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16x new research on bigger EU benefits, green conservatives, green US deposits, cool country risks, deforestation cost, ESG rating deficits, climate risks, carbon ratings, green VCs, life-cycle analysis, carbon offsets, transition bonds, green procurement, German impact and luxury watches (#shows the numer of SSRN full downloads as of March 6th, 2025)
Social and ecological research
Bigger EU benefits: Economic Benefits from Deep Integration: 20 years after the 2004 EU Enlargement from the International Monetary Fund by Robert Beyer, Claire Yi Li, and Sebastian Weber as of Feb. 26th, 2025 (#23): “EU enlargement has stalled since the last member joined over ten years ago … we estimate that EU membership has increased per capita incomes by more than 30 percent. Capital accumulation and higher productivity contributed broadly equally, while employment effects were small. Gains were initially driven by the industrial sector and later by services. Despite substantial regional heterogeneity in gains—larger for those with better financial access and stronger integration in value chains prior to accession—all regions that joined the EU benefited. Moreover, existing members benefited too, with average income per capita around 10 percent higher …“ (abstract).
Green conservatives: How natural disasters and environmental fears shape American climate attitudes across political orientation by Christopher R. H. Garneau, Heather Bedle, and Rory Stanfield as of Nov. 5th, 2024:”results support hypotheses that conservatives demonstrate lower climate concern and that fear of natural and environmental disasters increases climate concern. Interaction results show that fear of anthropogenic environmental disasters elicits greater climate concern amongst conservatives. At high levels of ecological fear, the political divisions diminish as all orientations converge on higher levels of acknowledging climate risks and causes”.
Greening US deposits: Climate change and bank deposits by H. Özlem Dursun-de Neef and Steven Ongena as of Feb. 27th, 2025 (#381): “Using branch-level deposit data from the U.S., we find that depositors divest from fossil fuel-financing banks when they experience warmer-than-usual temperatures. This is because of an upward shift in their climate change beliefs. Deposit reallocation is mainly due to prosocial motives rather than financial preferences” (abstract).
Cool country climate risks: A New Perspective on Temperature Shocks from the International Monetary Fund by Nooman Rebei as of Feb. 26th, (#23): “… While cold and wealthy nations experience smaller output losses than warm and poor countries in response to temporary temperature increases, the situation reverses with the permanent temperature rises associated with climate change. In this scenario, cold and rich countries suffer greater economic damage than their warmer and poor counterparts. The rationale behind this result is that, according to country-specific estimates, the magnitude of permanent temperature shocks is greater in both absolute and relative terms in colder regions. Additionally, in recent decades, these countries have faced a notorious increase in the frequency and intensity of climate-related disasters, namely storms and wildfires ,,,“ (p. 24).
Deforestation costs: Not Just Knocking on Wood: The Short- and Long-Term Pricing of Deforestation Risk on Global Financial Markets by Marc-Philipp Bohnet, Philip Fliegel, and Tycho Max Sylvester Tax as of Feb. 26th, 2025 (#49): “… We … conduct long-term asset pricing analyses of a Brown Minus Green (BMG) deforestation risk portfolio and a short-term event study of the EU Deforestation Regulation (EUDR). We find that the BMG deforestation risk portfolio does not pay a deforestation risk premium in the long term, but actually underperforms significantly by roughly 0.5% per month …” (abstract).
ESG investment research (in: Climate risks)
ESG rating deficits: Behind ESG ratings: Unpacking sustainability metrics by the OECD as of Feb.19th, 2025: “… this report aims to assess the scope and characteristics of over 2 000 ESG metrics from eight major ESG rating products. The analysis helped identify four key findings as presented below. Metric scope: significant imbalances and gaps across ESG topics … over 20 different metrics are used on average to measure performance related to topics such as corporate governance, business ethics and environmental management, compared to less than five metrics for topics such as biodiversity, business resilience, and community relations. In some cases, certain topics are entirely omitted from ESG rating products, including human rights and corruption. … Metric comparability: Considerable divergences in measurement approaches across products … For instance, one rating product uses 28 times more metrics to measure Corporate Governance performance compared to another. The range varies from 1 to 47 metrics to measure corporate GHG Emissions, and from 4 to 113 metrics to gauge a company’s corporate governance. … Metric characteristics: … ESG rating products rely primarily on input-based metrics (68%). These metrics capture self-reported policies and activities put in place to address potential and actual ESG impacts, risks, and opportunities. … Moreover, ESG performance is predominantly assessed using qualitative metrics (72%). … Moreover, most ESG rating products assess observance or “violations” of the OECD Guidelines through controversy-related metrics as a proxy … rather than evaluating a company’s due diligence efforts and effectiveness in mitigating sustainability impacts. 15% of all metrics could be broadly identified as ‘controversy-based’. Finally, measurement of ESG performance beyond an entity direct operation is limited, including measurement of how businesses identify, prevent, mitigate and account for adverse impacts in their business relationships and global supply chains …“ (p. 7/8). My comment: See this detailed comment Neues Research: Lieber keine ESG-Daten nutzen? | CAPinside and watch out for my upcoming blog post on ESG rating differences based on the same data pool
ESG lowers risk: Sustainability and financial risks of the best-in-class: A comprehensive analysis by Almudena García-Sanz, Juan-Ángel Jiménez-Martín, and M.-Dolores Robles as of March 3rd, 2025 (#14): ” We investigate the implications of firms‘ sustainability practices in mitigating their financial risks between 2000 and 2021 in the USA and Europe. … We find that the commitment to sustainability, as indicated by Thomson Reuters ESG scores, significantly impacts financial risks … the analysis by pillars highlights the Environmental pillar as the primary driver of risk mitigation …“ (abstract).
Many sectors with cli-risk: Climate risk and corporate valuations from Allianz Research by Jordi Basco Carrera and Patrick Hoffmann as of February 25th, 2025: “Investors today face dual climate risks that stem from both the transition to a sustainable economy and the increasing severity of physical climate events. Transition risks arise from rapid policy changes, technological innovations and evolving market behaviors, while physical risks include the damaging impacts of extreme weather, rising sea levels, prolonged droughts or productivity losses for workers exposed to heat. … Fossil fuels are not the only sector on the watchlist. Real estate, automotive, agriculture and heavy industry are also increasingly vulnerable due to stricter energy standards, rapid technological advancements and tighter regulatory measures. … Overall, we find that the technology and healthcare sectors show resilience under all climate transition scenarios in both the US and Europe, while the energy sector faces heightened vulnerability due to rising operational costs and regulatory pressures …” (p. 3). My comment: I am happy with the strong healthcare focus of the mutual fund which I advise
Carbon rating dominance: Environmental ratings and stock returns: The dominant role of climate change by Rients Galema and Dirk Gerritsen as of Feb. 27th, 2025 (#13): “We analyze the effect of MSCI’s environmental rating changes on stock returns for U.S. listed firms. … We find that the positive effect of aggregate environmental rating changes on subsequent stock returns is completely driven by changes in the underlying climate change rating with no significant impact of any of the other underlying theme ratings. Specifically, a one point increase in climate change rating, measured on a ten-point scale, is associated with stock returns increasing by about one percentage point over a subsequent period of six months. The impact of climate change rating changes is driven by changes of the underlying carbon emissions rating. Further analyses highlight the forward-looking nature of carbon emissions ratings in capturing emissions-related risks. Specifically, they show carbon emissions rating changes predict changes in future carbon emissions and carbon emission intensity” (abstract).
Green VC premium: Birds of a Feather Flock Together – How Investors Select and Affect Startups Based on Sustainability Signaling by Markus Koenigsmarck, Florian Kiesel, Martin Geissdoerfer and Dirk Schiereck as of Feb. 25th,2025 (#6): “Our results show that both startups select their investors, and investors select startups, according to sustainability signaling. In addition, we identified a substantial treatment on sustainability signaling when a green VC invests. Conversely, brown VCs do not influence the sustainability of their portfolio investments. Finally, we found a green alignment premium, with investors allocating more funding to startups with similar sustainability signals to themselves” (p. 32).
SDG and impact investment research
Carbon life analysis: Simplifying Life Cycle Assessment: Basic Considerations for Approximating Product Carbon Footprints Based on Corporate Carbon Footprints by Maximilian Schutzbach, Robert Miehe, and Alexander Sauer as of March 3rd, 2025 (#9): “.. calculating individual product carbon footprints (PCF) for each product remains impractical for companies, especially with extensive product portfolios … This article addresses this gap by proposing basic considerations that enable PCF approximation based on a CCF” (Sö: corporate carbon footprints, in: abstract).
Offsetting premium: Do Investors Care About Offsetting Carbon Risk? by Yumeng Gao, Andreas G. F. Hoepner, Florent Rouxelin, and Tushar Saini as of Feb. 26th, 2025 (#19): “…This paper provides empirical evidence that investors price carbon emissions as a material risk, demanding a higher transition risk premium for firms with substantial Scope 1 and Scope2 emissions. Regulatory pressures, shifting investor sentiment, and energy transition drive this premium, with proactive climate policies and higher renewable adoption reducing risk, while weak regulations and fossil fuel dependence amplify it. We also find that carbon offset inventory can help mitigate this premium, as firms located in regions with higher offset inventory tend to experience reduced transition risk …” (abstract).
Transition & bonds: Understanding climate risk in Europe: Are transition and physical risk priced in equity and fixed-income markets? by Nicola Bartolini, Silvia Romagnoli, and Amia Santini as of Oct. 29th,2024 (#42): “… climate risk variables have different effects on stocks and bonds, with stock returns appearing mostly unaffected by climate-related variables. In contrast, bond z-spreads show significant statistical relationships with both physical and transition climate risks. Physical risk, on average, rewards the green bonds in the sample, and penalizes the traditional bonds. As for transition risk, the two proxies are shown to capture different types of information and to affect different bonds. This suggests that credit default swaps are pricing a transition risk that goes beyond carbon emissions” (abstract).
Good green procurement: The Greener, the Better? Evidence from Government Contractors by Olga Chiappinelli, Ambrogio Dalò, Leonardo M. Giuffrida, and Vitezslav Titl as of Oct. 24th, 2024 (#45): “Governments support the green transition through green public procurement. Using US data, this paper provides the first empirical analysis of the causal effects of green contracts on corporate greenhouse gas emissions and economic performance. We focus on an affirmative program for sustainable products, which represents one-sixth of the total federal procurement budget, and publicly traded firms, which account for one-third of total US emissions. Our results show that securing green contracts reduces emissions relative to firm size and increases productivity. We find no evidence that the program selects greener firms, nor that green public procurement sales crowd out private sales” (abstract). My comment: For a reason, I focus on green procurement with my shareholder engagement activities
German impact: Beyond grants: Foundations‘ responses to the hybrid practice of impact investing by Marie-Christine Groß as of Jan. 29th, 2025 (#23): “… this study conducts a multiple case study with ten large German foundations. Drawing on institutional logics, the paper constructs a conceptual model to enhance the understanding of foundations‘ responses to impact investing. … the affiliation to both logics at play and the level of risk aversion shape how foundations respond to impact investing. These factors influence whether foundations reject the hybrid practice, engage directly in impact investing, or support indirectly via system building. … Approaches of foundations engaged in impact investing are analyzed in detail …” (abstract). My comment: Investors can have some impact with my “most responsible” investment fund
Other investment research (in: Climate risks)
Double-luxury watches: Time is Money: an Investment in Luxury Watches by Philippe Masset and Jean-Philippe Weisskopf as of Feb. 24th, 2025 (#72): “The luxury watch market offers lower returns than equities but is less volatile. It also outperforms fixed income and real estate, with significant performance variation across brands. Illiquidity, analogous to other collectables, is an important feature, yet luxury watches enhance portfolio diversification and reduce risk. Additionally, the study contrasts the distinct features of investing in physical watches versus stocks of watch manufacturers …”. My comment: Lower returns with high illiquidity (and high costs): The marginal diversification benefits most be really high to add luxury watches to investment portfolios.
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Werbung (in: Climate risks)
Unterstützen Sie meinen Researchblog, indem Sie in den von mir beratenen globalen Small-/Mid-Cap-Investmentfonds (siehe FutureVest Equity Sustainable Development Goals R) investieren und/oder ihn empfehlen.
Der Fonds konzentriert sich auf die UN-Ziele für nachhaltige Entwicklung mit durchschnittlich einzigartig hohen 99% SDG-vereinbaren Umsätzen der Portfoliounternehmen und sehr hohen E-, S- und G-Best-in-Universe-Scores sowie einem besonders umfangreichen Aktionärsengagement bei derzeit 28 von 30 Unternehmen (siehe auch My fund).
Zum Vergleich: Ein Gesundheits-ETF hat eine netto SDG-Umsatzvereinbarkeit von 12%, Artikel 9 Fonds haben 21%, Impactfonds 38% und ein ETF für erneuerbare Energien 45% (vgl. Hohe SDG Umsätze? Nur wenige Investmentfonds!).
Insgesamt hat der von mir beratene Fonds seit der Auflage im August 2021 eine ähnliche Performance wie durchschnittliche globale Small- und Midcapfonds (vgl. z.B. Fonds-Portfolio: Mein Fonds | CAPinside und Globale Small-Caps: Faire Benchmark für meinen Artikel 9 Fonds?).
Ein Fondsinvestment war also bisher ein „Free Lunch“ in Bezug auf Nachhaltigkeit: Ein besonders konsequent nachhaltiges Portfolio mit marktüblichen Renditen und (eher niedrigeren) Risiken. Vergangene Performance ist allerdings kein guter Indikator für künftige Performance.