ESG interest: 7x new research on AI pollution, financial nature risks, Sovereign ESG risks, green mortgages, ESG communication effects, positive ESG competition (# shows number of SSRN full document downloads as of April 24th, 2025)
AI pollution: The Silent Polluter: Artificial Intelligence and CO2 Emissions by Ashrafee T. Hossain and Neal Willcott as of April 18th, 2025 (#48): “… Using a large sample of firm-year observations from publicly listed US firms covering the period from 2010 to 2020, we find statistically significant and economically consequential results that AI investment is positively associated with CO2 emissions. … Additionally, this association is more (less) prominent for firms with unethical (ethical) behavior and those with poor (strong) monitoring/governance. Not surprisingly, the market reacts adversely in the form of lower valuation when firms emit more while investing in AI initiatives. Moreover, CEOs of such firms tend to receive lower compensation” (abstract).
Financial nature risks: Firm-Level Nature Dependence by Alexandre Garel,Arthur Romec, Zacharias Sautner, and Alexander F. Wagner as of April 8th, 2025 (#557): “… we develop and analyze new firm-level measures—NatureDep scores—that quantify the extent to which a firm’s business activities depend on ecosystem services … The measures are available for a global sample of 26,595 firms from 115 countries between 2010 and 2022. … The three ecosystem services on which firms have the highest dependence are Water Flow Regulation, Storm Mitigation, and Water Supply. … the scores are largely uncorrelated with physical climate risk exposure metrics. However, information contained in NatureDep scores is associated with measures of downside risk. These results indicate that investors recognize that nature-related disruptions or regulatory shocks affect nature-dependent firms“ (p. 28).
Sovereign ESG risks: Governance, Resilience, and Sovereign Credit Ratings: Implications for ESG Investing Strategies by Sabah Abdullah and Zannatus Saba as of April 16th, 2025 (#11): “… The findings reveal that strong governance effectiveness (WGI_GE) and high ESG and ESR performance lead to better credit ratings, while weak institutions, low ESG scores, and insufficient climate adaptation elevate sovereign risk and borrowing costs. Migration dynamics — reflecting labor force volatility and socio economic stress — influence creditworthiness across models …” (abstract).
Green mortgages: Energy Costs and Default Risk in Green Mortgage Securitisations by Monica Billio, Massimo Dragotto, Alfonso Dufour, Samuele Segato, and Simone Varotto as of April 23rd,2025 (#11): “This study investigates the credit risk implications of Green-labelled residential mortgage-backed securities (Green RMBS) in the European Union. We find that loans securitised within Green RMBS deals exhibit 43% lower delinquency rates compared to loans in Non-Green RMBS. Green-labelled tranches are more likely to achieve investment-grade ratings and perform better under stress scenarios, with senior and mezzanine tranches remaining protected even in extreme default and loss conditions. … We find that low income and periods of high energy inflation amplify the negative impact that poor energy efficiency has on delinquency. These effects are driven by higher utility costs, which reduce disposable income, especially for vulnerable borrowers…“ (abstract).
ESG communication effects: The ESG Disclosure–Performance Paradox in BRICS: Strategic Alignment, Total Shareholder Returns, Profitability, and Firm Value by Marcos Alexandre dos Reis Cardillo and Leonardo Fenando Cruz Basso as of April 18th, 2025 (#16): “This study examines the financial implications of corporate sustainability disclosure and performance across emerging economies, using a panel of 2,987 firm-year observations from 2016 to 2023. … Results indicate that integrated sustainability disclosure—covering environmental, social, and governance dimensions—positively influences profitability and investor confidence while selective sustainability disclosure and performance erodes shareholder return and profitability. … even strategically integrated, sustainable practices efforts may erode firm value over time. …. excessive engagement leads to diminishing returns. … the findings suggest that in emerging economies, sustainable financial performance depends more on the ability to communicate sustainable commitment than on the actual depth or quality of sustainability practices“ (abstract).
Positive ESG competition: ESG Rating Competition and Rating Quality by Cai Chen, Svenja Dube. and Shiran Froymovich as of April 23rd, 2025 (#13): “… We exploit the entry of Sustainalytics as a new ESG rating agency in 2010. … First, we find that higher competition decreases incumbents’ ESG rating disagreements of the same scope. … Second, we find that incumbents’ ratings of ESG concerns are more strongly associated with future negative ESG news for firms additionally covered by Sustainalytics. … Third, we find that incumbents evaluate more difficult-to measure outcome metrics for firms covered by Sustainalytics, consistent with competition inducing more effort“ (abstract).
ESG interest: Predictors of Sustainable Investment Motivation: An Interpretable Machine Learning Approach by Sergey Sosnovskikh, Danila Valko, and Raphael Meyer-Alten as of April 22nd, 2025 (#7): “This study investigates the determinants influencing retail investors’ capital allocation to sustainable financial products, focusing specifically on Germany …. We utilised two surveys conducted in 2020 … our analysis identified that three primary motivation components – personal values, social and environmental impact, and investment return – exhibit significant overlap. The findings demonstrate that investment motivations are consistently predicted by sustainability interests. In contrast, socio-demographic factors (age, gender, education, household income) exhibit inconsistent pattern across investment motivations and exert weaker influence” (abstract).
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