Impact beats ESG illustration by Megan Rezaxin Conde from Pixabay
Impact beats ESG includes 6x new research papers on Ukrainian refugees, brown monetary risks, ESG washing, pollution measurement and impact funds (#shows the number of SSRN full paper downloads as of Jan. 9th, 2025).
Social and ecological research
Homesickness: The Effect of Conflict on Ukrainian Refugees’ Return and Integration by Joop Adema, Cevat Giray Aksoy, Yvonne Giesing, and Panu Poutvaara as of March 14th, 2024 (#23): “Our analysis has highlighted that the vast majority of Ukrainians in Ukraine plan to stay and most Ukrainian refugees in Europe plan to return … which contrasts with high pre-war emigration desires. … In our panel survey, we find that close to 2% of Ukrainian refugees returned every month. … Ukrainians’ confidence in their government and optimism have reached exceptionally high levels in international comparison … ” (p. 24).
ESG investment research (in: Impact beats ESG)
Brown monetary risks: Green Stocks and Monetary Policy Shocks: Evidence from Europe by Michael D. Bauer, Eric A. Offner, and Glenn D. Rudebusch as of Dec. 23rd, 2024 (#44): “… euro-area green stocks appear significantly less affected by monetary policy surprises to interest rates than higher-carbon brown stocks … focusing on narrower stock market indexes for the green and brown energy sectors, we find that the interest rate reactions of the renewable energy industry are weaker than the response of the oil & gas energy sector … These conclusions are in broad agreement with recent research using U.S. data … a carbon premium, while not firmly established empirically in the literature, seems to be a promising potential candidate explanation for the differential green/brown sensitivity. … Another potential explanation is a demand channel, according to which the product demand for green firms is less cyclical and less interest-sensitive than for brown firms …“ (p.34/35).
ESG washing: Green Window Dressing by Gianpaolo Parise and Mirco Rubin as of Dec 13th, 2024 (#46): “ESG fund managers are assigned two conflicting objectives: to deliver performance and to invest responsibly. While investors monitor how fund managers fare along the first dimension daily and from unbiased performance metrics, they tend to evaluate funds’ responsibility through sustainability ratings. These ratings are based on granular portfolio holdings that must be publicly disclosed four times a year. However, portfolio disclosure is only informative as long as managers disclose portfolio holdings that are representative. If managers move into and out of responsible portfolios to time regulatory filings, sustainability ratings might be uninformative. In this paper, we establish that money managers engage in “green window dressing.” We document that funds move in and out of ESG stocks around disclosure to inflate sustainability ratings. We support this claim with four separate sets of analyses. … We find that expensive funds, as well as star and laggard funds are more likely to engage in green window dressing. … green window dressers end up attracting substantially higher capital flows. This last result holds only for institutional clients, which is consistent with the argument that institutional investors delegate green window dressing to ESG mutual funds” (p. 37-39). My comment: I disclose the fund holdings monthly and change them typically only once a year (see www.futurevest.fund).
Impact beats ESG: Different Shades of ESG Funds by Simona Abis, Andrea M Buffa and Meha Sadasivam as of Dec. 9th, 2024 (#84): “… among active equity mutual funds in the US …. the majority of the growth in ESG investment … comes from what we define as opportunistic funds; i.e, those funds which use ESG-related information only with the objective of maximizing risk-adjusted returns. Whereas, funds that have ESG-related considerations in their objective function for non-pecuniary reasons, altogether only represent 25% of the funds and 8% of the AUM of ESG-related active mutual funds by 2022. A more detailed portfolio analysis uncovers that funds with different ESG objectives display very different portfolios and trading behavior. With only impact, impact activist and opportunistic activist funds displaying significantly greater ESG ratings of stocks held” (p. 33). My comment: My fund invests in very high ESG rated companies which should have a positive impact measured by SDG-aligned revenues and in addition I try to have investor impact through stakeholder engagement
Impact investment research
Pollution washing? Socially responsible investing and multinationals’ pollution – Evidence from global remote sensing data by Virginia Gianinazzi, Victoire Girard, Mehdi Lehlali, and Melissa Porras Prado as of Dec. 19th, 2024 (#69): “Our findings reveal a positive association between ESG or sustainable institutional ownership and pollution reduction …. Firms with higher SRI ownership tend to decrease pollution. This relationship is predominantly observed in OECD countries or those with stringent environmental laws. In contrast, in non-OECD locations, where environmental regulations may be less stringent, vegetation quality around facilities does not show any significant reaction to SRI inflows. This heterogeneity suggests a potential strategic behavior of multinationals receiving SRI when deciding where to focus their environmental efforts. These insights also illuminate the concrete environmental impacts driven by sustainable capital, surpassing reliance solely on self reported emissions data” (p. 29).
Other investment research
Unfair investment AI? AI, Investment Decisions, and Inequality by Alex G. Kim, David S. Kim, Maximilian Muhn, Valeri V. Nikolaev and Eric C. So as of Dec. 30th, 2024 (#1400): “Using two large-scale experiments with actual financial data from 200 publicly traded firms … our evidence shows that generative AI significantly enhances both financial comprehension and investment performance, making earnings information more accessible to a broader investor base. … AI’s effectiveness critically depends on the alignment between its outputs and user expertise … AI can widen performance gaps by disproportionately benefiting sophisticated investors“ (p.33/34).
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Werbung (in: Impact beats ESG)
Unterstützen Sie meinen Researchblog, indem Sie in den von mir beratenen globalen Small-/Mid-Cap-Investmentfonds (siehe FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T) investieren und/oder ihn empfehlen.
Der Fonds konzentriert sich auf die UN-Ziele für nachhaltige Entwicklung mit durchschnittlich außerordentlich hohen 99% SDG-vereinbaren Umsätzen der Portfoliounternehmen und verwendet separate E-, S- und G-Best-in-Universe-Mindestratings sowie Aktionärsengagement bei derzeit 28 von 30 Unternehmen (siehe auch My fund).
Zum Vergleich: Ein traditionelle globaler Small-Cap-ETF hat eine SDG-Umsatzvereinbarkeit von 5%, für einen Gesundheits-ETF beträgt diese 1% und für einen ETF für erneuerbare Energien 44%.
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: Man erhält ein besonders konsequent nachhaltiges Portfolio mit markttypischen Renditen und Risiken.