Technology risk illustration with nuclear risk picture from Pixabay by clkr free vector images

Technology risks: Researchpost #139

Technology risks: 17x new research on SDGs, nuclear, blockchain and AI risks, innovation, climate, carbon offsets, ESG ratings, treasuries, backtests and trading, big data, forensic finance, private equity and other alternatives by Patrick Behr, Richard Ennis, Christian von Hirschhausen, Thierry Roncalli, Bernhard Schwetzler and many more (# shows SSRN downloads on August 17th, 2023):

Social and ecological research (Technology risks)

SDG or green? Take a Deep Breath! The Role of Meeting SDGs With Regard to Air Pollution in EU and ASEAN Countries by Huynh Truong Thi Ngoc, Florian Horky, and Chi Le Quoc as of July 10th, 2023 (#26): “First, the results show that in ASEAN countries, Goal 10 (Reduced Inequalities) has a negative correlation with most other SDGs while in the EU it shows a broadly positive correlation. … air pollution, particularly SO2 and CO emissions, is positively connected to most SDGs in ASEAN while the trend in the EU is not clear. This could be due to the rapid economic development in ASEAN nations as well …” (p. 19).

Nuclear risks: The Potential of Nuclear Power in the Context of Climate Change Mitigation -A Techno-Economic Reactor Technology Assessment by Fanny Böse, Alexander Wimmers, Björn Steigerwald, and Christian von Hirschhausen as of July 27th, 2023 (#17): “… we synthesize techno-economic aspects of potential new nuclear power plants differentiating between three different reactor technology types: light-water cooled reactors with high capacities (in the range or above 1,000 MWel), so-called SMRs (“small modular reactor”), i.e., light-water cooled reactors of lower power rating (< 300 MWel) (pursued, e.g., in the US, Canada, and the UK), and non-light water cooled reactors (“so-called new reactor” (SNR) concepts), focusing on sodium-cooled fast neutron reactors as well as high-temperature reactors. … Actual development .. shows an industry in decline and, if commercially available, lacking economic competitiveness in low-carbon energy markets for all reactor types. Literature shows that other reactor technologies are in the coming decades unlikely to be available on a scale that could impact climate change mitigation efforts. The techno-economic feasibility of nuclear power should thus be assessed more critically in future energy system scenarios“ (abstract).

Blockchain risks: On the Security of Optimistic Blockchain Mechanisms by Jiasun Li as of August 15th, 2023 (#68): “Many new blockchain applications … adopt an “optimistic” design, that is, the system proceeds as if all participants are well-behaving … We point out that such protocols cannot be secure if all participants are rational” (abstract). “Given that alternative solutions are still technically immature, … the community either has to deviate from its pursuit of decentralization and accept a system that relies on trusted entities, or accept that fact their systems cannot be 100% secure” (p. 33).

AI chains: Determining Our Future: How Artificial Intelligence Creates a Deterministic World by Yuval Goldfus and Niklas Eder as of Aug. 9th, 2023 (#22): “… we demonstrate that AI relies on a deterministic worldview, which contradicts our most fundamental cultural narratives. AI-based decision making systems turn predictions into self-fulfilling prophecies; not simply revealing the patterns underlying our world, but creating and enforcing them, to the detriment of the underprivileged, the exceptional, the unlikely. The widespread utilisation of AI dramatically aggravates the tension between the constraints of environment, society, and past behavior, and individuals’ ability to alter the course of their lives, and to be masters of their own fate. Exposing hidden costs of the economic exploitation of AI, the article facilitates a philosophical discussion on responsible uses. It provides foundations of an ethical principle which allows us to shape the employment of AI in a way which aligns with our narratives and values” (abstract). My comment: My opinion regarding AI for sustainable investments see How can sustainable investors benefit from artificial intelligence? – GITEX Impact – Leading ESG Event 2023

Musical therapy? The Value of Openness by Joshua Della Vedova, Stephan Siegel, and Mitch Warachka as of July 5th (#48): “We construct a novel proxy for openness using MSA-level data (Sö: US Metropolitan Statistical Areas) from radio station playlists. This proxy is based on the adoption of new music and varies significantly across MSAs. Empirically, we find a robust positive association between openness and proxies of value creation such as the number of new ventures funded by venture capital, the number of successful exits by new ventures, the proportion of growth firms, and Tobin’s q. … An instrumental variables procedure confirms that openness is highly persistent with variation across MSAs being evident more than a century before the start of our sample period. … our results are especially strong for young firms that are more likely to depend on new products“ (p. 26/27).

ESG and impact investing research

Climate stress: From Climate Stress Testing to Climate Value-at-Risk: A Stochastic Approach by Baptiste Desnos, Théo Le Guenedal, Philippe Morais, and Thierry Roncalli from Amundi as of July 5th, 2023 (697): „This paper proposes a comprehensive climate stress testing approach to measure the impact of transition risk on investment portfolios. … our framework considers a bottom-up approach and is mainly relevant for the asset management industry. … we model the distribution function of the carbon tax, provide an explicit specification of indirect carbon emissions in the supply chain, introduce pass-through mechanisms of carbon prices, and compute the probability distribution of potential (economic and financial) impacts in a Monte Carlo setting. Rather than using a single or limited set of scenarios, we use a probabilistic approach to generate thousands of simulated pathways” (abstract).

Disaster flows: Flight to climatic safety: local natural disasters and global portfolio flows by Fabrizio Ferriani,  Andrea Gazzani, and Filippo Natoli from the Bank of Italy as of July 5th, 2023 (#35): “… we find that local natural disasters have significant effects on global portfolio flows. First, when disasters strike, international investors reduce their net flows to equity mutual funds exposed to affected countries. This only happens when disasters occur in the emerging economies that are more exposed to climate risk. Second, natural disasters lead investors to reduce their portfolio flows into unaffected, high-climate-risk countries in the same region as well. Third, disasters in high-climate-risk emerging economies spur investment flows into advanced countries that are relatively safer from a climate risk standpoint“ (abstract).

Carbon offsets: Portfolio Allocation and Optimization with Carbon Offsets: Is it Worth the While? by Patrick Behr, Carsten Mueller, and Papa Orge as of Aug. 10th, 2023: “We explore whether the integration of carbon offsets into investment portfolios improves performance. … our results show that investment strategies that include such offsets broadly achieve higher Sharpe Ratios than the diversified benchmark, with the long-short strategy performing best”.

Useless ratings? ESG Ratings Management by Jess Cornaggia and Kimberly Cornaggia as of July 27th, 2023 (#92): “We use data from an ESG rater that incorporates feedback from firms during the rating process and produces ratings at a monthly frequency. We … find that when the rater changes the weight it applies to certain criteria in the creation of its ESG ratings, firms respond by adjusting their reported ESG behavior in the same month. … we do not observe real changes in the likelihood that firms are embroiled in ESG controversies, or that they reduce their release of toxic chemicals because of these adjustments. Rather, it appears firms “manage” their ESG ratings for the benefit of ESG-conscious investors and customers” (p. 26/27). My comment: I do not use market leading MSCI or ISS or Sustainalytics ratings and also because of my custom rating profile (Best-in-Universe with specific approach to treat missing data) the risk of such ratings management should be low, see Noch eine Fondsboutique? – Responsible Investment Research Blog (

AI and other investment research (Technology risks)

ETFs effect Treasuries: ETF Dividend Cycles by Pekka Honkanen, Yapei Zhang, and Tong Zhou as of Aug. 10th, 2023 (#340): “… in the “ETF dividend cycle,” ETFs accumulate incoming corporate dividends in MMFs (Sö: Money Market Funds)  gradually but withdraw them abruptly in large amounts when they themselves have to pay dividends to investors. … This … leads to large, sudden outflows from MMFs, forcing these funds to liquidate some of their underlying assets. We find that these liquidations are concentrated in short-term Treasury bonds. … in the aggregate time series, an ETF dividend distribution event of average size leads to increases in short-term Treasury yields by approximately 0.38-0.58 basis points. … The total value fluctuation in the Treasury market could be considerable, as ETFs distribute dividends on 205 trading days in 2019, for example” (p. 9/10).

Backtest-problems: Market Returns Are Estimated with Error. How Much Error? by Edward F. McQuarrie as of July 24th, 2023 (#30): “For periods beginning 1926, it is conventional to suppose that historical market returns are known with reasonable accuracy. This paper challenges that comfortable certainty. Multiple indexes of market return are examined to show that return estimates do not closely agree across indexes and are unstable within index over time. The paper concludes that two-decimal precision—to the whole percentage point, with an error band of plus or minus one percentage point—would better reflect the accuracy of historical estimates of annual market return” (abstract).

Easy profits: Intraday Stock Predictability Everywhere by Fred Liu, and Lars Stentoft as of July 5th, 2023 (#1167): “First, we demonstrate that the market and sector portfolios are highly predictable. … we show that portfolio profitability mostly remains high after accounting for transaction costs, and is largely orthogonal to common risk factors. … we further exploit machine learning forecasts of individual stocks by constructing machine learning intraday portfolios, and demonstrate that a long-short portfolio achieves a Sharpe ratio of up to 4 after transaction costs. … demonstrate that less liquid firms are more predictable and firms which are more actively traded and volatile tend to be more profitable … intraday predictability and profitability generally decrease as the time horizon increases” (p. 28/29). My comment: If this is so easy, why do Quant funds typically disappoint? The information is important for stock trading, though (for my trading approach see Artikel 9 Fonds: Sind 50% Turnover ok? – Responsible Investment Research Blog (

Satellite vs. people: Displaced by Big Data: Evidence from Active Fund Managers by Maxime Bonelli and Thierry Foucault as of Aug. 2nd, 2023 (#325): “We test whether the availability of satellite imagery data tracking retailer firms’ parking lots affects the stock picking abilities of active mutual fund managers in stocks covered by this data. … we find that active mutual funds’ stock picking ability declines in covered stocks after the introduction of satellite imagery data for these stocks. This decline is particularly pronounced for funds that heavily rely on traditional sources of expertise, indicating that these managers are at a higher risk of being displaced by new data sources“ (p. 29/30).

AI bubble? Artificial Intelligence in Finance: Valuations and Opportunities by Yosef Bonaparte as of August 15th, 2023 (#65): “First, we display the current and projected AI revenue by sector, technology type, and geography. Second, present valuation model to AI stocks and ETFs that accounts for AI sentiment as well as fundamental analyses. Our findings demonstrate that the AI revenue will pass $2.7 trillion in the next 10 years, where the service AI technology stack will contain 75% of the market share (as of 2023 it is 50% of the market share). As for AI stock valuation, we present two main models to adopt when we value stocks“ (abstract).

Bad finance: What is Forensic Finance? by John M. Griffin and Samuel Kruger as of Aug. 10th, 2023 (#467): “We survey a growing field studying aspects of finance that are potentially illegal, illicit, or immoral. Some of the literature is investigative in nature to uncover malfeasance that is recent and possibly ongoing. … The work spans newer areas such as cryptocurrencies, financial advisor and broker misconduct, and greenwashing; and newer research in established fields that are still developing, such as insider trading, structured finance, market manipulation, political connections, public finance, and corporate fraud. We highlight investigative forensic finance, common economic questions, common empirical methods, industry and political opposition, censoring, and the importance of avoiding publication biases“ (abstract).

Specialist PE: Specialization in Private Equity and Corporate Financial Distress by Benjamin Hammer, Robert Loos, Lukas Andreas Oswald, and Bernhard Schwetzler as of Aug. 7th, 2023 (#384): “We investigate the impact of industry specialization of private equity firms on financial distress risk of portfolio companies … Difference-in-differences estimates suggest an increase in distress risk through private equity backing. The effect is stronger for specialist-backed firms than for generalist-backed firms relative to a carefully matched control group. However, specialist-backed firms can afford the increase in distress risk because they are less risky than generalist-backed firms before the buyout. Overall, our findings are consistent with the idea that greater idiosyncratic risk in specialized PE portfolios induces more risk-averse target selection” (abstract).

Costly diversification: Have Alternative Investments Helped or Hurt? by Richard M. Ennis as of August 3rd, 2023 (#135): “This paper shows that since the GFC (Sö: Global Financial Crisis in 2007/2008), US public-sector pension funds’ exposure to alternative investments is strongly associated with a reduction in alpha of approximately 1.2 percentage points per year relative to passive investment. While exposure to private equity has arguably neither helped nor hurt, both real estate and hedge fund exposures have detracted significantly from performance. Institutional investors should consider whether continuing to invest in alts warrants the time, expense and reduced liquidity associated with them” (p. 11).


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Noch eine Fondsboutique mit Bild von Pixabay von Thomas G.

Noch eine Fondsboutique?

(„Noch eine Fondsboutique“ ist am 15. August 2023 zuerst auf LinkedIn veröffentlicht worden).

Es gibt schon so viele Fonds und Fondsboutiquen. Noch eine Fondsboutique zu gründen, scheint wenig Sinn zu machen. Trotzdem habe ich das im August 2021 auf Wunsch eines Geschäftspartners gemacht, nachdem ich ursprünglich nur Modellportfolios anbieten wollte. Ziel war es einen Fonds zu starten, der sowohl besonders gut auf ökologische aber auch auf soziale Entwicklungsziele der Vereinten Nationen (SDG) ausgerichtet ist und der zudem besonders geringe Umwelt-, Sozial- und Unternehmensführungsrisiken aufweist.

Nachhaltigkeit wichtiger als Überrendite

Ich habe viele Jahre als Fondsselekteur gearbeitet und weiß, wie schwer es ist, passive Benchmarks zu schlagen. Ich werbe auch bewusst nicht damit, Outperformance liefern zu können. Mein Ziel ist es, so nachhaltig wie möglich zu investieren. Damit strebe ich eine aktienmarkttypische Performance an. Das Modellportfolio, auf dem der Fonds basiert, hat das seit dem Start Ende 2017 weitgehend erreicht. Im Vergleich zu aktiv gemanagten Fonds funktioniert das trotz einer relativ schlechten Rendite im ersten Halbjahr 2023 durch das gute Jahr 2022 bisher auch für den Fonds.

Mein Ansatz ist sehr untypisch: Ich selektiere meine Aktien fast nur anhand von Nachhaltigkeitsinformationen. Die Diversifikation beschränke ich bewusst auf 30 Aktien, weil eine höhere Diversifikation meine Nachhaltigkeitsanforderungen verwässern würde. Trotzdem sind die Risikokennzahlen des Fonds gut.

Konsequente Nachhaltigkeit ist leichter von Small- und Midcaps erfüllbar (noch eine Fondsboutique)

Mein Fonds ist auf Unternehmen fokussiert, deren Produkte und Services möglichst gut mit mindestens einem SDG vereinbar sind. Das trifft eher auf kleinere als auf größere Unternehmen zu. Auch meine zahlreichen konsequenten Ausschüsse sind eher von spezialisierteren als von diversifizierten Unternehmen erfüllbar, so dass der Fonds überwiegend Small- und Midcaps enthält.

Unternehmen mit Hauptsitz in Ländern, die meinen Anforderungen an Gesetzmäßigkeit nicht entsprechen, bleiben unberücksichtigt. In meinem Fonds haben die USA aktuell einen Anteil von leicht über 50%. Der Eurolandanteil liegt ebenso wie der Australien-Anteil derzeit bei etwa 10%. Gesundheits- und Industrieunternehmen machen den Hauptbestandteil aus und auch (Sozial-) Immobilien und (nachhaltige) Infrastruktur sind überdurchschnittlich vertreten. Technologieunternehmen sind dagegen unterrepräsentiert im Vergleich zu traditionellen Aktienbenchmarks.

Große Unterschiede zu anderen Fonds

In Deutschland werden nur wenige global investierende Fonds mit Small- und/oder Midcap-Fokus angeboten. Im Juni habe ich mir die Portfolios potenzieller Wettbewerber angesehen und maximal vier Aktien Überscheidung gefunden.

Unterschiede zu anderen Fonds gibt es vor allem in Bezug auf das Nachhaltigkeitskonzept. Ich kenne keinen anderen Fonds mit so strengen und so vielen Ausschlüssen. Ich kenne auch keinen anderen branchendiversifizierten Fonds, der strenge Best-in-Universe ESG-Ratings nutzt. Dabei werden nur Unternehmen mit besonders geringen absoluten ESG-Risiken ausgewählt. Fast alle anderen Fonds nutzen einen laxeren Best-in-Class ESG-Ratingansatz, bei dem – abhängig vom jeweiligen Marktsegment – relativ gute ESG-Risiken ausreichen.

Viele Fonds haben zudem nur Mindestanforderungen an aggregierte ESG-Ratings und nicht explizit separate Mindestanforderungen an Umwelt-, Sozial- und Unternehmensführungsratings, wie es bei meinem Fonds der Fall ist. Auf Basis eines detaillierten Nachhaltigkeits-Engagementkonzeptes, das auch auf andere Stakeholder wie Mitarbeiter einbezieht, bin ich zudem aktuell mit 28 von 30 Unternehmen in einem aktiven Dialog.

Für die meisten Fondsselekteure ist mein Fonds aber noch zu jung und mit knapp über 10 Millionen Fondsvermögen noch zu klein. Durch meinen regelbasieren Ansatz kann ich aber auch als Ein-Personen Fondsboutique gemeinsam mit meinen Fondspartnern Deutsche Wertpapiertreuhand und Monega sowie mit meinem Beratungs- und IT-Partner QAP Analytic Solutions und meinem Datenlieferanten alle Anforderungen gut erfüllen.

Ich bin sehr zuversichtlich, dass mein Fonds eine gute Zukunft hat und möchte dauerhaft in großem Umfang im Fonds investiert bleiben.

Weiterführende Informationen siehe und z.B. Active or impact investing? – (

Disclaimer zu „Noch eine Fondsboutique)

Dieser Beitrag ist von der Soehnholz ESG GmbH erstellt worden. Die Erstellerin übernimmt keine Gewähr für die Richtigkeit, Vollständigkeit und/oder Aktualität der zur Verfügung gestellten Inhalte. Die Informationen unterliegen deutschem Recht und richten sich ausschließlich an Investoren, die ihren Wohnsitz in Deutschland haben. Sie sind nicht als Verkaufsangebot oder Aufforderung zur Abgabe eines Kauf- oder Zeichnungsangebots für Anteile des in dieser Unterlage dargestellten Fonds zu verstehen und ersetzen nicht eine anleger- und anlagegerechte Beratung. Anlageentscheidungen sollten nur auf der Grundlage der aktuellen gesetzlichen Verkaufsunterlagen (Wesentliche Anlegerinformationen, Verkaufsprospekt und – sofern verfügbar – Jahres- und Halbjahresbericht) getroffen werden, die auch die allein maßgeblichen Anlagebedingungen enthalten. Die Verkaufsunterlagen werden bei der Kapitalverwaltungsgesellschaft (Monega Kapitalanlagegesellschaft mbH), der Verwahrstelle (Kreissparkasse Köln) und den Vertriebspartnern zur kostenlosen Ausgabe bereitgehalten. Die Verkaufsunterlagen sind zudem im Internet unter erhältlich. Die in dieser Unterlage zur Verfügung gestellten Inhalte dienen lediglich der allgemeinen Information und stellen keine Beratung oder sonstige Empfehlung dar. Die Kapitalanlage ist stets mit Risiken verbunden und kann zum Verlust des eingesetzten Kapitals führen. Vor einer etwaigen Anlageentscheidung sollten Sie eingehend prüfen, ob die Anlage für Ihre individuelle Situation und Ihre persönlichen Ziele geeignet ist. Diese Unterlage enthält ggf. Informationen, die aus öffentlichen Quellen stammen, die die Erstellerin für verlässlich hält. Die dargestellten Inhalte, insbesondere die Darstellung von Strategien sowie deren Chancen und Risiken, können sich im Zeitverlauf ändern. Einschätzungen und Bewertungen reflektieren die Meinung der Erstellerin zum Zeitpunkt der Erstellung und können sich jederzeit ändern. Es ist nicht beabsichtigt, diese Unterlage laufend oder überhaupt zu aktualisieren. Sie stellt nur eine unverbindliche Momentaufnahme dar. Die Unterlage ist ausschließlich zur Information und zum persönlichen Gebrauch bestimmt. Jegliche nicht autorisierte Vervielfältigung und Weiterverbreitung ist untersagt.

Corporate governance illustration shows office worker with surveillance camera from Mohamed Hassan from Pixabay

Corporate governance and more: Researchpost #138

Corporate governance: 19x new research on German wealth, ESG real world impact, CDR, circular economy, ESG ratings, ESG AI, supplier ESG, climate data, green govvies and corporates, private equity ESG, VCs and UBS by Reiner Braun, Florian Ederer, Andreas Egert, Arnd Huchzermeier, Tim Kröncke and many more (# of SSRN downloads on August 10th, 2023) 

Social and ecological research

Rich Germans: Distributional National Accounts (DINA) for Germany, 1992-2016 by Stefan Bach, Charlotte Bartels, and Theresa Neef as of June 26th, 2023 (#36): “… Our DINA series show that economic growth has been pro-rich from 1992 to 2007 and pro-poor from 2007 to 2016. But although incomes of the bottom 50% have resumed to grow since 2007, the income gap between the bottom 50% and the top 10% has widened between 1992 and 2016. The ratio of top 10% to bottom 50%’s average incomes has increased from eight to ten. … Germany’s highly concentrated economic elite – Germany’s top 0.1% and 0.01% income share is similar to the United States and far above France. Germany’s top business income recipients primarily hold firms as partnerships predominantly owned by two to four shareholders, while top business income earners in the United States and France hold shares in corporations“ (p. 30/31).

CDR case studies: How Responsible Digitalization Creates Profitable Pathways to Sustainability by Niklas Werle and Arnd Huchzermeier as of June 24th, 2023 (#21): “… we show that companies that committed to CDR (Sö: Corporate Digital Responsibility) successfully implemented digitally enabled sustainability strategies. … we conclude that responsible digitalization enables improved sustainability and contributes to reaching not only the UN SDG goals but also carbon neutrality. This study contributes to the research on CDR by showcasing exemplary outcomes from pioneering companies and developing a framework explaining the effects of CDR practices“ (p. 23).

No ESG sales impact? Do consumers vote with their feet in response to negative ESG news? Evidence from consumer foot traffic to retail locations by Svenja Dube, Hye Seung (Grace) Lee, and Danye Wang as of July 20th, 2023 (#118): “We conduct an event-study analysis in the 21-day window around the release of negative ESG news. … individuals in counties with higher ESG consciousness (proxied with income, education, political affiliation, and population density) decrease their visits to stores following negative ESG news. … However, the magnitude of the response is inconsequentially small even for these most affected consumers” (p. 36).

Circular definition: Circular Economy by Mark Anthony Camilleri, Benedict Sheehy, and Kym Fraser as of June 26th, 2023 (#7):“This contribution features the submission of one of the most important sustainability keywords to Springer’s Encyclopedia of Sustainable Management. It provides a definition and an introduction to the circular economy (CE). It describes key policies and regulatory interventions that are meant to promote the CE agenda“ (abstract).

ESG investment research: Asset class independent (Corporate Governance and more)

ESG rating criticism: ESG Ratings—Guiding a Movement in Search for Itself by Andreas Engert as of July 31st, 2023 (#114): “ESG ratings deliver the short-hand evaluation that investors need to incorporate environmental, social, and governance aspects in their decision-making. … an ESG rating can serve two distinct purposes: either to inform financial investors about long-term risks and returns from ESG-related factors or to guide prosocial investors in awarding a “greenium” subsidy for social performance. Because the information demands differ, ESG rating providers should commit to either one of these missions. The paper analyzes the specific problems of ratings serving prosocial investors. Implicitly or explicitly, such ratings reflect an ordering of political priorities that rating providers have to set. … Standardizing ESG ratings would further strengthen the effect of impact investing but seems unlikely to be attainable“ (abstract). My comment: ESG ratings typically (should) measure ESG-risks for the rated entities and SDG ratings typically (should) measure the SDG-alignment of products and services offered

Chat ESG: Overcoming Complexity in ESG Investing: The Role of Generative AI Integration in Identifying Contextual ESG Factors by Yash Jain, Shubham Gupta, Serhan Yalciner, Yashodhan Joglekar, Parth Khetan, and Tony Zhang as of July 18th, 2023 (#171): “… The results of this study suggest that GPT 3.5 is capable of generating informative and accurate responses to prompts related to ESG. … we found that it has the ability to provide insights into various ESG-related topics, such as climate change, social responsibility, and corporate governance. Furthermore, the use of APIs in this study allowed for efficient and effective data collection and analysis“ (p. 32).

Supplier ESG: The Sustainability Reporting Ripple: Direct and Indirect Implications of the EU Corporate Sustainability Reporting Directive for SME Actors by Deirdre Ahern as of July 27th, 2023 (#31): “The unique regulatory lens of the Corporate Sustainability Reporting Directive challenges affected companies, not just to mechanically report on, but to qualitatively consider how other partners in their value chain (including SMEs) impact on achievement of the company’s sustainability goals. … although the Corporate Sustainability Reporting Directive has not imposed any new reporting requirements on SMEs, except for those with securities listed on regulated markets in the EU, the indirect impact on the SME sector can be expected to be far broader. … The signal that the information required from value chain SMEs should be no more onerous that under the simplified reporting standards for listed SMEs is important to ensure regulatory coherence, feasibility, and to reduce the administrative burden on regulated actors and SMEs in the value chain” (p. 20/21). My comment: One of the focus areas of my shareholder engagement activities is to include suppliers in ESG-improvements across the whole value chain, see Shareholder engagement: 21 science based theses and an action plan – (

Governance research 1: Corporate Governance Characteristics and Involvement in ESG Activities: Current Trends and Research Directions by Anand Kumar, Tatiana Garanina, and Mikko Ranta as of July 26th, 2023 (#38): “Our unique combined approach towards conducting a literature review allows us to come up with the key research topics in the area, their deep analysis and identification of the current and future research trends. A review of corporate governance and ESG literature suggests a shift towards a more strategic and practically oriented papers” (abstract).

Governance research 2: A Literature Review on Corporate Governance and ESG research: Emerging Trends and Future Directions by Bruno Buchetti and Francesca Romana Arduino as of August 5ht, 2023 (#112): “… our findings reveal that a variety of elements, such as the inclusion of female directors, the participation of institutional investors, the appointment of independent directors, the existence of specific CEO traits, a strategically formulated directors’ compensation scheme, and the establishment of a sustainability committee, all positively influence ESG outcomes. On the other hand, it seems that family ownership may adversely impact ESG performance. Our review has also highlighted several research areas where, we believe, future research should contribute“ (p. 30).

Climate data chaos: Are Implied Temperature Rise Metrics as Inconsistent as ESG Ratings?: Examining Firm-Level Disagreement among Data Providers by Lea Chmel, Manuel C. Kathan, and Sebastian Utzas of June 29th, 2023 (#20): “This study documents substantial heterogeneity in valuating firms regarding their ITR (Sö: Implied Temperature Rise) values across different providers. Pairwise Pearson correlations range from −0.133 to 0.313 and indicate disagreement among providers. … We find that energy-intensive industry sectors and a headquarter located in North America seem to be the strongest drivers for the disagreement. … size and tangibility also appear to be determinants of higher divergence in the ITR values of firms. This is puzzling since larger firms are covered by more analysts, on average. … underlying assumptions are not observable to investors, making the exact methodology to determine an ITR value a black box …”.

ESG investment research: Bonds and Loans (Corporate Governance and more)

Brown Govvies: A framework to align sovereign bond portfolios with net zero trajectories by Inès Barahhou, Philippe Ferreira, and Yassine Maalej from Kepler Cheuvreux as of July 26th, 2023 (#76):  “The first conclusion that we drew from our analysis is that it is necessary to impose significant constraints on the optimisation programme. Otherwise, the resulting net zero portfolios may appear unrealistic for investors. … We also highlighted that the choice of the carbon metric is fundamental for net zero alignment. …. Production-based metrics tend to favour developed countries because their industries are more efficient, and they have relocated carbon-intensive activities overseas. In contrast, consumption-based carbon metrics favour emerging countries which tend to have more carbon-efficient consumption habits. … considering carbon emissions or carbon intensities paints very different pictures of the carbon dynamics. … we are not able to find solutions to our net zero problem until 2050. … that unless there is a significant improvement in countries’ behaviours, the main sovereign bond universe will be highly incompatible with an increase in global temperature below 1.5°C“ (p. 40/41). My comment: For my responsible multi-asset portfolios, since many years I use bonds of multilateral development banks instead of government bonds, see

Green cover: Corporate Green Bonds: Market Response and Corporate Response by Sanjai Bhagat and Aaron Yoon as of July 13th, 2023 (#81): “… per the Green Stakeholder Hypothesis, announcement of green bond issuance should elicit a positive stock market response for the company … Per the Greenwashing Hypothesis, the stock market will respond non-positively to green bond issuance announcements. … Consistent with the Greenwashing Hypothesis, we do not find any significant market response to these green bond announcements. … We document no change in carbon emissions subsequent to the announcement of green bonds. … In the year of the green bond announcements, the abnormal operating performance of these announcing firms is significantly negative. This is consistent with the argument that managers of these firms are using the green bond announcements as a cover for their poor business performance“ (p. 24/25).

Sustenium: The Pricing of Sustainability Linked Bonds on the Primary and Secondary Bond Market  by Jannis Poggensee as of July 13th, 2023 (#33): “The central innovation SLBs provide is that their financial characteristics can vary depending on whether a predefined sustainable performance target has been achieved or not. Typically, the coupon steps-up 25bps for the remaining lifetime of the bond if the target will not be achieved. … investor pay higher prices (accept lower returns) for green assets reflected in the premium SLBs trade both on the primary and on the secondary market on average. Issuers benefit from lower cost of capital, although this effect is decaying“ (p. 32).

Green innovation premium: Can firms adopting a green innovation policy fetch better deals from debtholders? A study on G7 countries by Vu Quang Trinh, Hai Hong Trinh, Tam Huy Nguyen, and Giang Phung as of June 26th,2023 (#38):.“… We find that high green innovation lowers the corporate cost of debt … Specifically, high-level green innovation engagement facilitates firms to reduce their carbon intensity (risk) and the likelihood of bankruptcy … The better borrowing deals underneath green innovation are also more likely to be acquired in financially constrained businesses. … prolonged green innovation engagement helps firms secure a lower cost of debt because it signifies both a richer experience and higher commitment, increasing trust from debt providers …”(abstract).

ESG investment research: Equities (Corporate Governance and more)

Costly ESG: The Cost of Being Green: How ESG Ratings Affect a Firm’s Cost of Equity by Alessio Galluzzi, Fergus O’Donnell, and Reuben Segara as of July 10th, 2023 (#123): “We find that a one standard deviation increase in ESG ratings is linked to a significant 15 basis points increase in a firm’s COE on average. This relationship is predominantly observed among S&P 500 firms or large firms, while its impact is less pronounced for energy-intensive firms. These findings highlight the importance of considering industry-specific dynamics, firm-level characteristics, and the broader investment climate when assessing the impact of ESG ratings on a firm’s COE“ (abstract).

Brown Private Equity: ESG in the Top 100 US Private Equity Firms by Garen Markarian, Calvin Rakotobe, and Alexander Semionov as of July 17th, 2023 (#96): “… we conduct an examination of the ESG practices of the top 100 private equity firms in the United States, a sector that represents over $1.5 trillion of committed capital and directly employs 12 million individuals. … We find that approximately 58% of these private equity firms disclose no information about their ESG practices. Moreover, of the firms that do disclose, two-thirds provide sparse and uninformative ESG information. … Internal Rate of Return (IRR) does not predict ESG scores overall but relates to higher social scores.“ (p. 31).

Other investment research

Unquant PE: Limited Partners versus Unlimited Machines; Artificial Intelligence and the Performance of Private Equity Funds by Reiner Braun, Borja Fernández Tamayo, Florencio López-de-Silanes, Ludovic Phalippou, and Natalia Sigrist as of July 3rd, 2023 (#1556): “… traditional quantitative factors and document readability proxies, are poor predictors of future performance. In addition, we do not find our proxies of fundraising success at the beginning of a fund’s life are actually correlated with ultimate fund performance. … Results show that approaches exploiting the qualitative information disclosed to investors in PPMs (Sö: Private placement memorandum) have important predictive power for ultimate fund success …“ (p. 25/26).

Big tech control: The Great Startup Sellout and the Rise of Oligopoly by Florian Ederer and Bruno Pellegrino as of Aril 14th, 2023 (#638): “… we documented a secular shift from IPOs (Sö: Initial public offerings) to acquisitions by VC-backed startups. … firms face an increasingly high (opportunity) cost of going public … dominant companies that are disproportionately active in the corporate control market for startups (such as GAFAM) appear to have become more insulated from the product market competition over the same period. These facts are consistent with the hypothesis that startup acquisitions have contributed to rising oligopoly power in high-tech sectors …” (p. 7). My comment: One more reason for not investing with big techs?

Swiss bailout: The UBS-Credit Suisse Merger: Helvetia’s Gift by Pascal Böni, Tim Kröncke, and Florin Vasvari as of July 13th, 2023 (#204): “We show that the UBS-CS-merger … created a net value of 22.8 bn USD, distributed to UBS stockholders (5.1 bn USD), CS stockholders (-1.1 bn USD), and CS bondholders (18.8 bn USD). The combined wealth effect cannot be explained by the participating firms’ abnormal returns on securities. … we find that there have likely been large transfers of wealth from taxpayers to UBS/CS stakeholders. … First, we argue that UBS stockholders have profited from bidding restrictions imposed by the government. … Second, we believe that CS bondholders profited from substantial coinsurance effects. Third, the “too-big-to-fail” channel, combined with a material loss protection agreement which covered a specific portfolio of CS assets (corresponding to approximately 3% of the combined assets of the merged bank) may have contributed to the combined wealth effect. Finally, and importantly, we infer from our analysis that the government intervention likely came at the cost of a significant jump in Switzerland’s sovereign credit risk and thus an increase in its expected cost of debt, implying the risk of a substantial taxpayer wealth transfer in the magnitude of approximately six to seven billion USD” (p.23/24).


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Impact impact illustration by Geralt from Pixabay

Impact impact? Researchpost #137

Impact impact? 18x new research on pension taxes, food carbon labels, sector investing, brown divestments, biodiversity, ESG fund flows, governance washing, impact investing, stewardship, shareholder engagement, divestments, social bonds, article 9 funds and asset allocation (# of SSRN downloads on August 3rd, 2023) by Marco Becht, Tobias Berg, Timo Busch, Thierry Roncalli, Laurens Swinkels and many more

Social and ecological research

Pension taxes: Does a Decrease in Pension Taxes Increase Retirement Savings? An Experimental Analysis by Kay Blaufus, Michael Milde, and Alexandra Spaeth as of June 12th, 2023 (#34): “Many countries use tax incentives to promote retirement savings. … Using a series of experiments, we demonstrate that decreasing pension tax rates does not encourage retirement savings. … In contrast, an increase in the tax refund rate, i.e., the rate at which individuals can deduct their retirement savings, increases savings. … all subjects were fully informed about the tax rules and passed comprehension tests on these rules. Nevertheless, we observe significant misperceptions regarding taxes on pension income. … an instrument that increases current tax benefits is more effective than one that decreases future tax burdens even if both instruments are economically equivalent. … we show that substituting deferred taxation with economically equivalent immediate taxation increases the (effective) savings rate by 7.2 percentage points without changing tax revenue” (p. 28/29).

Food carbon labels: Should Carbon Footprint Labeling be Mandatory for all Food Products? RCT Shows no Benefit beyond Labeling the Top Third by Pierre Chandon, Jad Chaaban, and Shemal Doshi as of June 12th, 2023 (#26): “Carbon footprint labels have been shown to lead consumers to choose food products with lower CO2 emissions … We asked 1,081 American consumers to shop in an experimental online grocery store and choose one frozen meal among the full assortment of a major American grocer … A 16.5% reduction in emissions was achieved by labeling the top third of products, with no statistically significant improvement gained by further increasing the proportion of labeled products” (abstract).

ESG and internal control: Corporate Environmental, Social, and Governance (ESG) Performance and the Internal Control Environment by Jacquelyn Sue Moffitt, Jeanne-Claire Alyse Patin, and Luke Watson as of June 15th, 2023 (#59): “We find that ESG performance is negatively related to the likelihood of general internal control weaknesses, consistent with transparent reporting. We also find that ESG performance is negatively related to company-level internal control weaknesses, which are considered relatively severe. Further, we find that ESG performance is negatively associated with specific internal control weaknesses that indicate a lack of ethical tone at the top. … Overall, our results suggest that ESG performance is positively associated with the strength of the internal control environment“ (abstract).

ESG investing research: Impact impact?

Environmental sector investing: Environmental Preferences and Sector Valuations by Tristan Jourde and Arthur Stalla-Bourdillon as of July 7th, 2023 (#75): “… we explore the dynamic nature of pro-environmental preferences among investors through the lens of sector valuations in global equity markets from 2018 to 2021. … we find that firms’ green and brown sector affiliations are significantly priced in the global equity market, positively for green sectors and negatively for brown sectors. Furthermore, companies operating in green sectors have become increasingly overvalued relative to the rest of the market between 2018 and 2021, and vice versa for those operating in brown sectors … In addition, the turnover rate of both green and brown companies has increased over the last years …“ (p. 19). My comment: An update of the study after the 2022 market development would be interesting.

Brown divestments: Climate risk and strategic asset reallocation by Tobias Berg, Lin Ma, and Daniel Streitz as of Feb. 28th, 2023 (#128): “We document that large emitters, i.e., firms that are part of the Climate Action 100+ scheme, started to reduce their combined Scope 1 and 2 emissions by around 12% in the years after the 2015 Paris Agreement relative to other public firms with positive carbon emission levels. … There is no evidence for increased engagements in other emission reduction activities. … we find that buyers of large asset sales tend to be private, financial, and other firms that do not disclose emissions to the Carbon Disclosure Project. … We provide evidence that is consistent with increased regulatory risk being a main driver of the effects“ (p. 25/26). My comment: I am skeptical regarding Transition investments see ESG Transition Bullshit? – Responsible Investment Research Blog (

Biodiversity premium: A closer look at the biodiversity premium by Guillaume Coqueret and Thomas Giroux as of Juy 21st, 2023 (#163): “… while this (Sö: biodiversity) premium is not unconditionally strong, there are dimensions along which it may prove substantial. For instance, air pollution is priced significantly more than land use, even though the latter has a more decisive impact on the environment. Another important subtlety lies in the distinction between realized versus expected returns (from investors). Our results show more pronounced effects on expected returns. … Lastly, like all other premia, the biodiversity factor experiences fluctuating returns. The recent period is associated with largely negative premia, especially for expected returns. Our analysis shows that a few variables are able to explain some time-variations, notably attention to biodiversity and climate, oil prices, and consumer sentiment” (p. 17).

Good ESG capital: ESG Capitals and Corporate Value Creation by Banita Bissoondoyal-Bheenick, Scott Bennett, and Angel Zhong as of June 12th, 2023 (#110): “Our paper has documented that investing in ESG capital … can lead to better short-term and long-term shareholder wealth … In the short term, the ESG capital triggers sharp financial return improvement for a firm to improve their ESG capital from a very low point (i.e., a firm that seldom considers ESG activities and culture) to an average ESG performance. Such positive effects are small but still positive if the firm continues to enhance its ESG capital from the middle range towards the top level in the market. We also find that investment in ESG capital can positively and interactively influence other capitals, such as financial, innovation and manufacturing capitals, to improve financial returns. Under a good ESG environment, more holding of the other capitals could lead to more significant financial returns than each capital could achieve individually“ (p. 23/24).

Provider-friendly ESG? Machine-Learning about ESG Preferences: Evidence from Fund Flows by George O. Aragon and Shuaiyu Chen as of July 29th, 2023 (#36): “We first construct a broad dataset of ESG scores for active equity mutual funds based on funds’ stock holdings and stock-level scores from six prominent ESG data providers. We document substantial dispersion in scores across providers, but that many scores nevertheless have predictive power for flows. … Over our 2010–2020 sample period, we find that funds with higher ESG benefits subsequently realize higher flows, lower net returns against the benchmark, lower value-added from net returns, and hold stocks that underperform other stocks. We estimate that investors pay an annual premium of $11 million to invest in a fund with ESG benefits in the top decile. Overall, our findings shed new light on the relevance of ESG scores and the ESG preferences of investors“ (p. 23). My comment: The fund flows should be positive for my pure ESG fund and portfolios, see e.g. Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – (

Governance-washing: The G-pillar in ESG: how to separate the wheat from the chaff in comply-or-explain approach? by Daniela Venanzi as of June 26th, 2023 (#24): “This study tries to verify if a gap exists between apparent and real compliance to CG (Sö; Corporate Governance) Code requirements in a sample of Italian listed financial companies (mostly banks), with reference to two areas (independence of board members and transparency) that mostly make decision-making unbiased by conflicts of interests and are therefore crucial for corporate sustainability. We find opacity/obfuscation in CG narrative and avoidance/concealment strategies also in banks considered “CG champions”, more rarely non-compliance clearly declared and appropriately explained” (abstract).

ESG predictions: Are ESG ratings informative to forecast idiosyncratic risk? by Christophe Boucher, Wassim Le Lann, Stéphane Matton, and Sessi Tokpavi as of July 11th, 2023 (#71): “The contribution of this article is to propose a formal statistical procedure for assessing the informational content in ESG ratings. … We apply our procedure to evaluate two leading ESG rating systems (Sustainalytics and Asset4) in three investment universes (Europe, North America, and the Asia-Pacific region). The results show that the null hypothesis of a lack of informational content in ESG ratings is strongly rejected for Europe, while the results are mixed and predictive accuracy gains are lower for the other regions. Furthermore, we find that the predictive accuracy gains are higher for the environmental dimension of the ESG ratings. Importantly, we find that the predictive accuracy gains derived from ESG ratings increase with the level of consensus between rating agencies in all three universes, while they are low for firms over which there is a high level of disagreement“ (p. 31).

Risk-reducing disclosure: ESG Disclosure, CEO Power and Incentives and Corporate Risk-taking by Faek Menla Ali, Yuanyuan Wu, and Xiaoxiang Zhang as of July 25th, 2023 (#19): “… we analyze the impact of ESG disclosure on firm risk-taking within US companies. … the reduction in corporate risk-taking due to ESG disclosure mitigates excessive risk-taking rather than leading to risk avoidance“ (p. 26).

Impact investing research: Impact impact?

Impact impact? Missing the Impact in Impact Investing Research – A Systematic Review and Critical Reflection of the Literature by Deike Schlütter, Lena Schätzlein, Rüdiger Hahn, and Carolin Waldner as of July 6th, 2023: “Impact investing (II) aims to achieve intentional social impact in addition to financial return. … the growing academic literature on II is scattered across a variety of disciplines and topics, with inconsistencies in terminology and concepts and a paucity of theoretical explanations and frameworks. … Despite the fact that II aims to create a measurable societal impact, this impact of II, its raison d’être, is not scrutinized in the literature“ (abstract).

Stewardship overview: Investor Stewardship: The State of the Art and Future Prospects by Dionysia Katelouzou as of June 22nd, 2023 (#46): “Within less than fifteen years fifty-five soft-law stewardship codes have been developed across 23 jurisdictions on six continents and investor stewardship became the standard term of reference for the role of institutional investors in addressing not only corporate governance but also environmental and social issues. … Nevertheless, there is still a continuing lack of clarity or consensus over what regulators and investors deem to be a good investor steward. … Institutional investors acting as stewards are expected to exercise power and influence over their assets, on behalf of others, and for others. … Finally, I look at the future of investor stewardship, focusing specifically on two ongoing trends, that of green stewardship and disintermediated stewardship“ (abstract).

ESG engagement: Does Paying Passive Managers to Engage Improve ESG Performance? by Marco Becht, Julian R. Franks, Hideaki Miyajima and Kazunori Suzuki as of July 26th, 2023 (#283): “… the Japanese Government Pension Investment Fund (GPIF), the largest public pension fund in the world … gave its largest passive manager a remunerated mandate to improve the environmental (E), social (S) and governance (G) performance of portfolio companies. … engagement by the asset manager has resulted in improvements in some of the ESG scores for mid- and large cap companies; small-cap companies were rarely engaged. … we find evidence that GPIF’s portfolio tilt towards ESG indexes has created financial incentives to improve ESG scores” (abstract).

Career first? Exit or Voice? Divestment, Activism, and Corporate Social Responsibility by Victor Saint-Jean as of June 21st, 2023 (#80): “Using a classification framework based on US mutual funds’ portfolio holdings and votes on S-related shareholder proposals, I show that voice funds generally do better than exit funds when it comes to curtailing firms’ anti-social behavior. The exit strategy relies on the threat of lower stock prices and is effective only at firms with high CEO wealth-performance-sensitivity. Voice funds threaten directors’ reelection, and are thus more effective in general, especially when elections are approaching. Taken together, my results point to the career concerns of the leadership as driving pro-social change when shareholders demand it” (abstract).

No social premium: Green vs. Social Bond Premium by Mohamed Ben and Thierry Roncalli from Amundi as of May 21st, 2023 (#102): “Between 2019 and 2022, the greenium is about −3 bps on average, meaning that, all else being equal, investors are willing to forsake a small share of returns in exchange for environmental benefits. … For the social bond premium, we notice fragmented estimates of the premium in the secondary market. In the long run, the premium is close to zero and equal to −0.3 bps on average. … we notice that the social bond premium is not positively correlated with the greenium. … non-euro projects are subject to a higher premium“ (p. 26/27).

Article 9 segments: SFDR Article 9: Is it all about impact? by Lisa Scheitza and Timo Busch as of July 17th, 2023 (#235): “We investigate more than 1,000 investment funds that are classified under Article 9 of the EU Sustainable Finance Disclosure Regulation (SFDR). … while 60% of funds follow an impact-oriented investment strategy, we identify 40% that are not impact-related but rather pursue an Environment, Social, and Governance (ESG) investment strategy. Generally, we do not find significant differences in ESG scores and returns between ESG-related and impact-related funds. Yet, impact-related funds have higher SDG impact scores and higher management fees than ESG-related funds. Downgraded Article 9 funds, i.e., funds that changed SFDR status by January 2023, however, tend to follow less ambitious investment approaches and realize lower returns than funds that maintained their SFDR statuses“ (abstract). “ …. we find no significant differences in risk-adjusted returns between ESG-related investments and impact-related investments among Article 9 funds” (p. 16). My comment: My impact approach see Active or impact investing? – (

Other investment research

Asset allocation problem? Empirical evidence on the stock-bond correlation by Roderick Molenaar, Edouard Sénéchal, Laurens Swinkels, and Zhenping Wang as of July 26th, 2023 (#377): “Our historical data starting in 1875 indicates that a positive stock-bond correlation has been more common than a negative one, even though the latter has been observed mostly in the past two decades. Our overarching finding is that for the post-1952 period with independent central banks, a positive stock-bond correlation is observed during periods with high inflation and high real returns on Treasury bills. … Historical regimes with positive stock-bond correlation are associated with higher volatility risk of a 60/40 portfolio and lower Sharpe ratios“ (p. 25/26). My comment: My most-passive allocation approach see Microsoft Word – 230720 Das Soehnholz ESG und SDG Portfoliobuch


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Active ESG Share: Illustration by Julie McMurrie from Pixabay showing a satisfaction rating

Active ESG share: Researchpost #136

Active ESG share: 26x new research on SDG, climate automation, family firms, greenium and green liquidity, anti-ESG, ESG-ratings, diversity, sustainability standards, disclosure, ESG pay, taxes, impact investing, and financial education by Martijn Cremers and many more (#: SSRN downloads as of July 27th, 2023)

Ecological and social research: Active ESG share

SDG deficits: The Sustainable Development Goals Report Special edition by the United Nations as of July 10th, 2023: “At the midpoint on our way to 2030, the Sustainable Development Goals are in deep trouble. An assessment of the around 140 targets for which trend data is available shows that about half of these targets are moderately or severely off track; and over 30 per cent have either seen no movement or regressed below the 2015 baseline. Under current trends, 575 million people will still be living in extreme poverty in 2030, and only about one third of countries will meet the target to halve national poverty levels. Shockingly, the world is back at hunger levels not seen since 2005, and food prices remain higher in more countries than in the period 2015–2019. The way things are going, it will take 286 years to close gender gaps in legal protection and remove discriminatory laws. And in education, the impacts of years of underinvestment and learning losses are such that, by 2030, some 84 million children will be out of school and 300 million children or young people attending school will leave unable to read and write. … Carbon dioxide levels continue to rise – to a level not seen in 2 million years. At the current rate of progress, renewable energy sources will continue to account for a mere fraction of our energy supplies in 2030, some 660 million people will remain without electricity, and close to 2 billion people will continue to rely on polluting fuels and technologies for cooking. So much of our lives and health depend on nature, yet it could take another 25 years to halt deforestation, while vast numbers of species worldwide are threatened with extinction” (p. 4).

Climate automation: Labor Exposure to Climate Change and Capital Deepening by Zhanbing Xiao as of June 21st, 2023 (#31): “This paper looks into these risks and calls for more attention to the health issues of outdoor workers in the transition to a warmer era. … I find that high-exposure firms have higher capital-labor ratios, especially when their managers believe in climate change or when jobs are easy to automate. After experiencing shocks to physical (abnormally high temperatures) or regulatory (the adoption of the HIPS in California) risks, high-exposure firms switch to more capital-intensive production functions. …I also find that high-exposure firms respond to the shocks by innovating more, especially in technologies facilitating automation and reducing labor costs. … industry-wide evidence that labor exposure to climate change negatively affects job creation and workers’ earnings“ (p. 34/35).

Open or private data? Opening Up Big Data for Sustainability: What Role for Database Rights in the Fourth Industrial Revolution? by Guido Noto La Diega and Estelle Derclaye as of Nov. 8th, 2022 (#159): “… the real guardians of big data – the private corporations that are the key decision-makers in the 4IR (Sö: 4th Industrial Revolution) – are not doing enough to facilitate the sharing and re-use of data in the public interest, including the pursuit of climate justice. … While there may be instances where Intellectual Property (IP) reasons may justify some limitations in the access to and re-use of big data held by corporations, it is our view that, in general, IP should not be used to hinder re-use of data to pursue the SDGs. … First, we will illustrate the triple meaning of ‘data sustainability.’ Second, we will critically assess whether the database right (or ‘sui generis right’) can play a role in opening up corporate big data. Third, will imagine how a sustainable framework for sustainable data governance may look like. This focus is justified by the fact that the Database Directive, often accused of creating an unjustified monopoly on data, is in the process of being reformed by the yet-to-be-published Data Act” (abstract).

Clean family firms: Family Ownership and Carbon Emissions by Marcin Borsuk, Nicolas Eugster, Paul-Olivier Klein, and Oskar Kowalewski as of April 13th, 2023 (#159): “Family firms exhibit lower carbon emissions both direct and indirect when compared to non-family firms, suggesting a higher commitment to environmental protection by family owners. When using the 2015 Paris Agreement as a quasi-exogeneous shock, results show that family firms reacted more to the Agreement and recorded a further decline in their emissions. … Firms directly managed by the family experience a further reduction in their emissions. On the contrary, family firms with hired CEOs see an increase in emissions. We show that family firms record a higher level of R&D expenses, suggesting that they invest more in new technologies, which might contribute to reducing their environmental footprint. … Compared with non-family firms, family firms commit less to a reduction in their carbon emissions and display lower ESG scores“ (p. 26).

Green productivity: Environmental Management, Environmental Innovation, and Productivity Growth: A Global Firm-Level Investigation by Ruohan Wu as of June 18th, 2023 (#5): “… overall, environmental management and innovation both increase firm productivity but substitute for each other’s positive effects. Environmental management significantly increases productivity of firms that do not innovate, while environmental innovation significantly increases productivity of those without environmental management” (p. 30).

Good governance: Governance, Equity Issuance and Cash: New International Evidence by Sadok El Ghoul, Omrane Guedhami, Hyunseok Kim, and Jungwon Suh as of May 9th, 2023 (#18): “… we hypothesize that equity issuance is more frequent and growth-inducing under strong governance than under weak governance. We also hypothesize that cash added to or held by equity issuers creates greater value for shareholders under strong governance than under weak governance. Our empirical results support these hypotheses. Most remarkably, under weak governance, cash assets not only fail to create but destroy value for shareholders if they are in the possession of equity issuers instead of non-equity-issuers. Overall, strong institutions help small growth firms unlock their value through active equity issuance. On the flip side, weak institutions render an economy’s capital allocation inefficient by hindering value-creating equity issuance” (abstract).

ESG Ratings Reearch: Active ESG Share

MSCI et al. criticism? ESG rating agency incentives by Suhas A. Sridharan, Yifan Yan, and Teri Lombardi Yohn as of June 19th, 2023 (#96): “First, we report that firms with higher (lower) stock returns receive higher (lower) ratings from a rater with high index incentives relative to ratings from a rater with low index incentives. … Second, the rater with high index incentives provides higher ESG ratings for smaller firms with less ESG disclosure. … Third, we show that ESG index inclusion decisions are associated with stock returns. Collectively, our findings suggest that ESG data providers’ index licensing incentives influence their ESG ratings“ (p. 22).

Anti-ESG ESG: Conflicting Objectives of ESG Funds: Evidence from Proxy Voting by Tao Li, S. Lakshmi Naaraayanan, and Kunal Sachdeva as of February 6th, 2023 (#840): “ESG funds reveal their preference for superior returns by voting against E&S proposals when it is uncertain whether these proposals will pass. … active ESG funds and non-ESG focused institutions are more likely to cast votes against E&S proposals” (p. 26).

Non-ESG ESG? What Does ESG Investing Mean and Does It Matter Yet? by Abed El Karim Farroukh, Jarrad Harford, and David Shin as of June 26th, 2023 (#77): “… even ESG-oriented funds often vote against shareholder proposals related to E&S issues. When considering portfolio holdings and turnover, firms added to portfolios have better ESG scores than those dropped for both ESG and non-ESG funds. Nevertheless, portfolio additions and deletions do not improve fund scores on a value-weighted basis, and those scores closely track the ESG score of a value weighed portfolio of all public firms. This suggests that while investment filters based on ESG criteria may exist, they rarely bind. … we find that material E&S proposals receive more support, but only a small proportion (4%) of these proposals actually pass. Lastly, unconditional support from funds associated with families that have signed the United Nations Principles for Responsible Investing (UN PRI) would lead to a significant change in the voting outcomes of numerous E&S proposals. Overall, our findings suggest that the effects of ESG investing are growing but remain relatively limited. E&S proposals rarely pass, and the ESG scores of funds declaring ESG preferences are not that different from the rest of funds“ (p. 26).

ESG divergence: ESG Ratings: Disagreement across Providers and Effects on Stock Returns by Giulio Anselmi and Giovanni Petrella as of Jan. 23rd, 2023 (#237): “This paper examines the ESG rating assigned by two providers, Refinitiv and Bloomberg, to companies listed in Europe and the United States in the period 2010-2020. … Companies with higher ESG scores have the following characteristics: larger size, lower credit risk, and lower equity returns. The ESG dimension does not affect stock returns, once risk factors have been taken into account. The divergence of opinions across rating providers is stable in Europe and increasing in the US. As for the individual components (E, S and G), in both markets we observe a wide and constant divergence of opinions for governance as well as a growing divergence over time for the social component“ (abstract).

Active ESG share: The complex materiality of ESG ratings: Evidence from actively managed ESG funds by K.J. Martijn Cremers, Timothy B. Riley, and Rafael Zambrana as of July 21st,2023 (#1440): “Our primary contribution is to introduce a novel metric of the importance of ESG information in portfolio construction, Active ESG Share, which measures how different the full distribution of the stock-level ESG ratings in a fund’s portfolio is from the distribution in the fund’s benchmark … We find no predictive relation between Active ESG Share and performance among non-ESG funds and a strong, positive predictive relation between Active ESG Share and performance among ESG funds” (p. 41). My comment: My portfolios are managed independently from benchmarks and typically show significant positive active ESG shares, see e.g. Active or impact investing? – (

Responsible investment research: Active ESG share

Stupid ban? Do Political Anti-ESG Sanctions Have Any Economic Substance? The Case of Texas Law Mandating Divestment from ESG Asset Management Companies by Shivaram Rajgopal, Anup Srivastava, and Rong Zhao as of March 16th,2023 (#303): “Politicians in Texas claim that the ban on ESG-heavy asset management firms would penalize companies that potentially harm the state’s interest by boycotting the energy sector. We find little economic substance behind such claims or the reasoning for their ban. Banned funds are largely indexers with portfolio tilts toward information technology and away from energy stocks. Importantly, banned funds carry significant stakes in energy stocks and hold 61% of the energy stocks held by the control sample of funds. The risk and return characteristics of banned funds are indistinguishable from those of control funds. A shift from banned funds to control funds is unlikely to result in a large shift of retirement investments toward the energy sector. The Texas ban, and similar follow-up actions by Republican governors and senior officials, appear to lack significant economic substance“ (p. 23).

Better proactive: Gender Inequality, Social Movement, and Company Actions: How Do Wall Street and Main Street React? by Angelyn Fairchild, Olga Hawn, Ruth Aguilera, Anatoli Colicevm and Yakov Bart as of May 25th,2023 (#44): “We analyze reactions to company actions among two stakeholder groups, “Wall Street” (investors) and “Main Street” (the general public and consumers). … We identify 632 gender-related company actions and uncover that Wall Street and Main Street are surprisingly aligned in their negative reaction to companies’ symbolic-reactive actions, as evidenced by negative cumulative abnormal returns, more negative social media and reduced consumer perceptions of brand equity” (abstract)

Less risk? Socially Responsible Investment: The Role of Narrow Framing by Yiting Chen and Yeow Hwee Chua as of Dec. 8th, 2022 (#54): “Through our experiment, subjects allocate endowments among one risk-free asset and two risky assets. … Relative to the control condition, this risky asset yields additional payments for subjects themselves in one treatment, and for charities in the remaining two treatments. Our results show that additional payments for oneself encourage risk taking behavior and trigger rebalancing across different risky assets. However, payments for charities solely induce rebalancing“ (abstract). My comment: This may explain the typically lower risk I have seen in my responsible portfolios and in some research regarding responsible investments.

Greenium model: Asset Pricing with Disagreement about Climate Risks by Thomas Lontzek, Walter Pohl, Karl Schmedders, Marco Thalhammer, and Ole Wilms as of July 19th, 2023 (#113): “We present an asset-pricing model for the analysis of climate financial risks. … In our model, as long as the global temperature is below the temperature threshold of a tipping point, climate-induced disasters cannot occur. Once the global temperature crosses that threshold, disasters become increasingly likely. The economy is populated by two types of investor with divergent beliefs about climate change. Green investors believe that the disaster probability rises considerably faster than brown investors do. … The model simultaneously explains several empirical findings that have recently been documented in the literature. … according to our model past performance is not a good predictor of future performance. While realized returns of green stocks have gone up in response to negative climate news, expected returns have gone down simultaneously. In the absence of further exogenous shocks and climate-induced disasters, our model predicts higher future returns for brown stocks. However, if temperatures continue to rise and approach the tipping point threshold, the potential benefits of investments to slow down climate change increase significantly. In this scenario, our model predicts a significant increase in the market share of green investors and the carbon premium“ (p. 39/40).

More green liquidity: Unveiling the Liquidity Greenium: Exploring Patterns in the Liquidity of Green versus Conventional Bonds by Annalisa Molino, Lorenzo Prosperi, and Lea Zicchino as of July 16th, 2023 (#14): “… we investigate the relationship between liquidity and green bond label using a sample of green bonds issued globally. … our findings suggest that green bonds are more liquid than comparable ordinary bonds. … The difference is large and statistically significant for bonds issued by governments or supranationals, while it is not significantly different from zero for corporates, unless the company operates in the energy sector. … companies that certify their commitment to use the proceeds for green projects or enjoy a strong environmental reputation can also benefit from higher liquidity in the secondary market. … the liquidity of ECB-eligible green bonds improves relative to similar conventional bonds, possibly because they become more attractive to banks with access to ECB funding. Finally, we find that the liquidity of conventional bonds issued by green bond issuers improves significantly in the one-year period following the green announcement“ (p. 18/19).

Impact investment and shareholder engagement: Active ESG share

Standard overload: Penalty Zones in International Sustainability Standards: Where Improved Sustainability Doesn’t Pay by Nicole Darnall, Konstantinos Iatridis, Effie Kesidou, and Annie Snelson-Powell as of June 19th, 2023 (#17): “International sustainability standards (ISSs), such as the ISO standards, the United Nations Global Compact, and the Global Reporting Initiative framework, are externally certified process requirements or specifications that are designed to improve firms’ sustainability” (p. 1). “Adopting an International Sustainability Standard (ISS) helps firms improve their sustainability performance. It also acts as a credible market “signal” that legitimizes firms’ latent sustainability practices while improving their market value. … However, beyond a tipping point of 2 ISSs, firms’ market gains decline, even though their sustainability performance continues to improve until a tipping point of 3 ISSs“ (abstract).

Good ESG disclosure (1): Mandatory ESG Disclosure, Information Asymmetry, and Litigation Risk: Evidence from Initial Public Offerings by Thomas J. Boulton as of April 7th, 2023 (#168): “If ESG disclosure improves the information environment or reduces litigation risk for IPO firms, IPOs should be underpriced less when ESG disclosure is mandatory. I test this prediction in a sample of 15,456 IPOs issued in 36 countries between 1998 and 2018. … I find underpricing is lower for IPOs issued in countries that mandate ESG disclosure. From an economic perspective, my baseline results indicate that first-day returns are 15.9 percentage points lower in the presence of an ESG disclosure mandate. The typical IPO firm raises approximately 105.93 million USD in their IPO. Thus, the implied impact of an ESG disclosure mandate is an additional 16.8 million in proceeds. … I find that their impact on underpricing is stronger in countries with lower-quality disclosure environments. … a significant benefit of ESG disclosure mandates is that they lower the cost of capital for the young, high-growth firms that issue IPOs” (p. 27-29).

Good ESG disclosure (2): Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different? by Amir Gholami, John Sands, and Habib Ur Rahman as of July 18th, 2023 (#24): “The results show that the overall association between corporate ESG performance disclosure and companies’ profitability is strong and positive across all industry sectors. … All corporate ESG performance disclosure elements (ENV, SOC and GOV) are positively associated with corporate profitability for companies that operate in the financial industry. Remarkably, for companies operating in non-financial sectors, except for corporate governance, there is no significant association between corporate environmental and social elements and a company’s profitability“ (p. 12).

Climate pay effects: Climate Regulatory Risks and Executive Compensation: Evidence from U.S. State-Level SCAP Finalization by Qiyang He, Justin Hung Nguyen, Buhui Qiu, and Bohui Zhang as of April 13th, 2023 (#131): “Different state governments in the U.S. have begun to adopt climate action plans, policies, and regulations to prepare for and combat the significant threats of climate change. The finalization of these climate action plans, policies, and regulations in a state results in an adaptation plan— the SCAP. … we find that SCAP finalization leads residents in that state to pay more attention to climate-related topics. Also, it leads firms headquartered in that state to have higher perceived climate regulatory risks … Further analyses show a reduction of total CEO pay of about 5% for treated firms headquartered in the SCAP-adopting state relative to control firms headquartered in non-adopting states. The negative treatment effect also holds for non-CEO executive compensation. … the shareholders of treated firms reduce their CEO’s profit-chasing and risk-taking incentives, probably because these activities will likely incur more future environmental compliance costs. Instead, CEO pay is more likely to be linked to corporate environmental performance, that is, the treated firms adopt environmental contracting to redirect CEO incentives from financial gains to environmental responsibility” (p. 27/28).

Stakeholder issues: Corporate Tax Disclosure by Jeffrey L. Hoopes, Leslie Robinson, and Joel Slemrod as of July 17th, 2023 (#47): “Policies that require, or recommend, disclosure of corporate tax information are becoming more common throughout the world, as are examples of tax-related information increasingly influencing public policy and perceptions. In addition, companies are increasing the voluntary provision of tax-related information. We describe those trends and place them within a taxonomy of public and private tax disclosure. We then review the academic literature on corporate tax disclosures and discuss what is known about their effects. One key takeaway is the paucity of evidence that many tax disclosures mandated with the aim of increasing tax revenue have produced additional revenue. We highlight many crucial unanswered questions …” (abstract). My comment: Nevertheless I suggest to focus on tax disclosure/payment regarding community/government stakeholder engagement see Shareholder engagement: 21 science based theses and an action plan – ( rather than on donations or other indicators.

Impact investment status quo: Impact Investing by Ayako Yasuda as of July 23rd, 2023 (#62): “Impact investing is a class of investments that are designed to meet the non-pecuniary preferences of investors (or beneficiaries) and aim to generate a positive externality actively and causally through their ownership and/or governance of the companies they invest in. Impact investing emerged as a new branch of responsible, sustainable or ESG (environmental, social, and governance) investment universe in the last few decades. In this article, we provide a definition of impact investing, review the extant literature, and discuss suggestions for future research” (abstract).

Political engagement: Collaborative investor engagement with policymakers: Changing the rules of the game? by Camila Yamahaki and Catherine Marchewitz as of June 25th, 2023 (#44): “A growing number of investors are engaging with policymakers on environmental, social and governance (ESG) issues, but little academic research exists on investor policy engagement. … We identify a trend that investors engage with sovereigns to fulfil their fiduciary duty, improve investment risk management, and create an enabling environment for sustainable investments. We encourage future research to further investigate these research propositions and to analyze potential conflicts of interest arising from policy engagement in emerging market jurisdictions” (abstract).

General investment research

Good diversity: Institutional Investors and Echo Chambers: Evidence from Social Media Connections and Political Ideologies by Nicholas Guest, Brady Twedt, and Melina Murren Vosse as of June 26th, 2023 (#62): “… we measure the ideological diversity of institutional investors’ surroundings using the social media connections and political beliefs of the communities where they reside” (p. 24/25). “Finally, firms whose investors have more likeminded networks exhibit substantially lower future returns. Overall, our results suggest that connections to people with diverse beliefs and information sets can improve the financial decision making of more sophisticated investors, leading to more efficient markets (abstract).

Good education: The education premium in returns to wealth by Elisa Castagno, Raffaele Corvino, and Francesco Ruggiero as of July 6th, 2023 (#17): “… we define as education premium the extra-returns to wealth earned by college-graduated individuals compared to their non-college graduated peers. We find that the education premium is sizeable … We find that an important fraction of the premium is due to the higher propensity for risk-taking and investing in the stock market of better educated individuals … we document a significantly higher propensity for well-diversified portfolios as well as a higher persistence in stock market participation over time of better educated individuals, and we show that both mechanisms positively and significantly contribute to the education premium” (p. 25).

Finance-Machines? Financial Machine Learning by Bryan T. Kelly and Dacheng Xiu as of July 26th, 2023 (#12): “We emphasize the areas that have received the most research attention to date, including return prediction, factor models of risk and return, stochastic discount factors, and portfolio choice. Unfortunately, the scope of this survey has forced us to limit or omit coverage of some important financial machine learning topics. One such omitted topic that benefits from machine learning methods is risk modeling. … Closely related to risk modeling is the topic of derivatives pricing. … machine learning is making inroads in other fields such as corporate finance, entrepreneurship, household finance, and real estate“ (p. 132/133). My comment: I do not expect too much from financial maschine learning. Simple approaches to investing often work better than pseudo-optimised ones, see e.g. Pseudo-optimierte besser durch robuste Geldanlagen ersetzen – Responsible Investment Research Blog (


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ESG sales impact picture showing fair trad from suju-foto from Pixabay

ESG sales impact: Researchpost #135

ESG sales impact: 11x new research on ESG sales effects, governance knowledge deficits and policies, corporate purpose measurement, CSR returns, impact frameworks, bad asset managers, financial advice AI and Bitcoin by Christina Bannier, Lars Hornuf, Judith Stroehle and many more (#: SSRN downloads on July 19th, 2023)

Social and ecological research: ESG sales impact

ESG sales impact (1): Do Consumers Care About ESG? Evidence from Barcode-Level Sales Data by Jean-Marie Meier, Henri Servaes, Jiaying Wei, and Steven Chong Xiao as of July 11th, 2023 (#266): “… we find that higher E&S ratings positively affect subsequent local product sales. The positive effect of E&S ratings on local product sales is stronger in markets with more Democratic voters and with a higher average income. … revenue also declines after the release of negative E&S news. … we find a significant increase in the sensitivity of local retail sales to firm E&S performance after (Sö: natural and environmental) … disaster events for counties located closer to the events“ (p. 23).

ESG sales impact (2): How Does ESG Shape Consumption? by Joel F. Houston, Chen Lin, Hongyu Shan, and Mo Shen as of June 21st, 2023 (#280): “Our study explores the effects of more than 1600 negative events captured from the RepRisk database, on 150 million point-of-sale consumption observations … Our baseline findings show that the average negative event generates a 5 – 10 % decrease in sales for the affected product in the six months following the event. … we find that there is considerable heterogeneity in consumer responses, and that the average response varies considerably depending on consumer demographics and the nature of the ESG-related reputation shock“ (p. 23/24).

Governance doubts: Seven Gaping Holes in Our Knowledge of Corporate Governance by David F. Larcker and Brian Tayan as of May 3rd, 2023 (741): “… we highlight significant “holes” in our knowledge of corporate governance. … While the concepts we review are not exhaustive, each is critical to our understanding of the proper functioning of governance, including board oversight, the recruitment of CEO talent, the size and structure of CEO pay, and the advancement of shareholder and stakeholder welfare” (abstract).

Purpose first: Sustainable Corporate Governance. An Overview and an Assessment by Steen Thomsen as of June 8th, 2023 (#144): “This paper outlines what could be some of the key elements of sustainable corporate governance 2.0 including company law (director liability), long-term ownership, ESG investment, company purpose, sustainability committees, sustainability competencies, ESG incentives, climate plans, climate risk management, sustainability reporting, and internal carbon pricing. … the current fixation on regulation and ESG is counterproductive and suggest that a better way forward is to start with company purpose and to adjust corporate governance accordingly. Using this approach, I outline a tentative roadmap for sustainable corporate governance 2.0“ (abstract). My comment: I suggest a Roadmap for corporate and stakeholder engagement here Shareholder engagement: 21 science based theses and an action plan – (

Responsible investment research: ESG sales impact

Purpose measurement: Through the looking glass: tying performance and materiality to corporate purpose by Judith C. Stroehle, Kazbi Soonawalla, and Marcel Metzner as of June 7th, 2023 (#18): “The performance principles of corporate purpose suggest that measurement needs to reflect whether companies take into account the growing significance of workers, societies and natural assets both inside and outside a company’s legal boundaries … Purpose without measurement runs the risk of being merely a mirage …. we show that it is not impossible to establish measurement of purpose, in particular when performance in relation to purpose is linked to existing frameworks of measurement and notions of single and double materiality“ (p. 30/31).

Irresponsible returns? The risk‑return tradeoff: are sustainable investors compensated adequately? by Christina E. Bannier, Yannik Bofinger, and Björn Rock as of April 27th, 2023: “… our results show that low CSR (Sö: Corporate Social Responsibility) is … associated with higher portfolio returns. Interestingly, these higher returns even overcompensate the investor for the amount of risk she has to bear. … from an investor’s perspective, the ‘optimal’ return-to-risk ratio is achieved for a portfolio that invests in the lowest CSR-rated firms” (p. 169/170). My comment see ESG Transition Bullshit? – Responsible Investment Research Blog (

Impact frames: How impact investing firms use reference frameworks to manage their impact performance: An industry-level study by Syrus M. Islam and Ahsan Habib as of July 10th, 2023 (#8): “… we show how impact investing firms use various reference frameworks (e.g., IFC Performance Standards, Impact Management Project framework, UN Sustainable Development Goals) to manage their impact performance throughout the investment lifecycle. … We also discuss … how reference frameworks used in performance management in the impact investing industry differ from those used in some other industries” (abstract). My comment: I use the SDG-Framework see Active or impact investing? – (

Bad asset managers? Who’s managing your future? An assessment of asset managers’ climate action by Lara Cuvelier at al. from Reclaim Finance as of June 28th, 2023: “At the parent (or group) level, the 30 asset managers included in this report invested at least $3.5 billion in 74 newly issued bond securities from companies actively engaged in fossil fuel expansion. … The 30 asset managers analyzed held US$597 bn in bonds and shares in the biggest fossil fuel developers as of January 2023. … the majority of these 30 major asset managers do not currently sanction polluting companies for failing to take the right steps for the climate …After five years of intensive dialogue by investors from the CA100+ initiative, only 20% of the companies from the coal mining and oil and gas sectors that have been engaged have even set an ambition to achieve net zero emissions by 2050. … only two of the companies are working to decarbonize their capital expenditures” (p. 7).

General investment research

AI & investments: Executives vs. Chatbots: Unmasking Insights through Human-AI Differences in Earnings Conference Q&A by John (Jianqiu) Bai, Nicole Boyson, Yi Cao, Miao Liu, and Chi Wan as of June 22th, 2023 (#125): “… we use earnings conference calls as a setting and introduce a novel measure of information content (Human Machine Differences, HAID) by exploiting the discrepancy between answers to questions at earnings conference calls provided by actual corporate CFOs and CEOs and those given by several context-preserving Large Language Models (LLM) including ChatGPT. … HAID has significant predictive power for the absolute cumulative abnormal return around earnings call, stock liquidity, earnings growth, analyst forecast accuracy, as well as management’s propensity to provide guidance. … Overall, we find that HAID provides a unique and previously unidentified source and methodology to help investors uncover new information content” (p. 26).

LLM Advice: Using GPT-4 for Financial Advice by Christian Fieberg, Lars Hornuf, David J. Streich as of July 6th, 2023 (#250): “GPT-4 can provide financial advice which is on par with the advice provided by professional low-cost automated financial advisory services. While the portfolios suggested by GPT-4 displayed considerable home bias, its historical risk-return profiles are at least on par with … benchmark portfolios. … To investigate GPT-4’s ability to serve clients’ sustainability preferences (ESMA, 2018), we added sustainability preferences to some of our investor profiles. The portfolios suggested for those profiles included ESG-focused versions of the portfolio components such as the iShares ESG Aware MSCI USA ETF. … risk profiling … can currently not be handled by GPT-4. … GPT-4 cannot offer assistance in implementing the portfolio (opening an account, purchasing and rebalancing portfolio components)“ (p. 11/12).

Bitcoin infects: Is Bitcoin Exciting? A Study of Bitcoin’s Spillover Effects by Minhao Leong and Simon Kwok as of July 13th, 2023 (#16): “… we detect the presence of positive jump spillovers from Bitcoin to risk assets (U.S. equities, developed market equities and emerging market equities) and negative jump spillovers from Bitcoin to defensive assets (gold and emerging market bonds) after COVID-19. … we also find evidence of jump and diffusion spillovers from Bitcoin to U.S. equity sectors, particularly to the financials, technology, consumer discretionary and communication services sectors. … We show that over time, the proportion of blockchain and cryptocurrency exposed U.S. companies (BCEs) has increased in recent years, from 19% during the pre-pandemic period to 28.8%. Specifically, the adoption of blockchain and cryptocurrency related technologies by mega-cap names such as Microsoft (Technology), Amazon (Consumer Discretionary), Alphabet (Communication Services) and Tesla (Consumer Discretionary) has increased the Bitcoin exposures of equity market and sector indices“ (p. 41/42).


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GHG math illustration with CO2 picture from Gerd Altmann from Pixabay

GHG math issues – Researchpost #134

GHG math: 10x new research on supply chains, oil and gas companies, EU taxonomy, green employees, green technologies, brown dividends, shareholder wealth and stock trading by Henrik Bessembinder, Andreas Hoepner, Christian Klein, Frank Schiemann and many more  (#: SSRN downloads on July 13th, 2023)

Ecological and social research: GHG math

Complex supplies: How Far Goods Travel: Global Transport and Supply Chains from 1965-2020 by Sharat Ganapati and Woan Foong Wong as of May 9th, 2023 (#94): “Transportation usage per unit of real output has more than doubled as costs decreased by a third. Participation of emerging economies in world trade and longer-distance trade between countries contribute to this usage increase, thereby encouraging longer supply chains. We discuss technological advances over this period, and their interactions with endogenous responses from transportation costs and supply chain linkages. Supply chains involving more countries and longer distances are reflective of reliable and efficient transportation, but are also more exposed to disruptions, highlighting the importance of considering the interconnectedness of transportation and supply chains in policymaking and future work” (abstract).

GHG math problems: Abominable greenhouse gas bookkeeping casts serious doubts on climate intentions of oil and gas companies by Sergio Garcia-Vega, Andreas G. F. Hoepner, Joeri Rogelj and Frank Schiemann as of May 23rd, 2023 (#136): “In our analysis of the Scope 1 emissions reported by companies from the Oil & Gas industry and their respective breakdowns, we found a considerably large amount of misreporting. First, on average, we find that 38.9% of the companies do not add up to the sum of Scope 1 emissions reported. …. in 15.5% of the cases, the sum of the breakdowns exceeds the total Scope 1 emissions reported by the company. … Scope 1 emissions only constitute a small, yet very easiest-to-report fraction of the GHG emissions O&G companies …“ (p. 10/11).

Greenwashing risk: Emissions gaming? A gap in the GHG Protocol may be facilitating gaming in accounting of GHG emissions by David Aikman, Yao Dong, Evangelos Drellias, Swarali Havaldar, Marc Lepere, and Matthias Nilsson as of June 2023: “The framework for calculating firms’ greenhouse gas emissions via the GHG Protocol is highly complex. It involves the collection and management of large datasets on companies’ activities, and both scientific and estimation uncertainty in translating such activities into emissions estimates. Moreover, there are substantial degrees of freedom created by the existence of multiple calculation methods and emission factor databases, which deliver markedly different emissions estimates for the same underlying activity data inputs. … If gaming opportunities are fully exploited, actual emissions for some firms could be several times larger than those currently reported“ (abstract).

German taxonomy gap: Let’s talk numbers: EU Taxonomy reporting by German companies by Jannis Luca Arnold, Thomas Cauthorn, Julia Eckert, Christian Klein and Sebastian Rink as of June 28th, 2023: “On average, 26 percent EU Taxonomy-eligible turnover is reported. … the Consumer Discretionary, Industrial, Real Estate, and Utility industries have substantially higher EU Taxonomy-eligible turnover, CapEx and OpEx. … Real Estate has the highest average EU Taxonomy-eligible turnover at 93 percent. In contrast, Health Care and Consumer Staples have zero percent EU Taxonomy-eligible turnover. The Utility industry has an average EU Taxonomy-eligible turnover of 26 percent. However, Utilities have the highest EU Taxonomy-aligned turnover (15 percent), CapEx (68 percent) and OpEx (34 percent). On average, three percent EU Taxonomy-aligned turnover (of eligible turnover) is reported“ (p. 42).

Green employees: Green Behavior: Factors Influencing Behavioral Intention and Actual Environmental Behavior of Employees in the Financial Service Sector by Joachim P. Hasebrook, Leonie Michalak, Anna Wessels, Sabine Koenig, Stefan Spierling and Stefan Kirmsse  as of August 30th, 2022: “A smartphone friendly online survey concerning the intention to improve and show ‘green behavior’ was sent to 1200 professionals working in 17 locations in 13 European countries, 470 of which responded to the survey (39%). From these participants, 20% are convinced of the need to act in a “green” manner, and only 5% are hardly accessible. Monetary benefits combined with social motives contribute to sustainable living, whereas financial benefits alone actually hinder it“ (abstract). My comment: Companies and investors should try to leverage the interest of employees in ESG. My respective stakeholder engagement proposal see Shareholder engagement: 21 science based theses and an action plan – (

Responsible investment research: GHG math

11 green key technologies: Delivering transformative impact from US green bank financing by McKinsey as of April 20th, 2023: “To reach net zero by 2050, the United States could need an estimated $27 trillion in climate investment. … This report focuses specifically on the estimated need for and impact of investment in 11 key technologies across three themes—household and community decarbonization, business decarbonization, and energy system transformation. Aiding these particular investments could advance the GHGRF’s (Sö: Greenhouse Gas Reduction Fund) dual goals of reducing emissions and benefiting disadvantaged communities while also fulfilling its mission to provide “additionality” through investments that would not have occurred without its funding” (p. 4).

Brown dividends: “Brown” Risk or “Green” Opportunity? The dynamic pricing of climate transition risk on global financial markets by Philip Fliegel as of July 13th, 2023 (#8): “I utilize the TRBC business classification to categorize companies in three climate sensitive sectors into high/low-risk portfolios based on the climate transition risk exposure of their technologies. … My results show that green stocks produce a highly significant double-digit annual alpha, especially in the 7 years following the Paris Agreement. This is well above all previous estimates and might be explained by my proposed methodology which can identify brown and green “pure-plays” in the most climate sensitive economic sectors. … The return expectation today is very different from 2013 … My dividend yield findings indicate that the expect payouts for brown portfolios today is indeed substantially higher compared to green portfolios“ (p. 23). My comment: Shouldn’t brown companies invest in green transition instead of distributing dividends? See ESG Transition Bullshit? – Responsible Investment Research Blog (

Supplier GHG math: Quantifying Supply Chain ESG Risks: A Flexible Framework by Alejandro Gaba, Toby Warburton, and Hao Yin from State Street as of July 13th, 2023 (#4): “.., the calculation of Scope 3 emissions is difficult and costly. … we propose a simple and intuitive approach to calculating the emissions resulting from a company’s base of suppliers. … Empirical tests suggest that the proposed metric makes a statistically significant contribution in explaining the outputs of conventional approaches, in addition to those from Scope 1 and Scope 2 measures. Furthermore, our model offers a flexible framework for evaluating other types of ESG risks embedded in a firm’s value chain” (Abstract). My comment: 2 of my five engagement focus topics are Scope 3 GHG emissions and supplier ESG evaluations, see Shareholder engagement: 21 science based theses and an action plan – (

Traditional investment research

Few big winners: Shareholder Wealth Enhancement, 1926 to 2022 by Hendrik Bessembinder as of June 18th, 2023 (#636):  “Investments in publicly-listed U.S. stocks enhanced shareholder wealth by more than $55.1 trillion in aggregate during the 1926 to 2022 period, even while investments in the majority (58.6%) of the 28,114 individual stocks led to reduced rather than increased shareholder wealth. The degree to which wealth enhancement is concentrated in relatively few stocks has increased over time: for example, the number of high-performing firms that explain half of the net wealth creation since 1926 decreased from ninety as of 2016 to eighty-three as of 2019 and to seventy-two as of 2022. I identify the firms with both the largest enhancements and largest reductions in shareholder wealth since 1926 and during more recent intervals” (abstract).

Too frequent info: Alert for Alerts: How Investment Price Tracking Alerts Affect Retail Investors by Che-Wei Liu, Yanzhen Chen, and Ming-Hui Wen as of June 5th, 2023 (#97): “… we reveal that price tracking alerts, which provide convenient access to price data and cost-effective investment monitoring, lead to increased trading activity, suboptimal market timing, and diminished investment returns. Furthermore, our findings suggest that the availability of such investment management tools intensifies overconfidence bias and magnifies the disadvantage of inadequate financial literacy“ (p. 35).


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Engagement washing is illustrated with a money laundering wash maschine with a picture from mohamed hassan from pixabay

No engagement-washing! Opinion-Post #207

Engagement-washing as a term, according to my research, was first used by Kunal Desai in an interesting study in early 2022 (see Active-Engagement-thought-piece-final-2.pdf ( Engagement-washing means pretending that shareholder engagement can create a significant positive real-world impact when it probably can’t. That is different from impact-washing which typically is used to describe overambitious product marketing claims to make the world better.

Impact investing and engagement-washing

Impact investing is clearly on the rise. With impact investing, investors want to improve the world through their investments in equity capital or through credits. Impact investing with secondary-market listed equities or bonds is especially difficult. With those products, one security holder buys the security from another one. With such a transaction, issuers of the securities do not receive any additional funds. Therefore, providers of listed products which want to create impact typically use shareholder voting and shareholder engagement to change the issuers of the securities they are invested in.

Limitation of shareholder voting

Shareholder voting is typically only possible at annual shareholder meetings. Votes can only be used regarding the proposals on the agenda. In most cases, corporate management proposals are supported by the majority of votes. Investors can try to put own proposals on the agenda, but even the largest shareholders alone typically do not have enough votes to get them through.

Shareholder (or bondholder) engagement can be exercised at any time and regarding every topic. If investors can convince the top management of companies to adopt their proposals, they may have impact.

So far, so good. But the reality may not be that simple (data see Kunal Desais paper which refers to ESG Shareholder Engagement and Downside Risk by Andreas G. F. Hoepner, Ioannis Oikonomou, Zacharias Sautner, Laura T. Starks, Xiaoyan Zhou :: SSRN):

7 limitations of ecological and social shareholder engagement

  1. Although engagement becomes more popular, the majority of investors most likely does not engage at all.
  2. Even if investor engage, engagements typically are undertaken only for a minority of investments. That is not surprising, because most institutional investors own very many securities and only have limited resources for engagement.
  3. The majority of engagements involves only one interaction with the targeted companies. Since changes at companies typically take some time, one interaction does not seem enough to change much.
  4. Governance topics typically dominate engagements whereas impact-relevant environmental and social topics are the minority of topics addressed during engagements.
  5. ESG-ratings cover dozens if not hundreds of topics. Engagement typically only focus on one or very few topics. Even very well managed companies have many and sometimes also huge improvement potential in several social and ecological issues. The typical share of actual shareholder engagement topics compared to potentially relevant social and ecological engagement topics therefore is very low.
  6. It is very unclear how many engagements are successful since so far there is no good system to measure engagement success. If anything, shareholders measure engagement activity and not success. Often, marketing only repeats the same case study of a successful corporate engagement over and over. Shareholders for Change (see SfC-ENGAGEMENT-Report2022-1.pdf ( page 6) proposes an evaluation scheme but it does not allow to quantity the aggregate success of shareholder engagements.
  7. Mostly, companies do not state clearly what the consequences are, when their engagements are not successful. I assume that there are no divestments or even reductions in investments after most unsuccessful engagements. The reason is the low openness to divestments and benchmark deviations of institutional investors. Most try to stay very close to their selected benchmarks, even though divestments typically would reduce their portfolio diversification only marginally.

Conclusion: No engagement-washing but investing as good as you can

Conclusion: Social and ecological shareholder engagement is the most important tool to create impact with listed companies. But investors should not pretend to be able to significantly change the engaged target companies. Calling listed equity or bond funds “impact” funds does not sound right to me (impact-aligned is somewhat better, though). And reliance on investors to change listed companies is insufficient.

Engagement-washing seems to be a real risk which, if revealed, would hurt the “washer” but also potentially the whole segment of responsible investments. Investors nevertheless should invest as responsibly as possible. They should also try to engage as much as they can afford to. And that should include engagements with industry associations, NGOs, politicians etc. to advance responsible investing in general.

Further reading regarding engagement-washing

Shareholder engagement: 21 science based theses and an action plan – ( The 21 theses already contain many of my arguments above and show my engagement topics which include leveraged or stakeholder engagement approaches. The article also refers to additional relevant research papers.

Stakeholder engagement and ESG (Special Edition Researchposting 115) – Responsible Investment Research Blog ( Current research on shareholder ESG engagement

Active or impact investing? – ( Explains my engagement approach with a 100% engagement target for invested companies

Divestments bewirken mehr als Stimmrechtsausübungen oder Engagement | SpringerLink: approx. 20 pages with long literature list

ESG gut: % Zeichen Bild von Geralt von Pixabay als Illustration

ESG gut: 1. Halbjahr gut für ESG- und schlecht für SDG-Portfolios

ESG gut: Vereinfacht zusammengefasst haben meine nachhaltigen Portfolios im ersten Halbjahr 2023 ähnlich rentiert wie vergleichbare traditionelle aktiv gemanagte Fonds aber etwas schlechter als traditionelle ETFs. Während die ESG-Portfolios dabei relativ gut abschnitten, waren SDG-fokussierte (Multi-Themen) Portfolios im ersten Halbjahr 2023 relativ schlecht. Außerdem haben die Trendfolgesignale im ersten Halbjahr 2023 zu Verlusten gegenüber Portfolios ohne Trendfolge geführt. Das war 2022 noch anders: Im Vorjahr haben besonders meine Trendfolge und SDG-Portfolios gut rentiert (vgl. SDG und Trendfolge: Relativ gut in 2022 – Responsible Investment Research Blog (

Traditionelle passive Allokations-ETF-Portfolios

Das nicht-nachhaltige Alternatives ETF-Portfolio hat im ersten Halbjahr 2023 -1,3% verloren. Dafür hat das regelbasierte „most passive“ Multi-Asset Weltmarkt ETF-Portfolio im ersten Halbjahr mit +4% trotz seines hohen Anteils an Alternatives relativ gut abgeschnitten, denn die Performance ist ähnlich wie die aktiver Mischfonds (+4,1%).

ESG gut: Auf Environmental, Social und Governance und Sustainable Development Goal fokussierte ETF-Portfolios

Vergleichbares gilt für das ebenfalls breit diversifizierte ESG ETF-Portfolio mit +4%. Das ESG ETF-Portfolio ex Bonds lag mit +7,1% aufgrund des hohen Alternatives-Anteils zwar hinter den +10,6% traditioneller Aktien-ETFs aber etwas vor den +6,8% aktiv gemanagter globaler Aktienfonds. Das ESG ETF-Portfolio ex Bonds Income verzeichnete ein etwas geringeres Plus von +6,1%. Das ist aber besser als die +4,9% traditioneller Dividendenfonds.

Mit -1,3% schnitt das ESG ETF-Portfolio Bonds (EUR) im Vergleich zu +1,5% für vergleichbare traditionelle Anleihe-ETFs relativ schlecht ab. Anders als in 2022 hat meine Trendfolge im ersten Halbjahr mit +0,4% für das ESG ETF-Portfolio ex Bonds Trend auch nicht gut funktioniert.

Das aus thematischen Aktien-ETFs bestehende SDG ETF-Portfolio lag mit +1% erheblich hinter traditionellen Aktienanlagen zurück und das SDG ETF-Trendfolgeportfolio zeigt mit -4% eine relativ schlechte Performance.

Direkte pure ESG und SDG-Aktienportfolios

Das aus 30 Aktien bestehende Global Equities ESG Portfolio hat im ersten Halbjahr +6,5% gemacht und liegt damit etwa gleichauf wie traditionelle aktive Fonds aber hinter traditionellen Aktien-ETFs, was vor allem an den im Portfolio nicht vorhandenen Mega-Techs lag. Das nur aus 5 Titeln bestehende Global Equities ESG Portfolio war mit +3,7% schlechter, liegt aber seit dem Start in 2017 immer noch vor dem 30-Aktien Portfolio.

Das Infrastructure ESG Portfolio hat +1,1% gemacht und liegt damit vor den +0,3% traditioneller Infrastrukturfonds aber hinter den +3,3% eines traditionellen Infrastruktur-ETFs. Das Real Estate ESG Portfolio hat im ersten Halbjahr -6,3% verloren, während traditionelle globale Immobilienaktien-ETFs mit -1% und aktiv gemanagte Fonds nur um die -1,4% verloren haben. Das Deutsche Aktien ESG Portfolio hat im ersten Halbjahr +10,3% zugelegt. Das liegt hinter aktiv gemanagten traditionellen Fonds mit +11,5% und nennenswert hinter vergleichbaren ETFs mit +15,2%.

Dasauf soziale Midcaps fokussierte Global Equities ESG SDG hat mit -2,1% im Vergleich zu allgemeinen Aktienfonds schlecht abgeschnitten. Allerdings haben aktive gemanagte Gesundheitsfonds mit -1,0% ebenfalls schlecht rentiert. Das Global Equities ESG SDG Trend Portfolio hat mit -5,8% – wie die anderen Trendfolgeportfolios – im ersten Halbjahr nicht gut abgeschnitten. Das noch stärker auf Gesundheitswerte fokussierte Global Equities ESG SDG Social Portfolio hat mit -1,8% ebenfalls unterdurchschnittlich rentiert.


Mein FutureVest Equity Sustainable Development Goals R Fonds, der am 16. August 2021 gestartet ist, zeigt nach einem sehr guten Jahr 2022 vor allem aufgrund des immer noch relativ starken Gesundheitsfokus mit -1,9% eine erhebliche Underperformance gegenüber traditionellen Aktienmärkten. Insgesamt ist die Performance seit dem Fondsstart weiterhin aber ähnlich wie die von traditionellen aktiv gemanagten Aktienfonds (weitere Informationen wie z.B. auch den aktuellen detaillierten Engagementreport siehe FutureVest Equity Sustainable Development Goals R – DE000A2P37T6 – A2P37T und Artikel 9 Fonds: Kleine Änderungen mit großen Wirkungen? – (

Anmerkungen: Die Performancedetails siehe und zu allen Regeln und Portfolios siehe Das Soehnholz ESG und SDG Portfoliobuch. Benchmarkdaten: Eigene Berechnungen u.a. auf Basis von

Many greens: Picture from Alexa from Pixabay with 3 frogs

Many greens: Researchpost #133

Many greens: 12x new research on crypto spillovers, toxic risks, greenwashing, green lending, greening ECB, climate communications, climate policy costs, green bonds, impact investing, inclusive fintech, political engagement and digital angst (# SSRN downloads on June 30ths)

Social and ecological research: Many greens

Crypto spillovers: The Effects of Cryptocurrency Wealth on Household Consumption and Investment by Darren Aiello, Scott R. Baker, Tetyana Balyuk, Marco Di Maggio, Mark J. Johnson, and Jason Kotter as of June 28th, 2023 (#421): “Using financial transaction-level data for millions of U.S. households, we show that household crypto investors appear to treat crypto as one piece of an investment portfolio, some households chasing crypto gains and other households rebalancing a portion of crypto gains into traditional brokerage investments. Households also use crypto wealth to increase their discretionary consumption. The MPC (Sö: Marginal propensity to consume) out of crypto wealth is substantially higher than the MPC out of equity wealth …. Households also withdraw crypto gains to purchase housing—both to enter the market as new buyers and to upgrade their existing housing. This increased spending on housing puts upward pressure on local house prices, particularly in areas that are heavily exposed to crypto assets” (p. 33). My comment: I am worried about the effects of future crypto crashes on the real economy

Toxic effects: Pollution Risk and Business Activity by George Zhe Tian, Buvaneshwaran Venugopal, and Vijay Yerramilli as of June 18th, 2023 (#32): “… we use major toxic chemical spills as shocks to the pollution risk of their local neighborhoods and examine the consequent effects on local small business. …. Establishments in the smallest size quartile experience large reduction in sales, modest reduction in employment, and significant increase in likelihood of exit following exposure to pollution shocks, whereas those in the largest size quartile experience increase in sales and employment. … We also find that there is a significant and persistent exodus of population and income from counties that experience major toxic spills“ (p. 33/34).

Japanese greenwashing: Environmental Greenwashing: The Role of Corporate Governance and Assurance by Frendy, Tomoki Oshika, and Masayuki Koike as of May 17th, 2023 (#82): “First, companies with an indication of greenwashing decrease the extent of their disclosures for a given level of environmental performance. Second, those companies are likely to employ environmental assurance to intensify the greenwashing practice. … We found that organizational-level corporate governance characteristics of Japanese corporations are ineffective in mitigating greenwashing“ (p. 20).

Climate enforcement: The Environmental Spillover Effect through Private Lending by Lili Dai, Wayne R. Landsman, and Zihang Peng as of May 13th,2023 (#69): “We find evidence indicating that when one borrower experiences an enforcement action targeted by the Environmental Protection Agency (EPA), other firms sharing the common lender reduce toxic emissions in the following years. This spillover effect is more pronounced for lenders with stronger monitoring incentives and abilities and for borrowers with greater environmental pressures and larger similarities to EPA-targeted firms. Further analyses show increased abatement efforts and decreased profit margins following the enforcement shocks spread through lending networks. Taken together, these findings suggest that lenders can learn from and respond to borrowers’ EPA enforcement actions when dealing with other borrowers that pose similar environmental risks” (abstract).

ECB climate policy: Enhancing Climate Resilience of Monetary Policy Implementation in the Euro Area by Jana Aubrechtová, Elke Heinle, Rafel Moyà Porcel, Boris Osorno Torres, Anamaria Piloiu, Ricardo Queiroz, Torsti Silvonen, and Lia Vaz Cruz of the ECB as of June 23rd, 2023 (#28): “The European Central Bank (ECB) extensively reviewed its monetary policy implementation framework in 2020-21 to better account also for climate change risks. This paper describes these considerations in detail to provide a holistic perspective of one central bank’s climate-related work in relation to its monetary policy implementation framework. … Climate-related disclosures, improvements in risk assessment, a strengthened collateral framework and tilting of corporate bond purchases are the main pillars of the framework enhancements. … It also takes stock of the different challenges involved in the identification and estimation of climate change-related risk, how these can be partially overcome, and when they cannot be overcome, how they can constrain the ability of financial institutions, including central banks, to take further action. … This paper also examines possible future avenues that central banks, including the ECB, might take to further refine their monetary policy implementation using an assessment framework for climate change-related adjustments“ (abstract).

Climate communication: Ten key principles: How to communicate climate change for effective public engagement by Maike Sippel, Chris Shaw, and George Marshall as of June 19th, 2022 (#364): “This report summarises up-to-date social science evidence on climate communication for effective public engagement. It presents ten key principles that may inform communication activities. At the heart of them is the following insight: People do not form their attitudes or take action as a result primarily of weighing up expert information and making rational cost-benefit calculations. Instead, climate communication has to connect with people at the level of values and emotions. Two aspects seem to be of special importance: First, climate communication needs to focus more on effectively speaking to people who have up to now not been properly addressed by climate communications, but who are vitally important to build broad public engagement. Second, climate communication has to support a shift from concern to agency, where high levels of climate risk perception turn into pro-climate individual and collective action” (abstract).

Responsible investment research: Many greens

Climate policy costs: The Impact of Climate Change and Carbon Policy on Company Earnings by Matt Goldklang, Bingzhi Zhao, Ummul Ruthbah, Trinh Le, and Ben Bowring as of June 22th, 2023 (#158): “… we … build a framework for an asset-level, climate adjusted valuation of company earnings. In the European context, we see disparate impacts between and within sectors with carbon pricing impacts largest in the heavy emitting sectors, equivalent to -2% of earnings at the mean, whereas the physical impacts of climate change are more geographically segregated, with a median impact of -14% discounted 20 years into the future“ (abstract).

Brown trust: Green bonds pay when trustworthy by Sang Baum Kanga and Jiyong Eom as of May 30th, 2023 (#37): “… our empirical results support that green bond investors would pay more when they have greater confidence in the green management capability of the issuer. … the higher the relative intensity of GHG emissions, the greater the wedge between the green bond yield and the corresponding ”brown” bond yield. This may be puzzling to some readers because a firm with inferior environmental performance issues a more expensive green bond. However, the opportunity costs can explain this counter-intuitive finding. When a firm emits more GHG emissions, the firm is exposed to greater transition risk, and the firm’s environmental and financial successes become more correlated. Thus, the opportunity costs of committing greenwashing becomes higher, and the firm is more likely to use green bond proceeds responsibly. Therefore, the investor can regard the firm’s issuance of green bonds as a credible sign of commitment to green projects. Additionally, the markets are found to be statistically and economically sensitive to direct emissions (scope 1 emissions) rather than indirect emissions (scope 2 and 3 emissions) of bond issuers. According to our empirical results, the sub-investment-grade green bonds’ greenium is more negative than investment-grade green bonds. This may also surprise some audiences as the value of a green bond relative to its otherwise-equivalent conventional bond increases with a lower credit rating. …. Some might think the average greenium of -41 bps is small. However, recall that our sample, January 2013 to October 2021, is from low-interest-rate periods. More importantly, our primary market results are much more negative than other recent papers. … We conjecture that the green investors’ environmental preference may be reflected more clearly in the primary market, given their motives for providing affordable funds to the firm investing in green projects” (p. 18/19).

Impact PE: Private Market Impact Investing: A Turning Point by Michael Eisenberg, Katerina Labrousse and Ribhu Ranjan Baruah from the World Economic Forum as of May 8th, 2023: “Today, far more GPs (Sö: General Partners) at the higher end of the market are launching impact and energy transition products across private market asset classes and strategies, including infrastructure, buyouts, venture, private credit and other real assets. That means more and larger investments are made in impact-focused businesses, enabling the transition to a low-carbon economy” (p. 5). “Despite the many positive developments in the area of private market impact and transition investing over the last several years, much work remains to drive more capital to address the SDGs and accelerate the transition to a low-carbon economy. Asset owners need to further understand and develop convictions about the long-term secular tailwinds and favourable trends these opportunities present. Likewise, GPs need to further develop their track records and attract even more impact and transition investing talent to expand their capabilities in these areas and raise larger pools of capital over time” (p. 28). My comment: For public market “impact” investing see e.g. ESG Transition Bullshit? – Responsible Investment Research Blog ( and Active or impact investing? – (

Inclusive fintech: Fintech and Financial Inclusion: A Review of the Empirical Literature by Carter Faust, Anthony J. Dukes and D. Daniel Sokol as of May 16th, 2023 (#61): “Fintech has proven to enable financial inclusion on a global scale. This review highlighted case studies that demonstrate how digital lending, digital payment, and mobile money platforms can bring financial services to unbanked and underbanked communities. It further provided examples of how fintech can increase resilience in times of economic crises and shock, especially in underdeveloped regions. This review also acknowledged common challenges associated with the adoption of fintech, such as consumer data and privacy concerns, as well as infrastructure and education barriers“ (p. 151)

Political engagement: Collaborative investor engagement with policymakers: Changing the rules of the game? by Camila Yamahaki and Catherine Marchewitz as of June 25th, 2023 (#18): “A growing number of investors are engaging with policymakers on environmental, social and governance (ESG) issues, but little academic research exists on investor policy engagement. Applying universal ownership theory and drawing on eleven case studies of policy engagement … We identify a trend that investors engage with sovereigns to fulfil their fiduciary duty, improve investment risk management, and create an enabling environment for sustainable investments“ (abstract). My comment: Regarding shareholder engagement see also Shareholder engagement: 21 science based theses and an action plan – (

and other research

Digital angst: Digital Anxiety in the Finance Function: Consequences and Mitigating Factors by Sebastian Firk, Yannik Gehrke and Miachel Wolff as of May 13th, 2023 (#36): “Based on a survey of more than 1,000 employees working in the finance function of a large multinational business group, we observe that digital anxiety is relevant among 40% of the respondents. We further find that digital anxiety is negatively associated with employees’ work engagement, which further relates to fewer realized benefits from digital technologies. Finally, we argue and find that digital trainings, the digital affinity of peers, and transformational leadership can help to mitigate digital anxiety among employees” (p. 31).


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