that enable changes”. … This corresponds to 2,721 unique United Nations Global Compact companies” (p. 8). This does not seem to be the best basis to measure SDG alignment. I suggest activity-based company revenue shares instead which is available from independent data providers such as This provider also covers many (small and midsize) companies which are not UNGC members. My fund, for example, currently has >70% such SDG Revenue share. Also, concentrated SDG funds (my fund focuses on the 30 most sustainable stocks according to my criteria) may have higher such shares than more diversified ones, a topic which could be analyzed in future studies.

Other investment research (In: Impact washing?)

Good concentration: Bad Ideas: Why Active Equity Funds Invest in Them and Five Ways to Avoid Them by C. Thomas Howard as of Feb. 1st, 2024: “The best and worst idea stocks are, respectively, those most and least held by the best US active equity funds. … The two best ideas category stocks eclipse their benchmarks by 200 and 59 basis points (bps) …. The bad idea stocks, by contrast, underperform. (These results would have been even more dramatic had we excluded large-cap stocks since stock-picking skill decreases as market cap increases: The smallest market-cap quintile best idea returns far outpace those of the large-cap top quintile best ideas.)”

Profitable purpose: Purpose, Culture, and Strategy in Banking by Anjan Thakor as of Oct. 5th, 2023 (#73): “What the research is showing, however, is that in many instances, acting to serve the greater good actually helps the bottom line as well, and the channel for this effect is employee motivation. … Part of the reason for this relationship is that adoption of an authentic higher purpose engenders employee trust in the organization’s leaders (e.g. Bunderson and Thakor (2022)) and this facilitates the design of more complex and profitable products and services (e.g. Thakor and Merton (2023))” (p. 18). My comment: With my shareholder engagement I try to activate employee and other stakeholder (ESG) motivation, see Shareholder engagement: 21 science based theses and an action plan – (

Climate vs. SME credits: Climate vulnerability and SME credit discouragement: Nurturing a vicious circle by Jeremie Bertrand, Christian Haddad, and Dupire Marion as of Dec. 4th, 2023 (#9): “… based on a sample of SMEs from 119 developing countries in the 2010–2019 period .. our findings indicate a positive association between vulnerability to climate change and credit discouragement” (abstract).

Millennials are different: Bitcoin: Between A Bubble and the Future by Yosef Bonaparte as of Dec. 20th, 2023 (#28): “… we find that social holidays has greater impact during the Millennials segment than previous generations, while the impact of post trading days of traditional holidays declines. We also find that days of the week and month of the year anomalies are different for Millennials than previous generations. Thus, we suggest that anomalies are subject to generations. At the cross-sectional level, we demonstrate that some sectors are positively sensitive to generations, especially to the Millennials (including Textiles, Defense and Beer and Liquor) while others negatively (Coal, Construction and Mines). At the micro portfolio choice level, we find that Millennials exhibit a unique portfolio choice strategy with more aggressiveness (higher participation and more investing in risky assets) and more diverse (invest in many stocks and more international stocks). We also find that the Millennials employ a unique search strategy for stocks as they rely more on professionals help when they invest“ (p. 21/22).

Fractional share benefits: Nominal Price (Dis)illusion: Fractional Shares on Neobroker Trading Platforms by Matthias Mattusch as of Feb.6th, 2023 (#53): “… we examine neotrading behavior in the light of three key innovations of neobrokers: commission-free trading, easy availability, and fractional shares trading. … we identify a substantial and enduring surge in demand for stocks with lower nominal prices. … Notifications on trading apps, specifically regarding corporate actions, elicit observable market reactions. … most importantly, the introduction of fractional shares suggests that most of these nominal price reactions will be weakened, if not eliminated. … Introducing fractional shares boosts overall trading activity … The introduction of fractional shares could likely eliminate anomalies in asset pricing, which would pave the way for interesting future research“ (p. 20/21).


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