Liquid impact picture shows water drop by rony michaud from pixabay

Liquid impact – Researchpost #148

Liquid impact: 10x new and interesting research on greentech, sustainable jobs, ESG exclusions and ratings, green performance, greenwashing and advisor growth by Ulrich Atz, Thomas Dangl, Michael Halling and many more  (# show SSRN downloads on Oct. 19th)

Ecological and social research

Greentech: The global environmental effects of FinTech market growth by Charilaos Mertzanis as of Sept. 25th, 2023 (#13): “We contribute to the existing literature by examining the impact of aggregate values of FinTech finance on environmental performance across a sample of fifty-eight countries during the period of 2013-2019. Our findings show a small but statistically significant positive effect of FinTech finance on environmental performance within our sample. … government effectiveness emerges as a crucial factor in driving environmental performance, promoting it both directly and indirectly through fostering higher growth effects in the FinTech market“ (p. 20).

Good jobs: Hidden Figures: The State of Human Capital Disclosures for Sustainable Jobs by Ulrich Atz and Tensie Whelan as of Oct. 11th, 2023 (#34): “Sustainable jobs … can lead to better financial performance, and represent a material impact for most corporations. … Using data from six leading ESG rating providers, we demonstrate substantial reporting gaps. For example, we find that only 20% of social metrics are decision-useful and quantitative measures are missing for most firms (70-90% per metric across raters). Even turnover, a financially material metric, is only available for half of firms at best and lacks details. Two case studies, on Amazon and the quick-service restaurant industry, further illustrate the financial costs of ignoring employment quality. We also provide several practical recommendations for managers and other stakeholders“ (abstract).

Responsible investment research: Liquid impact

Rating differences: ESG Reporting Divergence by Qiang Cheng, Yun Lou, and Mengjie Yang as of Sept. 9th,2023 (#128): “ … the ESG reporting divergence measure is lower for firm-pairs using the same ESG reporting framework, with similar size, and with similar ESG performance than for other firm-pairs. We also find that the level of divergence in firms’ reporting of environmental or social activities is significantly higher than that of governance reporting … we find that a higher level of ESG reporting divergence is associated with more ESG rating disagreement among ESG rating providers and weaker association between ESG ratings and ESG fund allocation. … We also find that the informativeness of ESG ratings about firms’ future ESG performance declines with ESG reporting divergence“ (p. 34/35).

ESG exclusions: Green Dilution: How ESG Scores Conflict with Climate Investing by Noel Amenc, Felix Goltz, and Antoine Naly from EDHEC as of June 2023: “By comparing the greenness of portfolios built to have both higher ESG scores and lower carbon intensity to that of portfolios solely built to reduce carbon intensity, we are able to compute the incremental impact of the inclusion of ESG scores on carbon intensity reduction, which we call green dilution. We show green dilution is pervasive, regardless of which ESG scores are targeted as objectives, substantial, with an average of 92% across our portfolios, and robust across several alternative specifications. A 92% green dilution means that 92% of the carbon intensity reduction investors could have reached by solely weighting stocks to minimise carbon intensity is lost when adding ESG scores as a partial weight determinant. … A more sensible alternative is to separate the two objectives, by first screening out stocks with low ESG scores, and then weighting the remaining stocks by the investor’s key objective, carbon intensity in our case. Since both dimensions are unrelated, screening out stocks by ESG scores does not affect the carbon intensity distribution of the stock universe. ESG exclusions thus result in a neutral impact on portfolio carbon intensity, with a green dilution close to zero” (p. 6). My comment: I exclude low (best-in-universe and separate E, S and G) rated stocks since many years, see e.g. 140227 ESG_Paper_V3 1 ( and Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – (

Low emissions, high returns: Carbon emissions, stock returns and portfolio performance by Papa Orgen as of Oct. 11th, 2023 (#28): “This study offers an explanation for the absence of a carbon risk premium on the basis of firm carbon intensity. The results suggest investors became more responsive to firm-level climate risks proxied by carbon intensity in the aftermath of the Paris Climate Conference. The relationship between carbon intensity and stock performance is underpriced before the Paris Conference, but strong and economically significant afterwards. The estimated carbon premium can neither be diversified away by risk factors or size, nor can it be attributed to highly carbon-intensive sectors such as Energy, Utilities and Industrials. Moreover, portfolios with a low carbon intensity focus broadly outperform the benchmark and/or high carbon intensity portfolios regardless of firm size, beta and alpha“ (abstract).

Green performance: The impact of green investors on stock prices by Gong Cheng, Eric Jondeau, Benoit Mojon and Dimitri Vayanos from the Bank of International Settlements as of Sept. 29th, 2023: “We study the impact of green investors on stock prices in a dynamic equilibrium asset-pricing model … Contrary to the literature, we find a large fall in the stock prices of the high-emitting firms that are excluded and in turn an increase in stock prices of greener firms when the exclusion strategy is announced and during the transition process” (abstract).

Green advantage? Firm-specific Climate Risk Estimated from Public News by Thomas Dangl, Michael Halling, and Stefan Salbrechter as of Oct. 5th, 2023 (#48): “… we propose a fully data-driven methodology to estimate firm-specific climate risk from public news. … A portfolio that is long “green” stocks (low regulatory risk) and short “brown” stocks (high regulatory risk) reveals a regime shift occurring around 2012. The regulatory risk premium is positive from 2002 to 2012 (1.54% p.a.), but switches sign in the subsequent period from 2012 to 2020 and becomes significantly negative with a point estimate of -2.56%. … In addition, we find a significant positive risk premium of 1.5% p.a. for physical climate risk over the period 2002 to 2020“ (p. 51).

Costly lies: Greenwashing: Do Investors, Markets and Boards Really Care? By Erdinc Akyildirim, Shaen Corbet, Steven Ongena, and Les Oxley as of Oct. 12th, 2023 (#97): “What are the financial repercussions of corporate greenwashing? … We find a broad devaluation, with an average abnormal stock return of -0.63% …. We further find a shift in investor sentiment in parallel with the growth of social media, underscoring the potential for future swift and extensive reputational damage. … Industries inherently associated with environmental concerns, particularly energy and manufacturing, experienced more pronounced market reactions …. Furthermore, nations with robust environmental values and consciousness witnessed intensified market penalties for greenwashing …” (abstract).

Liquid impact and other investment research

Liquid impact strategies: DVFA-Leitfaden Impact Investing vom DVFA-Fachausschuss Impact vom 18. Oktober 2023: „… Additionalität nicht als notwendige Bedingung für Impact Investments gesehen werden. Stattdessen sollte besser der Beitrag einer Investition zur Lösung von ökologischen und sozialen Problemen transparent dargestellt werden. Hierfür spielen die Intentionalität sowie die Nachweisbarkeit bei der Erzielung der (netto-) positiven Wirkung eine wichtige Rolle … Erstmals werden unterschiedliche Impact- bzw. Engagementstrategien definiert (risiko- bzw. prozessorientiertes, reportingorientiertes, stakeholder- und outputorientiertes Engagement), deren Ergebnisse unterschiedlich gemessen werden können … “. Mein Kommentar: Die aktive Mitarbeit im Fachausschuß war sehr interessant und ich habe versucht, Impulse zu liefern für Engagement, vor allem Strategien, Priorisierungen und Messung, vgl. auch Shareholder engagement: 21 science based theses and an action plan – (

Advisor growth: Investment Advisors to Individual Investors by Harry Mamaysky and Yuqi Zhang as of Sept. 29th, 2023 (#43): “Investment advisors are individuals who work at firms called registered investment advisors (RIAs). We focus specifically on vanilla RIAs, whose main business is advising individuals on how they should invest. Using a novel data set of annually mandated SEC filings, we document how services, fees, advertising, misconduct, and M&A activity have evolved in the vanilla RIA sector. We show how these factors impact RIA growth, as well as how their impact on RIA growth is related to future industry evolution. We introduce a novel measure of vanilla RIA performance and show it is related to future asset flows” (abstract).


Liquid impact advert for German investors

Sponsor my research by investing in and/or recommending my global small/midcap mutual fund (SFDR Art. 9). The fund focuses on social SDGs and uses separate E, S and G best-in-universe minimum ratings and broad shareholder engagement with currently 29 of 30 engaged companiesFutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T or Noch eine Fondsboutique? – Responsible Investment Research Blog (