Greenium research: Picture from Pixabay shows forest with sun in the background

Greenium research and more: Researchposting 117

Migration happiness: The Effects of International Migration on Well-Being of Natives and Immigrants: Evidence from Germany, Switzerland and the UK by Eleftherios Giovanis as of Jan.10th, 2023 (#10) “… we find a positive impact of migration on both native’s and migrants’ well-being in Germany, while a negative effect on life satisfaction of Swiss natives is revealed. Immigrants in Switzerland are happier, while migration has no impact on natives’ and immigrants’ well-being in the UK. However, the results vary according to the education and population density of immigrants in an area. Moreover, after some point, additional increases in net migration rates may negatively affect the well-being of respondents in Germany“ (abstract).

Right emissions: Curb Your Climate Enthusiasm: The Effect of Far-Right Populism on Greenhouse Gas Emissions by Vlad Surdea-Hernea as of Jan. 23rd, 2023 (#43): “… I have quantitatively assessed the impact of far-right populist parties on greenhouse gas emissions in EU member states between 1990 and 2018. … I provide robust evidence that when FRPPs make electoral gains in at least one region of a country during an election compared to the previous election, country-wide emissions increase by more than 3000 tonnes of gases on average“ (p. 21/22).

Scope 3 data issues: Corporate carbon emissions data for equity and bond portfolios by Thijs Markwat and Laurens Swinkels from Robeco as of Feb. 2nd, 2023 (#183): “We have analyzed the impact of the choice of the data provider on carbon accounting metrics for four large global asset classes. Even though methodologies across data providers differ, the effects are rather small for developed equity markets, and only slightly higher for emerging equity markets, when limited to scope 1 and 2. Coverage is substantially lower for investment grade and high yield corporate bonds, mainly because many corporate bond issuers do not have their shares listed on public equity markets. … Scope 3 intensities and footprints need to be (partly) estimated more often and are therefore noisier and differ more across data providers. Since their magnitude is typically five times as large as scope 1 and 2 emissions, the differences in scope 3 estimates dominate total carbon intensity and footprint data“ (p. 22/23).

Carbon confusion: Designing for comparability: A foundational principle of analysis missing in carbon reporting systems by Jimmy Jia, Nicola Rangeri, and Abrar Chaudhury as of Jan. 20th, 2023 (#207): “… this paper shows that the commonly used greenhouse gas (GHG) emission metrics are suitable for trend analysis, continuous improvement, and target setting, but not fit-for-purpose in making comparative assertions between multiple entities. … We identify that the problem arises in the merger of two incompatible metric systems – life cycle assessment and financial reporting. We propose three necessary conditions when combining metric systems which preserves the ability to make comparative assertions, which were developed from research on comparability across the accounting, engineering, and social science fields”.

Responsible listed equity research

Good climate agreements: Influence of Global Climate Change Agreements on Firm Performance by Dipti Gupta as of Jan. 23rd, 2023 (#15): “Building on institutional perspective, we investigate the impact of global Climate Change Agreements (CCA), specifically Copenhagen Accord and Paris Agreement, on the association between Environment, Social and Governance (ESG) performance indicators and financial performance of the firms. Using panel data-set of 1162 firms located in ten countries between 2008 and 2018, we find that CCA leads to a strong positive relationship. Results indicate a stronger effect of CCA for firms in developed countries compared to those in developing countries” (abstract).

Physical vs. transition: Climate-Change Risk and Stocks’ Return by Vu Le Tran, Thomas Leirvik, Morten Parschat, and Petter Schive as of Dec. 28th, 2022 (#119): “Our findings suggests that a positive, consistent across industries, risk premium exists for the disclosure of physical climate change risk. The premium is mostly related to the quantity of physical climate change disclosure … We are not able to find consistent results for the disclosure quantity of total or transitional climate change risks across industries. … After the Paris Agreement, the return premium related to physical climate change risk increased, which confirms an increase in investors’ perception of physical climate change risk“ (p. 46/47).

Good ESG scandals? The Good Left Undone: About Future Scandals, Past Returns and Ineffectual ESG by Ralf Laschinger and Christian Sparrer as of Dec. 16th, 2022 (#198): “A worldwide sample of 10,500 public companies from 2002 to 2020 shows that high risk-adjusted returns can predict future unethical behavior and corporate scandals. Statistical evidence indicates that risk-adjusted returns are a precursor for, rather than a result of, un-ethical behavior, while scandals do not affect long-term outperformance. This study sheds light on the implication that corporate scandals are a more tangible measure than the ESG score, which can be biased by greenwashing and even has a positive relationship with the number of scandals in our sample“ (abstract).

ESG talk returns: Green Investors and Green Transition Efforts: Talk the Talk or Walk the Walk? by Shuang Chen as of Dec. 10th, 2022 (#284): “I document that many green investors’ information source, the three main environmental ratings, all assign a better score to firms that hire more staff to engage in environment-related communication, keeping the level of substantive green transitions fixed. The majority of sustainable funds regulated by the EU Sustainable Finance Disclosure Regulation, light green funds, also invest more in these good talkers. Only dark green funds, with the strictest sustainable investing mandate, are not influenced by communication strategies. … The broad institutional investors are also sensitive to communication strategies while not sensitive to substantive green practices. … Firm efforts in environment-related communication predict a higher future stock return, controlling for other firm characteristics. In contrast, firm efforts in substantive green transition cannot predict future stock returns” (p. 26).

Good institutions: Institutional Investors and Corporate Environmental Costs by Wolfgang Drobetz, Sadok El Ghoul, Zhengwei Fu, and Omrane Guedhami as of Jan. 11th, 2023 (#81): “We provide evidence that institutional investor ownership has a significantly negative impact on corporate environmental costs. This effect is driven predominantly by foreign and long-term institutional investors … the effect of institutional ownership on environmental costs is stronger in low-income countries and in those with weak environmental regulations. … environmental intensity and its related costs negatively affect firm valuation, and positively affect firms’ cost of equity” (p. 27/28)

Greenium research

Greenium research (1): Who pays the greenium? By Daniel Fricke, Stephan Jank, and Christoph Meinerding as of Dec. 30th, 2022 (#62): “Merging a sample of matched green-conventional bond pairs with confidential data on the dynamic ownership structure of each bond by investor group, we document a set of novel findings. First, the average greenium in our sample amounts to minus three basis points, and it is largely borne by banks, investment funds and insurance companies (or their clients) which are the key investor groups in this market. Second, investment funds and pension funds generally overweight green over matched conventional bonds …. banks and insurances tend to display negative green (i.e., brown) preferences. Third, despite these negative green preferences, a significant share of the overall greenium can still be attributed to banks. More precisely, banks display a tilt towards specific green bonds with a relatively pronounced greenium. This tilt is particularly sizeable when the sample is restricted to young bonds, small bonds, bonds with a long residual maturity, or bonds issued by the financial sector. We draw the tentative conclusion that banks (or their clients) pay a significant greenium because they hold specific green bonds for motives other than green preferences. Examples may be market making, underwriting or liquidity management activities“ (p. 20).

Greenium research (2): ESG Investing Beyond Risk and Return by Rex Wang Renjie and Shuo Xia as of Jan. 30th, 2023 (#30): “We propose a new method to estimate the greenium by comparing green bonds with equivalent non-green synthetic bonds constructed using bootstrapped yield curves. Empirically, our greenium estimates are statistically significant and economically sizable both at issuance and after trading. … our greenium estimates are higher when investors are less concerned about greenwashing, more aware of climate change, and have more trust in issuers’ environmental commitment because of local environmental regulation and enforcement. More importantly, the significant greenium is direct evidence that investors prefer green assets when expected risk and return are constant” (p. 25).

Greenium research (3): Green Bond Effects on the CDS Market by Jung-Hyun Ahn, Sami Attaoui, and Julien Fouquau as of Jan. 6th, 2023 (#66): “Our event study shows that the CDS (Sö: Credit default swap) spread decreases when a green bond is issued while it increases when a conventional bond is issued. … the results are less significant in the case of North American firms. … a three or more green bond issuance leads to the appearance of an additional green discount, which suggest a reputation effect that the firm’s credibility is strongly enhanced by multiple issuance. … We show that the negative impact on the CDS spread exists also for conventional bonds that are issued after the third green issuance“ (p. 15).

Greenium research 4:  Green versus sustainable loans: The impact on firms’ ESG performance by H. Ozlem Dursun-de Neef, Steven Ongena, and Gergana Tsonkova as of Oct. 26th, 2022 (#624): “This paper studies the development of a firm’s Environmental, Social, and Governance (ESG) performance following the issuance of “green loans” earmarked for green projects versus “sustainable loans” to firms bench-marked by ESG criteria. Firms issuing green loans appear to be effective in shrinking their environmental emissions; however, they weaken in social performance indicated by a decrease in their human rights, community, and product responsibility scores. … Sustainable loans, on the other hand, we find to incentivize firms to improve their ESG performance by increasing their environmental and governance scores” (abstract).

Impact investment research

Passive voting: Shareholder Monitoring Through Voting: New Evidence from Proxy Contests by Alon Brav, Wei Jiang, Tao Li, and James Pinnington as of Jan. 3rd, 2023 (#55): “This paper presents a comprehensive analysis of mutual fund voting in proxy contests. Because relevant data have long been unavailable, voting in this setting has not been studied in the corporate governance literature. … although passive funds exhibit a higher average support rate for management in voted contests, we show that the passive–active gap is driven mostly by the Big Three families and that a lack of support by passive funds drives contests toward settlement. Third, we find that passive funds dedicate greater monitoring effort, proxied by views of contest-related SEC filings, than active funds during and after contest periods. Such efforts pay off insofar as the information content in voting by passive funds is on par with that in voting by active funds, with passive funds from the non-Big Three families enjoying slightly higher vote quality than active funds. We conclude that passive funds are diligent and effective monitors in pivotal, high-stakes voting events“ (p. 41). My approach: see Shareholder engagement: 21 science based theses and an action plan – (

Bad zero-cost? Meme corporate governance by Dhruv Aggarwal, Albert H. Choi, and Yoon-Ho Alex Lee as of Feb. 8th, 2023 (#56): “… during the same time period as retail investor ownership of meme stocks has increased, the rates of non-voting have significantly risen for meme stocks. … we observe the increase in non-votes beginning in 2019, the same year major brokerages abolished trading commissions. The result is also consistent with the event-study evidence presented in Part III that the 2019 advent of zero-commission trading could have stirred retail investor interest in meme stocks. … the new retail shareholders at these companies do not seem to be active in engaging with the management or in influencing the companies’ governance outcomes“ (p. 34/35).

Traditional investment research

Most-passive multi-assets: Why not a global market capitalization weighted benchmark? by Frederic Jamet as of Jan. 25th, 2023 (#30): “A standard global benchmark seems to be a 50% equities 50% bonds fixed weight portfolio, or alternatively 60% equities 40% bonds, where the equity and the bond asset classes are market capitalization weighted. Why 50% and why fixed weight ? Using Jorda and Kuvshinov databases, we have computed the performance of a global market capitalization weighted portfolio over 1880-2015 and this portfolio appears to be a good candidate for a global benchmark” (abstract). My comment: Compare Das „most-passive“ Anlageportfolio der Welt ist sehr attraktiv – Responsible Investment Research Blog (

Good futures: Financialization, Electronification, and Commodity Market Quality by Tobias Lauter, Marcel Prokopczuk, and Stefan Trück as of Feb. 1st, 2023 (#15): “Commodity futures markets underwent two substantial changes over the last decades. First, passive long-only index traders became a sizable group that changed the composition of market participants substantially. Second, volume gradually migrated from open-outcry trading pits to electronic limit order books after exchanges introduced side-by-side trading. … After the start of the financialization in 2004 and during the electronification of commodity markets, both illiquidity and price inefficiency decreased in levels and their trends were negative. … We do not find a substantially harmful effect of index investor participation on liquidity and intraday price efficiency” (p. 33).

Sanctions favor gold: Gold as International Reserves: A Barbarous Relic No More? by Serkan Arslanalp, Barry Eichengreen, and Chima Simpson-Bell as of Jan. 17th, 2023 (#128): “Using data for as many as 144 countries … Aggregate evidence suggests that some reserve managers respond to relative costs and returns: they increase the gold share when the expected return is high while that on financial assets, such as U.S. Treasury securities, is low. … gold shares in advanced countries and emerging markets are increasing with a measure of economic uncertainty, and those in advanced economies increase in addition with a measure of geopolitical risk. In addition, we find that reserve managers in emerging markets increase the share of reserves held in gold in response to sanctions risk“ (p. 30).

Alternative investment research

No so green Swiss RE: How Sustainable Is Swiss Real Estate? Evidence from Institutional Property Portfolios by Fabio Alessandrini, Eric Jondeau, Ghislaine Lang, and Evert Reins as of June 1st, 2022 (#185): “To collect the data, we designed an online survey, which was sent to all institutional owners of Swiss real estate portfolios. … The final sample includes 66 investment vehicles, which represents a coverage of approximately 65% of the total AUM. We find that in the environmental category, energy issues are given a high level of priority and considerable efforts are being undertaken. … Eventually, we obtain a final ESG score … the score of real estate investment vehicles is comparatively low for the E pillar. The reason is that, for some environmental indicators, in particular waste generation and water use, several entities were not able to disclose the necessary information. … with larger portfolios obtaining higher scores” (p. 50-52).

Even higher fees? Accessing Private Markets Globally: Contracts and Costs by Wayne Lim as of Dec. 22nd, 2022 (#27): “This article is the first study on the contracts and cost of accessing private markets using a worldwide sample of funds comprising ten private capital fund types. The study goes beyond PE (Sö: private equtity)… The effect of fee payments on gross-to-net TVPI (Sö: Total Value to Paid In) is between 0.1x to 0.7x and 5% to 8% in annualized terms. These estimates suggest that the magnitude of fees on annualized returns for buyout and VC funds may have been previously underestimated. … Funds with higher managerial ownership, on average, performed better“ (p. 37/38).

PE reduces pay gaps: Private Equity and Pay Gaps Inside the Firm by Lily Fang, Jim Goldman, and Alexandra Roulet as of Feb. 8th, 2022 (#48): “We find that relative to a carefully constructed control group of firms, firms under private equity ownership experience significant and sustained reductions in pay inequality between the 90th and 10th percentile of the wage distribution, as well as in the three demographic dimensions (gender, occupation, age) that we study. The declines in these pay gaps come primarily from the job separations of particularly expensive employees in the high-pay categories (men, managers, and older workers). Instead of across-the-board wage reductions, men and young employees who stay at the target firms experience moderate wage increases relative to their peers in control firms, while the wages of staying older employees are not materially affected by the buyout. Expensive men and managers are replaced with new employees of the same category but who are cheaper. Expensive older employees are replaced by younger (and hence cheaper) employees” (p. 29).