Archiv der Kategorie: Regulierung

ESG beliefs: Researchpost #124

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

Ecologial and social research

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

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

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Taxonomy reporting: Can companies boost their share-prices?

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

Slow regulatory details

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

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

Taxonomy reporting is scarce and of little meaning

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

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

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

For all listed companies, taxonomy reporting can pay off fast

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

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

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

Greenium research and more: Researchposting 117

Greenium research: 25x new research on green subsidies, nature investing, populism, financial crime, ESG regulation, climate agreements, ESG scandals, transition, institutional investors, greenium, CDS, green loans, voting, multi-assets, gold, commodities, real estate, and private equity

Social and ecological research

Good green subsidies? Environmental Subsidies to Mitigate Net-Zero Transition Costs by Eric Jondeau, Gregory Levieuge, Jean-Guillaume Sahuc, and Gauthier Vermandel as of Jan. 13^th, 2023 (#298): “The implementation of a pure carbon tax policy to reduce CO2 emissions would result in substantial GDP losses because firms would divert resources to invest in environmental goods and services that are provided by an immature and low-competition sector. Mitigating the induced recession is possible through a massive subsidization of EGSS (Environmental Goods and Services Sector). By reducing labor costs for both entrants and incumbents operating in this sector, such a policy would accelerate its development and offer a large reduction in the selling price of abatement technologies. … Eventually, the GDP loss would be reduced from $266 trillion between 2019 and 2060 to $145 trillion. Importantly, reducing entry costs in EGSS would accelerate the transition and reduce the GDP loss mainly at the beginning of the transition” (p. 41/42).

More public spending? Nature as an asset class or public good? The economic case for increased public investment to achieve biodiversity targets by Katie Kedward, Sophus zu Ermgassen, Josh Ryan-Collins, and Sven Wunder as of Dec. 28^th, 2022 (#671): “Financial instruments for attracting large-scale private finance into conservation often incur high transaction costs to ensure ecological effectiveness, which potentially conflict with institutional investors’ need for competitive returns, market efficiency, and investment scalability. … Strategies to mobilize investor involvement by using public funds to ‘de-risk’ nature investments may not be as promising as assumed, given the costly exercise required to render nature markets conventionally ‘investible’. … Public financing is often more suitable to incentivize the imminent bundled nature of ecosystem services provided” (abstract).

Money crimes (1): Financial Crime: A Literature Review by Monica Violeta Achim, Sorin Nicolae Borlea, Robert W. McGee, Gabriela-Mihaela Mureşan, Ioana Lavinia Safta (Plesa) and Viorela-Ligia Văidean as of Dec. 19^th, 2022 (#52): “This chapter reviews the literature on some of the subfields of economic and financial crime. Among the topics discussed are tax evasion, bribery, money laundering and corruption in general. The determinants of financial crime are also identified. Several demographic variables are also examined to determine whether gender, age, education, income level, religion, geographic region, size of city, etc., are statistically significant. Nearly 150 studies are mentioned“.

Money crimes (2): Financial Crime: Conclusions and Recommendations by Monica Violeta Achim, Sorin Nicolae Borlea, Mihai Gaicu, Robert W. McGee, Gabriela-Mihaela Mureşan, and Viorela-Ligia Văidean as of Dec. 21^st, 2022 (#14): “This chapter discusses the conclusions and recommendations resulting from the study. A series of infographs is included to summaries the results of the study …” (abstract).

Complex ESG compliance: EU Sustainable Finance: Complex Rules and Compliance Problems by Félix E. Mezzanotte as of Feb. 12th, 2023 (#100): “Complexity is first identified in MiFID II rules covering the legal definition of sustainability preferences and the suitability requirements applicable to asset managers and investment advisors. … complex rules have been found to promote noncompliance. The underlying rationale, supported by this article, is that complex rules amplify the compliance burdens faced by companies” (p. 2).

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

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Green illusion: Researchblogposting #108

Green illusion: 15x new research on social media, Scope 3, CSR, ESG bonifications, sovereigns, pensions, securitization, microfinance, trend-following, IQ, VCs and fintech by Jonas Heese, Andreas Hoepner, Fabiola Schneider et al.

Ecological and social research: Green illusion

Good social media: The Monitoring Role of Social Media by Jonas Heese and Joseph Pacelli as of Nov. 22^nd (#104): “This paper examines the effect of social media on firm misconduct through multiple empirical strategies. … Mobile broadband access, and 3G internet in particular, is a key driver of growth in the use of social media applications. Our results indicate that facilities reduce violations by 1.8% and penalties by 13% in the three-year period following the introduction of 3G. … our findings suggest that social media is an effective monitor of corporate misconduct” (p. 35/36). My comment: With my article 9 fund I invest in telecom infrastructure companies (i.a.)

Green illusion? Beyond Scope 3: Modelling Resilience to a Lower-Emissions Future by Debarshi Basu, Gerald T Garvey, Shuangzi Guo, and Ryan Zamani from Blackrock as of Dec. 6^th, 2022 (#31): “We … compute the full supply-chain adjusted carbon footprint of 57 industries in 54 countries … We find a significant full-scope carbon footprint of industries such as Finance and Health Care despite their small direct emissions. At the other end, high-emitting industries such as Air Transport, Retailing, and Rubber support a wide range of otherwise low-carbon downstream activities and appear resilient to a low carbon transition. To test the model with historical data, we use high historical energy prices to proxy more stringent carbon regulation. Industries that our model classifies as resilient perform equally across high and low energy prices. By contrast, industries that are currently classified as green based on naïve emissions significantly underperform in times of high energy costs” (abstract).

Advert for German investors: “Sponsor” my research by recommending my article 9 fund. The minimum investment is approx. EUR 50 and return and risks are relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T: I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings. The fund typically scores very well in sustainability rankings, see this new tool for example.

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Microfinance risk and more: Researchposting #107

Microfinance risk: 15x new research on publication biases, green innovation, supply chains, biocredits, greenium, ESG ratings and loans, CSR, Kickbacks etc. by Karol Kemper, Ulf Moslener, Nic Schaub, Simon Straumann, Pınar Yeşin et al.

Ecological and social research

Misleading research: Footprint of publication selection bias on meta-analysis in medicine, economics, and psychology by František Bartoš et al as of August 25^th, 2022: “… we survey over 26,000 meta-analyses containing more than 800,000 effect size estimates from medicine, economics, and psychology …. The median probability of the presence of an effect in economics decreased from 99.9% to 29.7% after adjusting for publication selection bias. This reduction was slightly lower in psychology (98.9% −→ 55.7%) and considerably lower in medicine (38.0% −→ 27.5%)” (abstract). My comment: There is always bias in research, with my approach, too, but is important to disclose it: 100 research blogposts since 2018 – Responsible Investment Research Blog (prof-soehnholz.com)

Brown innovations: Toxic Emissions and Corporate Green Innovation by Wenquan Li, Suman Neupane, and Kelvin Jui Keng Tan as of Oct. 23^rd, 2022 (#264): “Consistent with our main hypothesis, which hinges upon regulatory burden and environmental awareness, we show that high-emission companies produce more green patents of higher quality and value than low-emission firms. … We also find that environmental related green patents mitigate future toxic air releases“ (abstract). My question: Is internal financing sufficient or external capital required to finance these innovations?

Advert for German investors: “Sponsor” my research by recommending my Article 9 fund. The minimum investment is approx. EUR 50 and return and risks are relatively good: FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T: I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

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ESG regulation and more (Researchblog #101)

ESG regulation: >15x new research on climate, regulation, (un)sustainable funds, SDGs, greenium, ESG reporting, voting, wealth, buy-and-hold, private equity, private real estate and AI by Roman Inderst, Andreas Hoepner et al.

Ecological and social and governance research: ESG regulation

Climate-heuristics: Harnessing the power of communication and behavior science to enhance society’s response to climate change: A white paper for comment by Edward Maibach, Sri Saahitya Uppalapati, Margaret Orr, and Jagadish Thaker as of October 5^th, 2022 (#181): “… we provide an evidence-based heuristic for guiding efforts to share science-based information about climate change with decisionmakers and the public at large. … We .. also provide a second evidence-based heuristic for helping people and organizations to change their climate change-relevant behaviors, should they decide to. These two guiding heuristics can help scientists and other to harness the power of communication and behavior science in service of enhancing society’s response to climate change” (abstract).

Advert for German investors: “Sponsor” my free research e.g. by buying my Article 9 fund. The minimum investment is around EUR 50. FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T: I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

For my approach to this blog see 100 research blogposts since 2018 – Responsible Investment Research Blog (prof-soehnholz.com)

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Green pills (Researchblog #95)

Green pills: >10 new research studies on CEO pay, climate scenarios and reporting, green and black bonds, big asset managers, green pills and responsible investing barriers, fund ratings, tail risks, hedge funds and fintech

Advert: Check my article 9 SFDR fund FutureVest Equity Sustainable Development Goals: With my most responsible stock selection approach I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings, see ESG plus SDG-Alignment mit guter Performance: FutureVest ESG SDG – Responsible Investment Research Blog (prof-soehnholz.com)

Ecological and social research

Misleading climate scenarios? Institutional decarbonization scenarios evaluated against the Paris Agreement 1.5 °C goal by Robert J. Brecha et al as of August 16^th, 2022: “… we … evaluate Paris Agreement compatibility of influential institutional emission scenarios from the grey literature, including those from Shell, BP, and the International Energy Agency. … Of the scenarios assessed, we find that only the IEA Net Zero 2050 scenario is aligned with the criteria for Paris Agreement consistency employed here”.

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ESG reporting outperformance? (Researchblog #93)

ESG reporting outperformance: >20x new research on gender, food, climate risk, central banks, voluntary and mandatory ESG reporting and ratings, EU taxonomy, article 9 funds, divestments, voting, (debtholder) engagement, impact, capital costs, banks, conviction, SRI ETFs, islamic funds and real estate

Advert: Check my article 9 SFDR fund FutureVest Equity Sustainable Development Goals (-0,5% YTD). With my most responsible stock selection approach I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

Social and Ecological Research

Genderlaw effects: Legal Gender Equality as a Catalyst for Convergence by Can Sever of the International Monetary Fund as of August 10^th, 2022 (#4): “This paper … shows that more gender-equal laws facilitate income convergence across countries over time, thereby mitigating income inequality across countries. The results point to large economic gains from moving toward legal gender equality” (p. 26/27).

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ESG overall (Researchblog #91)

ESG overall: >15x new research on fixed income ESG, greenium, insurer ESG investing, sin stocks, ESG ratings, impact investments, real estate ESG, equity lending, ESG derivatives, virtual fashion, bio revolution, behavioral ESG investing

Advert: Check my article 9 SFDR fund FutureVest Equity Sustainable Development Goals (-2,9% YTD). With my most responsible stock selection approach I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

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ESG skeptical research (Researchblog #90)

ESG skeptical: >15x new and skeptical research on ESG and SDG investments, performance, cost of capital, reporting, ratings, impact, bonifications and artificial intelligence

Advert: Check my article 9 SFDR fund FutureVest Equity Sustainable Development Goals. With my most responsible selection approach I focus on social SDGs and midcaps and use best-in-universe as well as separate E, S and G minimum ratings.

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